Now, don’t get me wrong here.  I’m all for someone starting off on a new career path but it’s just the methodology that most employ that I object to.  Back in the day when I was a regional manager in the state of Michigan for a large processor, I did the screening, hiring and training.

My motive was to find quality individuals that were energetic, trustworthy, willing to work hard and most of all….were totally honest and desiring of building long-term relationships.  When I did training, it consisted of industry knowledge and how it all works and not just “selling the service.  This is paramount to properly helping merchants in my estimation.  Training was thorough and lasted from three to five days.  And then, I went in the field with them to fully ascertain that they truly understood all that they were representing.

Unfortunately, that’s not the case for a great majority of those in the same industry.  Most often what you see is that the “throw ‘em against the wall and see who sticks” mentality prevails.  They typically get maybe a half day worth of training and they take off and hit the streets.  As time goes by, and these newbies get rejected over and over again, the majority of them fall by the wayside.  And then…a whole new batch is hired, quickly trained and they come walking thru your door.

Here’s what I’d like to say to all that are reading this right now.  I’ve been very successful in this business for a very long time for one reason….my clients trust me.  I have always been totally transparent with my merchants regarding all the charges they will be assessed.  I’ve always looked for ways for them to either save more money, or demonstrate ways to generate even more sales.  There’s been many times when I’ve recommended merchants stay with their current processor, for a variety of reasons.  The bottom line is that I perform a very thorough statement and procedural analysis.  The fact that I offer my FREE EMAIL course on Understanding Credit Card Processing, is testimony that I care about my merchants.  So, I have to ask you out there….if you are accepting credit cards in your business, why haven’t I heard from you?  There is never any obligation on your behalf for me to take a look at things for you.  And, in today’s electronic age, it doesn’t matter if your all the way across country from where I am.  The greatest majority of my business these days is typically done via email, fax and generally on-line so there are no limitations for me/us.

While I’m thinking about it here, there’s something that seems to come up often when I speak with new merchants.  Oftentimes, after some digging and asking lot’s of questions, I discover many merchants with “mysterious charges” coming directly out of their bank accounts that they don’t understand.  Sometimes, it’s PCI fees they are being assessed because they didn’t complete a PCI Assessment Questionnaire.  It’s a simple procedure and will eliminate monthly fees of $19.95 or more.  Then there are times when I discover that merchants are still paying monthly minimum fees to some previous processor that they haven’t done business with for years.  Simply put, I try to be very thorough with each and every contact that I am blessed to make.

Well, I guess that’s it for now.  I won’t harp on the topic any longer but just know that I am here and fully capable of being of service to your needs.  I hope to hear from you soon and look forward to initiating and building on a mutually rewarding long-term relationship.  You know how to get in touch with me so I’m here, ready and willing.  Blessings to you and yours!

As you may recall, effective January 27, 2013, some merchants are permitted to surcharge customers for certain types of transactions. A payment card surcharge, also known as a checkout fee, is an additional fee that a merchant adds to a consumer’s bill.  There are, however some important things to be aware of regarding merchant surcharging:

• Merchants cannot surcharge Signature Debit (check cards), Pre-Paid Cards, or PIN Debit
• The surcharge cannot exceed 4% (it really should be no more than the amount the merchant is actually charged by their processor.
• The surcharge amount must appear on the printed receipt (requires programming of your terminal or software)
• The merchant is required to inform customers of the surcharge at the point of entry and at the point of sale
•  The merchant must notify Visa, MasterCard at least 30 days prior to implementing surcharging
• the following states currently prohibit surcharging.  Merchants located in these states cannot surcharge any transactions, regardless of card type.  These states are:  California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

In addition there is a notification process merchants must follow in order to surcharge its customers. As a merchant you are instructed to register your intent to surcharge with both Visa and MasterCard.  Those notification pages can be accessed by clicking below:

For Visa

Select the ‘Notification of Intent to Surcharge’ and complete the corresponding form.

For MasterCard

 Select the ‘Click Here’ under Merchant Registration with MasterCard and Acquirer.  This is an email submission.

Merchants that have 3^rd party hardware/software must make separate arrangements to have the surcharge option made available in their processing solution.  The best advice I can give is that if you intend on surcharging, contact your merchant services provider for proper instructions.

Additional details can be found online HERE for Visa and HERE for MasterCard

Well, that about wraps it up for now.  As always, if you have any questions, don’t hesitate to contact me.

You see, previously, merchants had been prohibited from imposing a surcharge when customers paid with plastic.  This practice of passing on any kind of surcharge to customers has always been banned, in the fine print, in credit card processing contracts.  In fact, the posting of signs that say things like “$5.00 minimum purchase required to pay with credit card” has also always been prohibited but yet, you still see merchants doing it.  But now this, is a little different story as you can see.  How likely is it that merchants, even though they can legally do it, are going to pass on these costs, so blatantly (with a sign at checkout) at the risk of losing customers?

Okay, here’s a bit of information on how this came about.  A ways back, there was an antitrust class action case brought against Visa, MasterCard and a number of big banks by retailers who complained they were being overcharged in processing fees.  In November of last year, there was a tentative settlement agreed to and this eliminating the ban on surcharges is part of that settlement.

Here’s a bit more education for the consumer to get a little better understanding of what all of this means to merchants.  You see, every time you use plastic to pay for a purchase, the merchant pays a Discount Rate of somewhere from 2 to 4% to a credit card processing company.  The fees are a bit different, and less, if paying with a debit card, especially is you input your pin number.  The greatest majority of the Discount Rate the merchant pays is what is referred to as the Interchange Rate.  This fee gets paid directly back to the entity that issued you the credit card.  For example, in April 2012, the Interchange Rate on a Visa card swiped thru a POS device was 1.51% + $.10.  So, let’s say that the merchant is paying a 2.01% + $.20 Discount Rate.  You make a $50.00 purchase and they are taking a hit, immediately, to the tune of $1.21 to their bottom line.  On the other hand, let’s say your card is worn out or you make that same $50.00 purchase over the phone or on the merchants website, the Interchange Rate is .29% higher or an extra $.15 to the merchant.  These charges may seem small to you but, to the merchant, the costs add up over time.  In fact, most merchants will tell you that their three largest monthly expenses to running their business is rent, wages and credit card processing fees.

Now, let’s take a look at this from another perspective for a moment.  If you were asked to pay a surcharge for your purchase, would that cause you to rethink the “need” for the goods you purchase?  Afterall, one of the contributing factors to US consumer debt is attributed to credit card debt.  We buy things to satisfy our “wants” right now even though we don’t have the cash right now.  We, as individuals, would be much better off if we disciplined ourselves to wait to make many of our purchases when we can pay cash.  Wouldn’t you agree?  I’m sure you would….unless, as a consumer, you also happen to be a merchant selling goods or services.  So to you I say, aren’t you glad plastic exists and increases your overall sales due to our need for immediate satisfaction….even if it does cost you a few percentage points.

Okay, let me wrap up by simply saying this.  To merchants, you’ll have to decide if charging a “surcharge” is going to be beneficial or harmful to your bottom line.  To consumers, you’ll have to decide, when and if confronted with a surcharge on your purchase, to either pay the fee, shop elsewhere or not make the purchase at all until you have cash in hand.

Thanks for reading and as always, don’t hesitate to post your comments or questions.

                The question that has kept some merchants from utilizing this type of technology has to do with the risk of security.  Just how secure are these transactions?  Where and how is the data stored to ensure security.  What is the merchant’s liability and for what is the service provider responsible? Merchants should only partner with a “Provider of a validated solution” that offers P2PE (Point to Point Encryption).

                Okay, as long as you ask the right questions to be certain that you are processing with an appropriate provider, the next thing you want to know is how much these transactions are going to cost you.  Is the convenience and “coolness” of having these devices and the rates that you will pay, outweigh the costs of just processing the business when you get back to the office.  If you already have an established merchant account these devices might not be the great solution that they appear to be.  Let’s take a look now at the most often heard of players in this mobile processing market and then put some numbers to it based on your own business.

SQUARE:

This is probably the one most often heard of.  They offer two different pricing plans.  The first is a flat 2.75% with no monthly minimums or monthly service fees.  The second plan is $275 per month and includes 0% processing on all swiped payments under $400 and 0% processing on your first $21,000 in swiped payments per month (which equates to about $250,000 in payments in a year).  Go over either limit and they’ll automatically apply the  standard per-swipe pricing.  Manually entered transactions cost 3.5% + $0.15.  They offer a FREE Reader and app to their merchants.

PayPal’s  Here (Triangle)

Maybe you’ve heard most recently of this device as PayPal has jumped into the mobile game.  The service is referred to as PayPal Here but is often referred to as Triangle, simply because of its shape.  Rates are quite similar to the Square with a slightly lower rate of 2.70% and a FREE card reader and app.

INTUIT GO PAYMENT:

Rates the same as Square at 2.75% swiped slightly higher at 3.75% for keyed transactions with no transaction fee and no monthly or set-up fees.   They do, however, offer an optional program featuring a $12.95 monthly fee with 1.75% swiped and 2.75% keyed transaction rates.

PAY ANYWHERE:

Not one that you hear as much about but they offer a swiped rate of 2.69% with no monthly minimum or monthly fee.  And, of course, there is a free app and swiper.

PAYMENT JACK:

Now, here’s one that I personally offer my merchant’s  and like what it has to offer them.  Rather than go into specific rates here, suffice it to say, they are significantly lower than what either of the above mentioned service providers offer and is provided by one of the leading providers in the industry.  Like the others, a FREE card swipe device is offered with no set-up or monthly fees.  This Payment Jack device offers the leading mobile solution for real, processing merchants as opposed to the occasional user- e.g. garage sale, flea market etc type merchants.  While other devices primarily work only on “smart phones”, Payment Jack works virtually on all major cell phones (400+ phones) and simply with the addition of a data plan to your current calling plan.  The Payment Jack application is fully encrypted from the app to the swipe device.  Your credit card information is encrypted at the swipe, ensuring safety and security on every transaction. Payment Jack adheres to the highest possible standards in payment security.  Being PCI certified (Payment Card Industry), you can trust that your transactions are processed accordingly.  All customer data is encrypted before it leaves your cell phone.  No personal data is retained on your cell phone.  Payment Jack also includes a web interface so you can securely enter credit card data from your PC or Mac’s desktop.

                If you’ve been using one of these for a while now, make certain with your provider that you are actually using an encrypted device as earlier models weren’t.  The risks of transmitting or storing unencrypted card hold data on your phone is certainly not worth it.  Current devices are being shipped with encrypted card readers that make certain that card data is encrypted at the point-of-swipe.

                So, to summarize, do the math based on your business, average ticket size and how you typically process transactions.  It will quickly become very evident to you if this is a service that you need to look into in greater detail.   If you have any questions or anything else that I can help with, you know how to reach me.

Over the years, our personal/mobile phones have become “smart”.  They can do a whole lot more than just make phone calls.  They can pay for your meal, open the door to your car, turn on the security system at your home, book a hotel room and on and on.  They can access the internet with lightning speed utilizing WIFI connectivity, 3G , 4G or whatever cell service.  We also use them to take pictures, text quick messages to friends or colleagues or use their QR reader or the phone’s camera to read a code to get more information about a product or service.  We can also receive mobile texts, once opting in, from merchants to alert us of their “deal” for the day.

In most recent times, mobile phones have begun to be used, especially by smaller merchants, to process payments for goods or services.  This is accomplished by attaching a “dongle” or mini POS type card swiper to the audio jack of the phone.  There are products like Square, PayPal’s Triangle, Intuit’s GoPayment and many others.  We’re also seeing that many merchant services providers are offering FREE smart phone POS devices.  But all of that will be addressed in an upcoming article.

However, with all that said, the main purpose of this article is to speak about using your phone as a “mobile wallet”.  Let me be a bit clearer on exactly what it is when we’re talking about a “mobile wallet”.  Quite simply it would allow us, as consumers, to replace the plastic cards in our real wallet with some data stored on our phones “virtual” wallet.  What’s the likelihood that we’ll see mass conversion to this type technology here in the US?  Really, the idea of using the phone as a “wallet” is nothing new in Kenya or Japan, for example.  In other countries like Sweden and Canada, mobility is taking off.  But the question that I pose to you here is this….does it make sense to place all of your personal and financial information on your phone?  Could we potentially move into a cashless society and would consumers quickly adopt to the technology to use their phone like a wallet?

With identity theft continually on the rise, it’s not likely any time soon that consumers will be willing to expose themselves to the potential risk.  Developers for this technology assure us that the information transferred to your mobile phone is encrypted and therefore safe.  Access to the stored data can only be accomplished by the use of a six digit pin number.  So, while this brings a level of comfort, in my mind, still the equipment necessary to even process transactions, using your phone is pretty scarce.  Mobile wallets can only work, with current technology at least, on NFC (Near Field Communication where you simply wave your phone in front of a payment device) enabled phones which are very limited today.

In Europe, for example, talk of Mobile Wallets becoming more mainstream has been going on since 2004 and still, hasn’t really gained a strong foothold there.  So, while this may be the direction we are headed, as a society, don’t look for it to happen any time soon on a grand scale.  So, in the meantime, just pull out the plastic, keep spending and do your part to move the economy along.  See you next time.

Then came the dial-up credit card terminal.  Wow, this was sweet!  You no longer had to call for an authorization on credit card sales.  All you had to do was swipe the card, wait for the phone line to connect and then wait for the authorization to happen and get the approval.  Slow by today’s standards, it was still much more convenient and speedy than making the phone call.

Today, our credit card terminals are light years ahead of their predecessors and yet, soon, they will be outdated.  You’ve seen it happen in the past few years where you have internet enabled terminals that process transactions at lightening speed.  It’s hard to tell what the future will hold except that for certain, there will be change.

One thing that we know with certainty, that is on the horizon, is EMV technology.  Chances are your current terminal may not be “smart card” capable.  Which, of course, means that you will need to replace it.  But, hold on there for just a second.  I’ve been told recently by more than one merchant that reps are knocking on their doors with the “pitch” that this technology is going to be mandatory within the next couple months.  Don’t fall for that line.  It doesn’t take much to do a little internet research on your own to find out more and bring yourself up to speed regarding the likely timetable for this technology.

While we’re on the subject of technology, let’s talk about a couple other things.  Let’s face it, mobile is the future.  Do you have a website and if so, what have you done to make it “mobile friendly”?  Statistics show that there are currently more people accessing the internet via their mobile devices than PC’s or laptops.  If your site isn’t tweeked for mobile, but your competition is, guess where the customers are going.

And, since mobile is really where you need to be (I even heard an interview with Mark Zuckerberg today saying “mobile is the future”), what else are you doing to tap into this craze?  And, while we’re talking about Facebook, do you have a Facebook Fan Page for your business?  Have you implemented a Mobile Text Marketing program?  If not, why not?  I was in Subway today and saw they have a text marketing program that you can opt-in to get text notifications for specials.  The banner also said they are giving away FREE subs every 15 minutes to some lucky winners when you opt in.

There’s more we could talk about regarding technology changes and how it can affect your business, but, let’s just save that for another time.  My goal as a merchant services rep, has always been to provide total transparency for my merchants and keep them informed of trends that I feel may be of benefit to them.  Thanks for reading.

            The purpose of this article is to prompt you to be on the lookout for how your processing fees may be affected in the near future.  This industry is constantly changing with the types of cards being offered and how they are processed, all of which have different rates.  Since your monthly bill for accepting plastic is likely your third largest expense after rent and employees, it’s important that you fully understand what you are paying for.

For example, take a look at one of your current statements.  Can you easily tell how much you are paying for accepting a generic Visa card with no “perks” attached to it?  How about a Visa Rewards 1 or Visa Rewards 2 cards?  Sometimes the magstripe on the back of the card is worn and you have to key in the credit card number and that costs more….do you know how much more?  Then there’s a plethora of MasterCard types, each with their own Interchange rate…what are you paying for those?  Then there is the question regarding debit cards and how you process those.  Has your current provider enlightened you on the Durbin Amendment and how it directly affects debit transactions?  This amendment can potentially dramatically reduce fees to you on debits but, you must know about it in order to take full advantage of the savings.  How about FANF fees and Assessments and Access fees charged by Visa and MasterCard?  If they haven’t educated you on all of these items, you must ask yourself….WHY?

Anyway, let’s get back to the purpose of this article.  Grab your most recent merchant statement and take a look at ALL of your charges.  You need to have a point of comparison with which to look at when your November statement arrives.  Typically, any increases will be assessed to your account in either October or November.  Sometimes, not always, your processor will give you some notice of what is to come, on the first page of your statement.  For those of you that currently don’t receive a paper statement to look at, make certain that you get online the first week of October so you can access your September statement.  This will serve as your baseline to compare to.

While I’m thinking about it, let me bring up another topic here quickly which comes to mind as a result of a recent conversation with a merchant.  Are you leasing your credit card machine?  I certainly hope not but if indeed, you are, let me just point out something to you.  Typically lease agreements are for three years and they are ironclad….you can’t get out of them.  But here’s what happens all too frequently, as illustrated by my recent conversation.  This merchant has been leasing her Nurit 2085 for $31 a month….and, she’s been paying that amount for nearly four and a half years.  She’s paid nearly $1600 for a machine that she could have purchased for a few hundred bucks.  In fact, when hooked up with the right processor, she could even get a FREE terminal.  Anyway, the point is this.  If you have a lease, dig out your original lease documents and check out the inception date and the term.  When the lease is up, you need to contact the company and terminate it.  If you don’t, they will just continue to take the monthly payments.  And, absolutely NEVER purchase the machine at the end of the lease as you will pay too much for it and, it will soon be outdated anyway with the new EMV technology that is coming.

So, to wrap this up with what you need to do right away.  Check your current processing statement and make certain that you totally understand all the fees that you are being charged and how much you are being charged for all card and transaction types.  Then, be on the lookout for any “messages” from your current provider regarding upcoming Interchange Rate adjustments.  Hopefully you have found this article to be enlightening and profitable.

]]> http://creditcardprocessingknowledge.com/visamastercard-october-interchange-adjustments/feed/ 6 http://creditcardprocessingknowledge.com/durbin-and-debit-savings/ http://creditcardprocessingknowledge.com/durbin-and-debit-savings/#comments Thu, 16 Aug 2012 21:25:23 +0000 Michael http://creditcardprocessingknowledge.com/?p=342 Continue reading →]]> Okay, we’re closing on nearly a year since the Durbin Amendment to the Dodd Frank Act went into effect.  As you may recall, from an earlier article written on this subject,  Durbin capped the amount that “regulated” banks could charge for their issued debit cards.  Now, here’s where it tends to get a little tricky….who and what are “regulated” banks?  Well, the guideline is, I believe, $10 billion is assets.  Banks that don’t meet the asset criteria are “exempt” from the caps, therefore protection of one of their revenue streams.  Do you have a debit card?  Do you know the asset size of your issuing bank?  Not that it matters to you as a card holder but, to a merchant, it could make a big difference in fees.

Now the articles I write are primarily meant for the beneficial education of merchants.  So, with that in mind, let’s take a look at some examples of fees.  Typically, if a customer is spending money with you they will likely only use their debit card for smaller (and “smaller” means different things to different people) transactions.  So, for sake of this discussion, let’s say the transaction size is $100 and the customer hands over their debit card.   Let’s compare some cost-to-the-merchant examples:

Tiered Pricing

Let’s assume that you are on a Tiered Pricing structure and are getting charged $1.23% + $.10 for swiped debit cards.  Your fees on the $100 transaction would be $1.33 and under this form of pricing, you’re not getting the benefit of pinned or Durbin pricing.  Keep in mind the cap that can be charged on, for example, an Interlink Network retail transaction debit card is .80% + $.15 (if it’s an “exempt or unregulated bank issued card”) and .05% + $.21 (if it’s a “regulated” bank issued card).  So, in effect, under this form of pricing, your processor is keeping all that extra profit for themselves.

Interchange Plus Pricing

If you’ve read any of my articles in the past, you know that I’m a strong proponent of total transparency in pricing which is what Interchange Plus Pricing offers.  Let’s say that you’re fortunate enough to be priced at Cost Plus .25% + $.10 and utilizing those numbers, let’s look at some numbers.  So, a customer hands you their debit card (and certainly, remember here you don’t know if it is issued by a “regulated” or “exempt” bank).  First let’s look at your cost if it’s an exempt card.  Taking the .80% + $.15 PLUS your .25% + $.10, you are at 1.05% + $.25 or a total of $1.30 in fees on the $100 transaction.  No great savings here when compared to the Tiered Pricing description shown above but, now, what if it’s a “regulated” card.  Then, under this Cost Plus pricing, the cap is .05% + $.21 and then you tack on your PLUS of .25% + $.10 and you have a rate of .30% + $.31 resulting in total fees of $.61….now we’re talking.

Pinned Debit Comparisons

Now, let’s say that you are hooked up to accept pinned debit transactions either thru an external/internal pinpad.  Now, typically, your processor will be charging you a Monthly fee of maybe $5.00 to accept pinned debit transactions and also a per transaction fee of maybe $.15.  So, when a customer hands you their card, you have them enter their pin number and now your costs are as follows:  If it’s an Interlink network card issued by an exempt bank the rate would be .80% + $.15 plus $.15 (the processors per transaction charge), your fees on the $100 transaction would be $1.10.  On the other hand, if it is a card issued from one of the BIG banks, the regulated rate is .05% + $.21 + $.15 (for the processor), so the total fees on this $100 transaction would be $.41.  Of course, this would represent a significant savings for you.

Now with all this said, and with all these numbers swirling around in your head, what is most beneficial to you as a merchant?  In my opinion, when you look at the numbers, it really doesn’t matter if you are on a Tiered or Interchange Plus pricing model, and since you’ll never know at the point of sale if the card is issued from a regulated or exempt bank, I would suggest that you make certain that you are set up for pinned debit transactions (especially if your average ticket size is less than $100) and capture as many as you can, and the resulting savings that go along with it.

Hopefully, this has helped to de-mystify some of the confusion I’ve been hearing about regarding this Durbin Amendment.  Thanks for reading.

Why is EMV better than Magstripe Technology?

What exactly is EMV and why would credit card companies want to use it instead of a magnetic strip? The primary difference between EMV and the magnetic strip is that EMV cards use an embedded microprocessor chip within the card to encrypt the data for each transaction. This chip is a type of small computer that provides strong security features and other capabilities not possible with traditional magnetic stripe cards.  When the card gets close to a reader, it is activated electronically. The chip receives a signal from the card reader and then sends a signal back to authenticate the card.   The chip typically has the technology to alternate between verification methods for each individual transaction. For example, sometimes it asks for a pin number and sometimes it will ask for a signature. EMV is considered to be a safer credit card technology because the payment information changes every time. By comparison, with a magnetic strip, the payment information is the same for every transaction.  This makes it more difficult for identity thieves to use stolen credit cards.

Another type of chip card technology used for payment is called contactless (a subject worthy of it’s own future article). It works by holding the contactless chip card within a couple of inches of a contactless-capable reader. The reader energizes the chip embedded in the card and allows exchange of data via radio frequency without the card ever leaving the card holder’s possession

Magnetic stripe cards can be susceptible to fraud through skimming, where a card is swiped through a magnetic stripe reader to record the information needed to use the card for payment. The cardholder gets the card back and is unaware of the risk of fraud. The data stolen from the card can be written to another magnetic stripe card, effectively creating a duplicate that can be swiped to make a fraudulent purchase at an unsuspecting merchant.

How quickly will this transition take place?

Because of the increased protection from credit card fraud, it is inevitable that the United States will adopt this technology but it will take a while.  Just to give you a bit of history, back in 2001 3des pin pads were announced as being a necessity to replace less secure pin pads.  The full implementation wasn’t completed until 2009-2010.  Keep in mind, this was just a pin pad that required a lot less-no new cards, new hardware, new encryption and new programming.  With the new EMV technology, issuers will need to issue new cards (they say this new chip embedded card costs about $5 each in comparison to the current magstripe cards at $.05 each), new machines need to be developed and placed, new pin pads and new programming for it all.  And the EMV “Standard” as it is called, has yet to even be announced.  So, if it took 8-9 years to implement new pin pads, how long do you think EMV will take?

As of right now, processors have till April 2013 to be “ready” to process these transactions so they are implementing the back end.  Issuers are gearing up as well and, in fact, some are beginning to issue new EMV type cards to their card holders who travel internationally, where EMV technology is the standard.

There is certified equipment currently available that can handle EMV transactions but, they’ll need to be updated once the EMV standards have been set.  Some of them will need a peripheral device attached.  So, as a merchant, my advice is to wait it out for a while until it becomes absolutely necessary to get the new equipment.

Card companies starting to implement this technology

Although this technology has been a little bit slow to be adopted in the US, some credit card companies are starting to implement the technology. Many of the credit card companies in the United States are starting to issue cards that have both EMV and magnetic strips in them. This makes it possible for them to use the cards and regular retailers in the United States or with credit card machines that use EMV in Europe. As more people start to use these cards, the technology will slowly be adopted in the US.

• In August 2011, Visa announced plans to accelerate chip migration and adoption of mobile payments in the United States, through retailer incentives, processing infrastructure acceptance requirements and counterfeit card liability shift.
• In January 2012, MasterCard announced their U.S. roadmap to enable the next generation of electronic payments, with EMV the foundational technology.
• In March 2012, Discover announced implementation of a 2013 mandate for acquirers and direct-connect merchants in the U.S., Canada and Mexico, to support EMV.
• In June 2012, American Express announced its U.S. EMV roadmap to advance contact, contactless and mobile payments and plans to begin issuing EMV-compliant cards in the U.S. in the latter half of 2012.

Thanks to the EMV standards, chip card issuers have a uniform standard to help them ensure that the payment cards they give their cardholders will work in EMV compliant acceptance infrastructures anywhere in the world. Merchants and banks can invest in chip card acceptance infrastructures knowing EMV compliant cards have been developed based on uniform standards. Cardholders can feel more confident knowing the security advantages of EMV will help protect them against the risk of fraud anywhere EMV is implemented.

Beginning this October, retailers who process most of their Visa card transactions from payment terminals capable of handling EMV chip-based cards may be able to avoid having a PCI data-security audit on an annual basis — and eventually pay lower interchange fees as well.

In 2015, the card associations will begin to shift liability for card fraud to further motivate compliance of EMV-capable terminals.. For example, liability will be assumed by the card-issuing bank if the card used does not have an EMV chip but the merchant’s payment terminal is EMV-capable. Conversely, merchants will be liable if the card does contain a chip but the terminal is not able to process it.

For further information and a good first start is to read the Smart Card Alliance white paper, which explores roadmap options for issuers, acquirers/processors, merchants and ATM owners to move to EMV. It is an education tool for the U.S. payments industry stakeholders on the actions each stakeholder needs to consider to issue, accept and process EMV transactions.

The EMV Connection web site provides up-to-date information for all industry stakeholders on the status of EMV migration, along with tutorials and educational resources that will assist with migration.

There is also A Guide to EMV published by EMVCo

Let’s take a brief look to fully understand what these fees really are and who they affect.

Affect on Consumers

When you apply for, and receive, a credit card from a major bank, they are allowing you to buy “stuff” today and take your time paying for it (at least they hope you take your time rather than paying the balance every month because they charge you interest for this privilege).  This obviously is how they make money off of you for this convenience.  Now, in addition, whenever you use that card to pay for “stuff”, the issuing entity makes money in the form of “interchange fees” (and a variety of other fees like access, assessment, FANF fees, etc).  These fees are paid by the merchants that accept these cards so, ultimately, you, the consumer, pay because merchants typically increase their prices to cover this fixed cost of doing business.  It’s been my experience that a good majority of consumers weren’t aware of how this all works.  So, will this suit benefit the consumer in lower costs for goods and services….only time will tell.

Affect on Merchants

Merchants that accept credit cards for payment of their goods or services, have a relationship with a Merchant Services Provider (credit card processor) to facilitate these transactions.  In turn, they pay what is referred to a Discount Rate on each credit/debit card transaction.  The majority of this Discount Rate is the interchange fee referred to previously and then the processor tacks on something for providing the service.  The Wall St. Journal reports that for many retailers, those fees represent the third-biggest cost of doing business, right after rent and payroll. A merchant’s average fee, says the Journal, is 1.5 percent to 3 percent of each credit card transaction.  Unfortunately, in my many years in the processing business, it has been my experience that many merchants aren’t fully aware of all the fees they are paying.  That’s where I come in and offer a thorough understanding and total transparency in providing Interchange Plus pricing to help reduce their costs.

How will it all shake out?

First, let’s just understand that this large cash settlement that is to be paid out, isn’t going to make its way into the hands of the majority of retailers in this country.  We’re talking mostly about the big box retailers here.  The settlement also includes a reduction of 10 basis points, or 0.1percent, for eight months to “merchants involved in the case” and again, this won’t benefit the majority of business owners out there.

This settlement should/could help reduce card-acceptance costs to merchants, which in turn could result in lower prices for all consumers.  But, as always, it’s up to the merchant to negotiate lower rates for this service.  The agreement will allow retailers, for the first time since credit-card use has been in place, to slap a surcharge (or “checkout fee”) on consumers who pull out plastic rather than cash for their purchases. Visa and MasterCard have never allowed that for fear that it would thwart credit-card use (and dramatically reduce their income). But retailers have increasingly complained about the rising fees on credit-card purchases, which surpassed items bought with cash and checks in 2003. The agreement does not lower or level those fees.  Consequently, as a merchant, you still need to be proactive in fully understanding your processing service fees and do all you can to keep them under control.

Whether retailers actually charge consumers more at the cash register when they pull out credit cards, or do as many gas stations do today—offer a discount for cash—will take months, even years, to play out.  Still, the merchant doesn’t necessarily want to be the first one on the block to start surcharging, because they can irritate loyal customers.  Paying with credit cards is much more convenient for merchants and shoppers, and it might be a bad strategy to penalize someone using the most convenient way to pay.” And, in fact surcharging is prohibited in the following states:   California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.  It is possible that these states will change their laws, but laws, but none of that is known right now.

So, in summary, as a consumer, you may in the future start seeing retailers posting signs at checkout of a “checkout fee” for using plastic or, alternatively, offering you a slight discount (maybe 1-3 percent) for using alternative payment sources like cash or check.  At that point, you can either choose to pay the fee, use other forms of payment or, shop elsewhere.  As a merchant, you will need to decide how you will handle this situation.  Will you continue to do business as you do now and simply absorb the costs associated with accepting plastic in the price of your goods or services?  Will you add a “checkout fee” and possibly lose business?  Will you post signs offering a small discount for cash?  Will you consider other creative ideas (that some processing reps may suggest) to encourage customers to pay with cash and increase your business?  Really, the ball is in your court.

The bottom line is this:  credit cards are here to stay and since it is a “convenience” used by many, you will continue to see consumers wanting to use them in your business regardless of the costs to you.  So, the best, and only thing you can do is to make certain that you are paying fair and reasonable fees based on what is available to you and your business.

I wish you the best and once again, thanks for reading.  I hope you have found this article to be insightful and helpful.