Paying for products and services by credit cards is convenient for consumers, but for companies and vendors the credit card merchant services process can bring more than a few headaches.
Scott H. Wagner, a certified payment professional who runs the Chappaqua-based consultancy Harlan Davis Inc. (formerly known as Go Direct Merchant Services), observed that some of these headaches can be self-induced by business owners who fail to prioritize this aspect of their operations.
“Don’t leave this to the last minute,” Wagner warned. “It seems like this happens a lot in my world — someone’s busy opening up their new restaurant, their new jewelry store, whatever, and they have one million and one things to do. And at the last minute, they make hasty decisions.”
Wagner said that a typical hasty decision is assuming the local bank is the right choice for a merchant services account.
“Banks serve a purpose and they’re important,” he continued. “Credit card processing is just not their core business — they farm it out to big processors. There’s only one bank in the entire country that does their own in-house credit card processing.”
The one exception bank to the rule, he added, was Chase, and Wagner was not enthusiastic about its services.
Rather than rely on the local bank, Wagner said, business owners should talk to different providers to determine the quality and depth of their operations.
“It’s important to know that the person that you’re doing business with has been in the industry for a while and that they have a track record and references they can point to,” he said.
“Another good thing to ask about is the technical support, because the worst thing that you want is to have the terminal go down or something go awry on a busy day — you want to be able to know that you’re going to call somewhere and someone will pick up the phone in a reasonable amount of time, speak the language that you need them to speak and not put you on hold for 30 minutes.”
Wagner also advised business owners to ask questions on how the merchant services provider deals with data breach protection. While much of the recent media attention has focused on hacking and ransomware attacks on major companies and government agencies, small and midsize companies are also hit by digital assault and often face greater difficulty resolving them.
“All of the card brands are going to want to know why, where and when,” he said. “And then on top of that, they’re going to want a forensic exam as to why, where and when.”
Even worse, he noted, the business will have to pay for the forensic exam, as well as fines to the card brands and could even be forced to cover the costs of issuing new cards if the breach results in consumer accounts being hijacked.
“Something like that could range anywhere between $20,00 to $80,000 depending on the severity,” Wagner said. “So, breach protection pays for all of that, God forbid it happens.”
Wagner recommended that business owners consider implementing a cash discount program, which implements a service fee to all customers who pay with a card while providing a discount to those who pay with cash.
“This type of program has been used to a large degree by gas stations,” he said, pointing out that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 widened its availability to other industries.
“It’s now available to mom and pop on each corner. All of the different card brands have strict guidelines on how their cash discount program is to be implemented and it’s essential that the steps are followed, like correct signage must be posted at a minimum at the checkout and the amount of the service fee must be clearly displayed automatically on the receipt.”
Wagner advised several businesses on introducing a cash discount program, with profitable results — a dog groomer has been saving an average of $600 per month, a printer $700 and a pizzeria $5,000.
“That’s real money that can go into the business owner’s pocket, back into marketing or invested in a new piece of equipment,” Wagner said.
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