Dear Valued Merchant,
There are many factors that determine how much interchange you pay every time you accept a credit or debit card. Likewise, there are many ways to keep those charges in check — one of which is timely batching.
This issue of Payments Insider provides helpful tips on batching credit and debit card transactions so you get the best interchange rate. Read on, and you’ll also find ways to reduce the risk of fraud on card-not-present transactions.
As always, if you have any questions about payments – including batching transactions and card-not-present transactions – please call your relationship manager, account manager or our Heartland servicing team at 888.963.3600. Feel free to also email us at Heartland@e-hps.com.
Best regards,
P. Gayle Hoskinson
Interchange and Compliance Manager
Mike Hall
Loss Prevention Manager
How often do you “batch” your credit and debit card transactions? Do you send transactions off to be processed and settle your point-of-sale terminals whenever it’s convenient? Is it once a day, once a week or once a month?
Both Visa® and MasterCard® have strict timelines for settling transactions through their systems. In most cases, transactions need to clear through the card companies within two days, excluding Sundays and major holidays, to qualify for the most favorable interchange rates. That means Heartland — and other payments processors — have only two days to process your transactions and forward them to Visa and MasterCard … which, in turn, forward them to the issuing bank.
Batching even one day late can significantly increase the interchange rate. Transactions that don’t meet the two-day time period are “downgraded” to a higher rate — which means you actually pay more for them. If you settle your accounts only one day late, it costs you as much as 0.76% more per retail transaction for Visa transactions and 0.31% more for MasterCard transactions. As more time passes, the fees get even higher — as much as 1.16% more for Visa and 1.12% more for MasterCard.
For example, a $100 Visa retail card-swiped transaction has an interchange rate of 1.54 percent + 10 cents ($1.64) if you settle daily. If you settle only once a month, that very same $100 transaction now has an interchange rate of 2.70 percent + 10 cents ($2.80) — nearly doubling the amount you pay in interchange. In addition, late batching results in delayed payment on those transactions.
As if paying higher interchange rates isn’t reason enough to settle your accounts and terminals at the end of each day, a fine from Visa and MasterCard just might be. In fact, if you don’t settle your batch within three business days, and you consistently send in late transactions, you may face a hefty fine. Visa assesses anywhere from $5,000 to $50,000 or more for violations considered to be repetitive and willful.
Add cardholder satisfaction — or dissatisfaction — to the higher rates and fines. Most issuing banks drop the holds based on the authorized amounts from cardholders’ accounts after seven days. If the hold is dropped on the seventh day, and the sale comes in on the tenth day, the customer may experience an overdraft. As recourse, a customer may request a refund of the overdraft charges as well as a letter to clear his/her name. Worse yet, the cardholder may decide to no longer patronize your business.
Lastly, the longer you wait to download transaction information, the longer it takes to show up on a customer’s billing statement. After some time, the customer can dispute the charge and request a refund — which comes in the form of a chargeback to your business. If a settlement is processed more than 30 days* after the transaction date, you could also receive an additional “late-presentment” chargeback where the transaction gets “charged back” to your business.
Consider batching your transactions on a timely basis. If all other qualifying criteria are met, you qualify for the best interchange rates by settling your transactions daily. Plus, you avoid paying any fines to Visa and MasterCard — putting that money back in your business where it belongs.
* Currently, MasterCard accepts transactions — with no penalty or chargeback — within 30 calendar days from the transaction date. Effective October 3, 2008, the acquirer has a maximum of seven calendar days after the transaction date to present the transaction to the issuer.
| First violation of regulation | Warning letter with specific date for correction and $5,000 fine |
| Second violation of same regulation in a 12-month period after notification of first violation | $10,000 fine |
| Third violation of same regulation in a 12-month period after notification of first violation | $25,000 fine |
| Fourth violation of same regulation in a 12-month period after notification of first violation and assessed during each month the violation remains uncorrected | $50,000 |
| The violation is not corrected within a 12-month period | Additional fine equal to all fines levied during that 12-month period. Visa may consider the violation as willful and assess additional fines. |
– Schedule of fines courtesy of Visa
Keep on the lookout for these warning signs of potentially fraudulent transactions:
• Larger-than-normal orders
• Orders that include several of
the same item
• Orders made up of “big-ticket”
items
• “Rush” or “overnight” shipping
• Shipping to an international
address
• Transactions with similar
account numbers
• Shipping to a single address,
but transactions placed on
multiple cards
• Multiple transactions on one
card over a short period of time
• Multiple transactions on one
card or a similar card with a
single billing address, but
multiple shipping addresses
• For online transactions,
multiple cards used from a
single Internet Protocol (IP)
address
Does your business accept “card-not-present” payments — payments made by phone, internet or mail? If so, you might be at increased risk for payment card fraud. There are some red-flag signs that card-not-present transactions could be fraudulent. They include requests for overnight shipping, transactions placed on multiple cards but shipped to a single address and orders that include large quantities of the same item. Indicators like these should prompt you to follow up and check on the order. (See “Potential Signs of Card-Not-Present Fraud” for more indicators of possible fraud.)
In addition to knowing the warning signs, take these steps to reduce your risk of accepting fraudulent transactions:
- Obtain a proper authorization to verify the credit card has sufficient funds available to cover the transaction amount. Ask the customer for the card expiration date, and include this in the authorization request.
- Call the customer back and ask him/her to verify the transaction information.
- Participate in cardholder verification programs like Address Verification Service (AVS). AVS automatically compares the customer’s address with the billing address on file with the card issuer.
- Use cardholder verification programs like Visa’s Card Verification Value (CVV), MasterCard’s Card Validation Code (CVC) and the Card Identification Number (CID) from Discover and American Express to validate the cardholder. This is a three-digit code printed on the back of Visa, MasterCard and Discover cards — and a four-digit number on the front of an American Express card. This code enables you to verify the buyer has the card on hand during a card-not-present transaction. You should ask the customer for his/her verification code and enter it into your terminal or POS system so it will be sent to the card issuer as part of the authorization request.
Following these simple steps and knowing the potential signs of card-not-present fraud can save you time, frustration and money so you can focus on what really matters ... growing and improving your business.
