Diversifying Customer Payment Method Options

Offering customers multiple ways to interact with your business is a heavy priority this year. Does your business support social distancing and flexible payment options?

Economic effects of the coronavirus pandemic have challenged the way we do business. Businesses and consumers are extra avoidant of handling cash and credit cards. Those who accept credit cards are taking extra precautions to make sure their credit card terminals are disinfected between checkouts and their customers have the option to bypass contact altogether when they buy something in person.

Already, contactless payments were experiencing a surge in popularity, but since the virus started impacting the U.S. banks have issued more contactless credit cads than ever before. According to a study in March conducted by RTi Research, about 30% of consumers in the U.S. have started using contactless payments since the virus started raising widespread concern, and of those new users, 70% expect to continue using contactless payments method when pandemic risks have lessened. Contactless payments include transactions made via contactless credit card, wearable NFC devices like smart watches, and smart phones.

Most EMV chip-enabled terminals are also capable of contactless transactions. Examples range from standalone terminals like the Verifone VX520 to full-featured POS systems like the Clover Station.

Also according to RTi Research, approximately 30% of consumers worry about catching the virus from cash, heavily under fire as a virus transmitter. If your credit card terminal does not already accept contactless payments, it may be time for an upgrade through your merchant services provider. Don’t miss payments just because you don’t offer your customer’s preferred payment method.  

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Payment Processing Technology

Every business is unique, especially when it comes to accepting payments. The technology that you use to run your business is vital to your success, so it pays to really understand your needs and get the best payment technology solution possible.

Online Invoicing

Invoices are an essential part of billing for a majority of businesses. Many businesses still rely on very manual processes such as Excel templates, in order to create invoices. While this might seem like a cost-effective solution, the time wasted in creating your invoices and the lack of connectivity between your data can be highly detrimental.

EMV Smart Terminal

Physical credit card processing terminals are great for businesses with brick-and-mortar locations. If your customers are physically coming to you and swiping (or dipping) their cards, this is the solution for you. An important thing to remember is to make sure whatever machine you decide to purchase comes with full EMV and NFC technology enabled. This means you’ll be able to accept chip cards as well as contactless payment methods like contactless cards and digital wallets like Google Pay or Apple Pay.

Mobile Payment Solutions

Perfect for the on-the-go business owner, mobile payment technology can be a game-changer for your business. Some businesses can get by with just a mobile solution, but a large majority use their mobile credit card swipers and apps for trade shows and field reps to be able to take payments on the spot.

Online Shopping Cart

Online shopping carts are powered by payment gateways and are essential for any eCommerce business. Even if you mainly operate a brick-and-mortar location, having an online store is a great way to increase your product’s visibility. Processing payments through an online shopping cart couldn’t be easier, and typically involves a quick phone call with your provider to activate the payment gateway.

Virtual Terminals

While countertop POS systems or card readers may be the obvious choice for card processing equipment for some businesses, they may not be suitable for all. Especially if your business takes orders over the phone, mail, fax, or in-person, you are going to need the help of a virtual terminal. Virtual terminals are simply web-based applications that can run on your laptop, desktop, tablet, or smartphone, transforming them into a POS system so you can process transactions anywhere as long as you have an internet connection. All you need to do is enter the payment info into your virtual terminal and it will then be encrypted, authorized, and submitted for online payment.

Point-of-Sale

Point-of-sale systems are huge for restaurant and retail locations. These are large, integrated machines with a computer monitor, cash register, and an online credit card processing solution. POS systems come in a wide variety of shapes and sizes, so make sure you do your research and choose one with all of the right features for your unique business.

API

If you’re needing a very specific payment solution for your website or app, a payment processing API is probably the way to go. Some merchant services providers offer their API technology to developers to integrate into their proprietary applications, making it the perfect online credit card processing solution for companies needing something more customizable. Source

The Role of Credit Card Processors

The credit card processors are almost the unsung heroes of the entire operation, rounding up all the info and details to get your money from point A to point B. They’re the ones that keep the cash flowing smoothly between you, the merchants, and the banks, pulling the strings to make this miracle happen. Without them, you’d be stuck trying to trade chickens for groceries!

Connecting Merchants and Card Networks

Basically, credit card processors act like the rope that ties together the merchant and the card networks — Visa, Mastercard, Discover, and American Express. They occupy the middle ground between the parties and make sure your transaction is passed on correctly, keeping things running smoothly. 

They are also responsible for making sure all of this happens securely so that your data doesn’t end up roaming wild and free.

Here’s where the card processor comes in: When you swipe, tap, or insert your card, the processor ensures the information travels up the line to the banks and networks without any hiccups. Without these processors, your card swipe is a waste of time. They allow you to pay for purchases at stores, online, or over the phone without cash.

Authorizing Transactions 

Before cash changes hands, the processor checks to ensure you aren’t spending more than you have. They validate your information, watching for expired cards and suspicious activity.

The processor deals directly with the bank to validate that your account can pay for your purchase. 

Once that processor gets the all-clear from the bank, it gives the green light to complete the transaction. No funds, no sale — it’s just that simple!

How Payments Settle 

Settlement refers to the money heading to where it belongs — straight into the merchant’s bank account.

By this time, that processor has already cleaned up the loose ends. The cardholder’s bank is fixing to send funds right on over to the merchant’s bank — that’s the “acquiring bank” if you want to get technical. 

All the merchant’s bank does in a settlement is sit and wait for the money to flow in. That processor is the lead cowhand of this cattle drive, making sure every last penny is herded into the right account, no strays running loose. They may not be looking for a medal or anything, but you can’t deny they’re the ones that keep this whole shebang running smooth and fast with hardly any hiccups.

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11 Credit Card Habits You Need to Break Now

Taking control of how you use your credit card is the first step in getting out of debt. Here’s a look at 11 credit card habits you need to break immediately to start taking control of your finances.

1. Carrying a Revolving Balance

Carrying a revolving balance on your credit card makes each purchase you make more expensive thanks to interest fees. As your balance grows, interest charges accumulate, taking a big bite out of each payment you make to your account. Paying any amount of interest on your credit card account also voids any rewards you earn since the interest rate is calculated at a much higher rate than the rate at which you may earn cash back, points, or miles for your purchases.

Break this habit by treating your credit card like a debit card and only charging what you can afford to pay off in full at the time you charge it. It’s also a good idea to check in on balances once a month so you know when it’s time to scale back on spending.

2. Relying on Credit to Make Ends Meet

A recent LendingTree survey found that 64% of Americans are living paycheck-to-paycheck and many of them are relying on credit cards to make ends meet. While using credit cards to pay bills and afford other monthly expenses may seem like your only option when there’s no money left in the bank, setting up a budget can help get your finances back on track. 

Begin by creating a detailed spending plan that accounts for saving and paying down debt. Scrutinize bills for potential savings, start meal planning to reduce grocery spending, and track each purchase to ensure your dollars are going exactly where they need to so you can stay on budget. Tap into budgeting apps like YNAB or PocketGuard for help organizing your expenses and use services like Trim to identify and cancel unused services.

3. Keeping High Balances

Pushing your credit limits can cost you in the form of a poor credit score. Although the 2009 Card Act prevents credit card issuers from allowing accounts to go over their set limit so you don’t get charged an over-the-limit fee, there are other negative consequences that come with carrying a high balance such as dinging your credit score. In fact, credit utilization rate refers to how much available credit you have versus how much debt you owe. Your total indebtedness accounts for 30% of your credit score points.

In general, it’s advised that you use no more than 30% of your available credit to maintain a good credit rating. Using any more than that will impact your score for the worse and make it harder to secure a loan to buy a house or car.

4. Paying Just the Minimum Payment

Paying just the minimum due each month will trap you into a revolving cycle of debt that becomes increasingly difficult to pay off. As your balance grows and interest fees rise, you end up shelling out an incredible amount of money to pay down your original charges.

Say you’re carrying a credit card balance of $5,000 at the average interest rate of 20.74% and are only able to make a payment of $100 per month, it is estimated that it will take you 117 months (that’s almost 10 years!) to pay off the entire balance. That will cost you $6,650 in interest on top of your original purchase charges. That means you will have spent a total of $11,650 during this time.

5. Missing Payments

Pay close attention to when statement charges are due to avoid late payment fees and other potential penalties. Those who miss their payment due date will get slapped with a late payment fee of up to $41, and they will begin accruing interest on purchases charged during that billing cycle. Missing payments for 60 days or more will result in a penalty rate increase which will make your balances more difficult to pay off, leading to a vicious debt cycle. 

If you’re struggling to pay your credit card bill, don’t ignore it. Call your credit card issuer to set up a payment plan to avoid fees and penalties. Otherwise, setting up bill reminders and auto pay are easy ways to avoid these potential fees.

6. Using Multiple Credit Cards

The more credit cards you have, the easier it is to lose track of your total spending and rack up balances across multiple accounts, leading to devastating debt. It’s better to stick with one credit card so you can keep a watchful eye on spending to ensure you aren’t going over budget. This also allows you to maximize rewards to earn a greater amount of cash back, miles, or points on those daily purchases and monthly expenses.

7. Chasing Rewards

Spending more to earn rewards will cost you more in the long run compared to what you get back from the card issuer. Only use your credit card for purchases you carefully planned and use other tools to increase cash back or other reward earnings. 

8. Ignoring Bonus Reward Offers

Many reward credit cards offer bonus-earning potential each month for select retailers and businesses. These promotional offers allow you to rack up more cash back, miles, or points when making purchases with these companies, but you don’t automatically qualify for the extra perks. Such offers are usually emailed to you from your credit card company and require you to log into your account and opt-in to qualify for the extra rewards. Overlooking these promotional offers could mean you miss out on extra rewards to put toward a purchase or travel booking.

9. Swiping on Impulse

According to the Impulse Spending Report from Slickdeals, the average consumer spends just over $150 on impulse purchases each month. While $5 here and $10 there seems harmless, these small purchases quickly snowball and can cause you to take on a balance you cannot pay off by the due date. Tracking each purchase and following a carefully crafted budget is key to avoiding debt.

10. Opening Store Cards to Score a Discount

Retailers entice shoppers to open store credit cards by offering an immediate discount of 10 to 20% off their purchase if approved for an account. While the additional savings is tempting, opening a new credit card for a discount is ill-advised for a few reasons. 

First, your credit score may get dinged each time you request a new line of credit which will put a current loan request in jeopardy. Second, most store cards have low credit limits, high interest fees, and limited reward earning and redemption options, making them a poor choice for most shoppers. 

11. Ignoring Savings When Paying Down Debt

A common mistake people make when trying to get out of debt is to use all their available funds to pay down balances. However, ignoring the need to save at the same time can backfire and cause you to take on more debt down the road. While it’s important to work toward paying down high-interest debt, it’s even more important to build up savings in case of emergencies. 

An emergency fund protects your financial health by giving you a cash cushion that you can lean on during a tough financial time or when an unexpected bill pops up. Having access to liquid cash ensures you can pay bills rather than rely on a high-interest credit card and dig yourself back into a deeper debt hole. Aim to save up to three months of these living expenses in a separate account so it’s out of sight and out of mind. 

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What is a Card Verification Value?

A Card Verification Value (CVV) or Card Verification Code (CVC) is a three- or four-digit security number on a credit card used to verify that the cardholder has the physical card during online or phone transactions, providing an extra layer of fraud protection. But card issuers have developed some pretty good defenses against these ne’er-do-well thieves. One of them is that little three- or four-digit number called a Card Verification Value (CVV) — or, as some call it, the Card Verification Code (CVC). It’s your job to keep that number secret.

How Card Verification Value Works in Card Transactions

The CVV/CVC was invented to put an extra lock on your credit card and keep fraudsters at bay. It’s a secret password to ensure the rightful card owner is using the card before any money changes hands.

Enhances Online Transaction Security 

That little CVV/CVC is like a guard dog, just watching over your credit card when you go to make purchases online. And even if some no-good thieves happen to get a hold of your card number, they won’t be getting very far without that magic code. These codes are a real fence against those sneaky outlaws who might get hold of your card number but don’t have their mitts on your card itself. Without the CVV, it’s like trying to get into the corral without the gate key — it just isn’t happening!

Verifies Card-Not-Present Transactions 

When you’re making an online or phone purchase of an item, the seller asks you for the card’s CVV. It helps keep fraudsters at bay with card-not-present (CNP) purchases where you don’t physically hand over your card. The setup keeps rustlers from making off with your goods should they steal your account number but not your CVV.

Where to Find the Card Verification Value on Your Cards

It’s mighty important to know where the CVV or CVC is hiding on your card because it’s the key to keeping no-good varmints from riding off with your money. Different cards stash it in different spots, so if you’re looking to protect your funds, you’d best know where to find it.

• CVV on Visa, Mastercard, and Discover: You’ll usually find the CVV on the back of Visa, Mastercard, and Discover cards next to the signature panel. It’s a three-digit number that stands off by itself, separate from the main card number, silent but deadly against would-be hackers and fraudsters. It may be only a tiny number, but it is like the lock on a cattle gate — without it, the rustlers can’t make off with your wealth. If you aren’t paying attention to it, you might as well leave your safe wide open!

• CVV for American Express Cards: Things are a little different if you’re using an American Express card. The CVV — or,  in this case, CVV — sits on the card’s front, a four-digit number above the card number. It’s about as hard to miss as a coyote in a henhouse, and Amex likes to make sure you can find it without breaking a sweat. So, it’s a little more prominent compared to other cards. It’s as if Amex is waving a flag, saying, “Here I am!” With Amex, you look at the card front to get the code you need.

• Differences in CVV/CVC Formats: The length and placement of CVV/CVC codes depend on the card issuer. Some cards, such as Visa, Discover, and Mastercard, use only three digits, while Amex goes the extra mile with four. 

Some cards, such as virtual ones, do not even physically display a CVV. Instead, each transaction is accorded a new number. Source

Dual Pricing: Offsetting Your Processing Fees the Legal Way

Accepting credit card payments can be a double-edged sword for many small business owners – while it’s great to give your customers the option to pay with their preferred payment methods, the credit card processing fees can really add up.What if there was a way to incentivize customers to pay with cash instead, so you can avoid the fees? Well, there is! It’s called dual pricing.

What is Dual Pricing?

Dual pricing, otherwise known as cash discounting, is the practice of charging a customer less when they pay with cash instead of a credit card. It’s an increasingly popular program for businesses of all types, but you’re probably most familiar with seeing it at gas stations (where margins for the sale of gasoline are notoriously tight).

It often looks a little something like this: 

Cash discounting is a less-regulated alternative to the (heavily regulated) practice of surcharging, which presents itself as a line item on a receipt for up to 3% of the transaction total. This practice is subject to federal and state laws, and while federal law allows surcharging on credit card transactions, certain states have laws that prohibit or limit it. In a nutshell: surcharging is a markup for credit card payments, while dual pricing/cash discounting is a discount for cash payments.

As the cost of almost everything for merchants continues to increase, we’ve noticed a proliferation of “dual pricing” among small businesses. While it’s true that dual pricing (or cash discounting) is much easier to implement than surcharging, there are some rules your business should follow to avoid hefty fines and even a suspension from accepting credit card payments.

Surcharging Illegally: Common Mistakes with Dual Pricing

When we’re out and about, we’re seeing that the two most common mistakes merchants make are:

1. Changing their pricing to the cash price and then marking up the prices at the register when a customer presents a credit card.
2. Not properly informing customers of the available discount when paying in cash.

These practices look a lot like illegal surcharging.

Outside of potentially losing consumer trust, you’re putting your business at risk of penalties from your local authorities, legal action by credit card companies like Visa and Mastercard, and getting banned from accepting credit cards.

Lastly, it’s important to note that most of these mistakes originate from misinformation by merchant services providers. Whatever you’re told, make sure to do your research before implementing any cash discounting / dual pricing / surcharging programs.

Here’s how to offset the cost of processing fees with cash discounting or dual pricing while being compliant with the rules: 

• Your posted or displayed price must represent the cost of the goods if the customer pays via credit card. Alternatively, you can list both the credit card price and the cash price (dual pricing).
• You must only reduce the price at the register when your customer pays in cash, not the other way around.
• You can inform your customers of the discount opportunity with postage signage.
• Use a POS system that supports dual pricing and has a separate card price and cash price for each of your products.
• Use a reputable and licensed payment processor, like Gravity Payments.

Pro Tip: To take full advantage of cash discounting, you can raise your prices by your average credit card processing fee (say 3%) across the board, then discount the same at the register when your customer pays in cash. Source

Tap to Pay: What It Is and How It Works

Since the first plastic credit card was issued by American Express in 1959, payment tech progress has been growing exponentially. Magnetic stripe payments enjoyed a 30-year reign between the ’70s and ’90s. EMV chip card technology had a good two decades or so, beginning in the mid-’90s. And the winner of the 2010s and beyond is the NFC-powered, contactless sensation that is tap-to-pay.

Contactless payments became a must-have during COVID. Most modern card readers and payment terminals are NFC-equipped. But tap-to-pay is transcending that plastic card of the last 60+ years. NFC technology is in the midst of an evolution. Customers are driving digital advancements, and savvy small business owners should be aware of what’s to come.

History of Tap to Pay

Although contactless payments weren’t widely adopted until the 2010s, the technology actually dates back to 1995. In Seoul, South Korea, the Seoul Bus Transport Association introduced the UPass, a contactless payment card that commuters could tap on as they entered the bus. Almost ten years later, the US tried the technology, and it was four years after that when all EMV cards became NFC-equipped.

Despite the tap technology being available on most major cards, it was the smartphone advancements that really pushed consumers to adopt it. Tapping their phone to a terminal proved far more exciting than tapping the card. Google was the first, in 2011, to enable contactless payments via their mobile app. Apple Pay caught up in 2014; in 2015, the wearables market made everyone aware of the tap’s potential. Once the thought of the tap was there, the behavior followed. In 2015, many merchants switched to NFC-enabled terminals; by 2019, most banks were issuing contactless cards.

How Tap to Pay Works

Tap-to-pay, whether used with a contactless card or a smart device, operates through Near Field Communication (NFC) technology. This short-range wireless communication technology allows data exchange between devices close to each other, typically within a few centimeters.

NFC operates on radio-frequency identification (RFID) principles and electromagnetic induction, enabling communication between devices without needing physical contact or Wi-Fi connectivity.

Here’s how it works:

1.) NFC-enabled devices: The customer’s payment card (credit, debit, or mobile wallet app) and the merchant’s payment terminal must be equipped with NFC technology.

2.) Close proximity: The customer holds their NFC-enabled card or smartphone close to the merchant’s NFC-enabled terminal to make the payment.

3.) Data transmission: The NFC antennas in both devices communicate with each other. The customer’s payment information is securely stored in the NFC chip and transmitted to the merchant’s terminal.

4.) Authentication: The payment terminal validates the transaction by sending the payment details to the payment network (such as the card issuer—e.g. Visa, Mastercard, and the customer’s bank) for authorization.

5.) Secure transaction: The payment network verifies the transaction details, ensuring sufficient funds and confirming the transaction’s authenticity. A unique, one-time code is generated for that specific transaction if approved.

6.) Completion: The transaction is completed, and the customer receives a payment confirmation. The entire process is fast and secure and does not require physical contact between the card or smartphone and the payment terminal.

Benefits of Using Tap to Pay

During the pandemic, the number one benefit of contactless technology was the simple fact that it is contactless. No contact, no germs. But the benefits made known during that time were more aligned with the original reason for its development.

It’s faster

Contactless technology speeds up the payment process. Rather than “dipping” the card into the machine, merchants can quickly pass the reader close to the customer. The customer taps the card, and the transaction is complete. NFC devices facilitate the fastest and most convenient data exchange available today.

It’s secure

NFC transactions are secure due to the short distance over which they occur. Moreover, NFC devices can be secured with encryption and authentication protocols that ensure the confidentiality and integrity of the transmitted data, such as the cardholder’s personal information and card number.

It’s universally compatible

Unlike the chip card and magnetic stripe, NFC technology is standardized. This ensures compatibility between different devices and applications. Standardization enables seamless integration of NFC into more devices, including smartphones, tablets, payment cards, and other smart gadgets. It can power a payment future beyond our current plastic cards.

It’s versatile

One way to verify the longevity of a technology is to look at its usability outside of the obvious application. Businesses are using contactless loyalty cards and even loyalty apps that allow customers to store those loyalty cards digitally. Interactive marketing lets customers tap NFC-enabled promotional material to access offers, discounts, and product information. Beyond retailers and accepting payments, NFC is used for public transport, access control systems, smart advertising, data exchange between devices, and interactive gaming. NFC even enables smart packaging to provide customers with product and usage information at the point of sale.

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