Consumer Credit Card Protection

Merchant Services: Consumer Credit Card Protection

As a business owner or merchant, you always want your customers to be happy. With the use of credit and debit cards at an all-time high, the risk of fraud and financial loss to merchants is increasing. While it may be impossible to prevent every instance of a chargeback or other credit or debit card related issue, there are some methods of protection you can put in place to limit these occurrences.

Credit card theft is a major problem for many consumers. As a merchant, you can be aware of instances when someone might be attempting to make a purchase with a stolen credit card. If a charge goes through with a stolen card, you may be hit with a chargeback, which can include not only having to refund money for a purchase but also penalties and fines from the card issuer, depending on terms set forth in the merchant agreements.

If a customer’s card is declined, it may have been reported as lost or stolen. Customers should be aware that there are legal protections which limit their liability, and as a merchant, a familiarity with these protections may improve customer service and help build return business.

As a merchant, your customer’s legal limit for liability under the Fair Credit Billing Act (FCBA) law is capped at $50. This means that the cardholder cannot be held responsible for any unauthorized charges over this amount. Because credit cards tend to have more fraud associated with them, you as a business operator are typically charged a higher processing fee per transaction than for purchases made with a debit card. Different card issuers such as Visa, Mastercard, and Discover have different “pass through rates,” or a percentage of each purchase that is deducted for allowing customers to use that particular card. Something called a security code located on the back of the credit card adds another layer of security. It is advised that you set up your credit card machine to take this security code in addition to swiping the card, just so you have an added layer of security for the customer. Many merchants also opt to ask for identification, which is a good way to help prevent card fraud. If you feel uncomfortable taking a card, you can always call the card issuer to verify information if need be.

Debit cards are another way for customer to pay that offer the same convenience as a credit card, but the funds are deducted directly from their bank account instead of credit. Theft and fraud for debit cards is also high, but tends to be a bit lower risk for theft. There is often a surcharge associated with using a debit card and this charge is billed to the customer. The rate of these fees varies from bank to bank, and may also depend on the amount of money being charged on the debit card. The funds using debit are usually placed on a temporary hold until they actually clear the customer’s bank. Because the bank is technically the issuer of the money, merchants are at a lower risk and are therefore charged a lower pass through fee. New laws passed have now asked banks to simply decline a customer’s debit card if they have insufficient funds versus charging them overdraft fees. This can affect you because the customer my have to decline making a purchase due to lack of funds, but it is a help to them because it avoids them having to pay overdraft charges later.

There are many laws and stipulations put in place when it come to using both credit and debit cards. Merchants can be aware of current laws and understand what to look for in the event that someone is attempting to use a stolen card. By understanding these laws and knowing the ins and outs of how credit and debit cards work, you can better protect yourself and your customers from fraudulent or unauthorized charges.

For more information about debit and credit card transaction laws, please refer to the following websites:

 
 
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