How to Lower Your Risk When Processing Credit Cards for Your Small Business
Understanding the Risks When Processing Credit Cards
On the one hand, customers love options, and denying them the option to use credit cards can lower your sales. But, on the other hand, accepting credit cards increases your risk as a business owner by opening you up to fraud opportunities, processing fees, and more. Luckily, you can combat some of this risk by being aware and following a handful of credit card processing best practices. Read on to learn what risks exist if your business accepts credit cards, what not do when processing credit cards, and more.
Credit Processing and Fraud Risk
In this day and age the words “credit card” and “fraud” are two peas in a pod. No matter how secure your business is, allowing credit card processing creates the risk of fraud. Fraudsters have become increasingly savvy and are constantly creating new methods to take advantage of businesses and consumers. Luckily, Point of Sale (POS) System providers, credit card companies, and the government are using the following methods to fight fraudsters. By taking advantage of these methods, you can lower your credit processing risk.
Use EMV Card Processors
While EMV cards have long been popular in Europe, they’ve only started becoming prevalent in the U.S. over the last few years. EMV cards have encrypted chips that cannot be duplicated, ensuring that only the cardholder can use the card. EMV card processors are hand held and allow consumers to keep a hold on their credit card throughout every transaction. While these two features are beneficial to consumers, there are also additional benefits to businesses. By using EMV Card Processors for every transaction, you protect your business from fraudulent charge backs. Per the laws regarding EMV Cards, if businesses swipe an EMV Card through a non EMV processor, the small business is liable for any charge back that may occur. This means that if a card is fraudulently used, or if a consumer commits fraud and claims that they didn’t make the transition, then the small business must cover the cost of the charge back- not the credit card company and not the consumer. Your business isn’t liable if an EMV Processor is used. Protect yourself and your customers by complying with EMV laws.
Take Advantage of Your POS System’s Security
As you probably know by now, your POS System can do far more than ring up sales. Along with being able to track inventory, automatically reorder low stock, and auto-generate reports, POS Systems also come with impressive security features. Many POS Systems provide encryption and tokenization, which can minimize the risk of data breaches for your business and reduces credit card processing risks for your small business. To avoid risks, make sure to look into the security features your POS System provides and how you can use them.
The Cost of Processing Credit Cards
Fraud risk aside, many small businesses don’t accept credit cards because of the increased cost per transaction. Credit card companies make money by charging businesses a percentage of every transaction they run. This raises the bottom line for businesses, increasing their risk as an independent business. Fight credit processing risk in a few ways:
Add the Processing Fee into the Price Tag
To recoup some cost, consider slightly raising the cost of the goods you sale. This way, you won’t have to eat the cost of the processing fee. However, when making these cost changes, keep in mind that if you raise the price too much your prices may not be competitive.
Utilize a No Cost Processing Program
Credit card processing fees effect many small businesses since they sell small ticket items. Consider implementing a no cost processing program to offset your credit card processing fees. Incentivize your customers to pay in cash by charging a small service fee to customers who pay by card.
Negotiate Better Rates with Your Credit Card Processor
Credit card processing rates are flexible and are based on volume of transactions. Consider reaching out to your credit card processor to see what your options are for rates and how you can lower them.
Review Your POS System is Properly Set Up
Credit card processors place high value on security, and they’re ready to reward you if you can prove your store and terminal is secure. Make sure you have a strong security system in place. and then make sure your POS System is set up securely. Then, work with your credit card processor to ensure you’re meeting their standards and can enjoy their discounts.
Communicate with Your Bank
Your relationship with your bank is pivotal to your success with credit card processing. By keeping in contact with your bank, you’re ensuring that all of your transactions run smoothly. However, just talking to the teller when you make a deposit isn’t enough.
Touch Base on Large Transactions
Banks and credit card companies are becoming increasingly shrewd regarding their customers activity. Using your deposit and transaction data, they have many algorithms to let them know if something out of the normal is occurring. Communicate with your bank or credit card processor if anything out of the ordinary is going to occur. It’s important to make sure to notify your bank if you will be running a higher than average transaction.
Keep Your Information Up to Date
Keeping your bank and your credit card processing company aligned is pivotal to lower your risk of credit card processing. Merchants must communicate with their processor when they have a change of bank. Merchants should also communicate with their processor and their bank when they have a terminal change or address change.
That’s it! Following these simple steps allow you to reap the benefits of accepting credit cards, while lowering the risk. Take the time to properly implement EMV chip cards, review your POS System security features, communicate with your bank and credit card processor, and work with your credit card processor to quickly cut down on the risk and cost of credit card processing for your business.
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