5 tips for effectively managing credit card transactions

It is almost unthinkable that a company operating in today's cashless society does not offer its customers the ability to pay by credit card. Every business needs an electronic payment solution, which means that every business must make an agreement with one or more credit card processors to make credit card sales. Typically, a merchant agrees to accept credit from their customers (cardholders) who, under certain conditions, duly present a credit card at the point of sale, payment to the merchant by the credit card processor being the credit card processor's receipt of payment from the cardholder. In general, all payments made by the credit card issuer are conditional and subject to chargebacks, fees and fines.

 In some cases, the credit card processor may, in its sole discretion, suspend disbursement of funds when a default event has occurred (either because of the processor's agreement with the merchant or cardholder) or if the credit card processor has reason to believe that it is fraudulent Could give transactions that the dealer has submitted to him. Chargebacks to the merchant may be due, inter alia, to: (a) a cardholder denying the validity of a transaction. (b) a cardholder disputes the quality or receipt of goods or services; and (c) a copy of the sales draft was not provided on request.

 It is important to note that these reversals can be made under the processing agreement even if there is little or no evidence of a dispute, with the result that the credit card merchant's receipt of payment may be further delayed until settlement Dispute. To make matters worse, in some cases, the dealer has no choice but to spend time and resources rebooking these chargeback transactions, which are essentially accounts that were not purchased by the credit card processor.

In addition, credit card processing agreements typically empower the processor to open a reserve account that can be set up by the processor at its discretion. Among other things, this depends on the processing history and the potential risk of loss that the processor may experience from time to time. If the amount in the merchant account is less than the required reserves in the reserve account, the merchant is obliged to pay the shortfall. The reserve account may also be funded without notice from funds transferred to the merchant account. In some cases, this Reserve Account may be held for more than 270 days after the termination of the Credit Card Termination Agreement or for a longer period consistent with the processor's liability for credit card transactions. The processor may also unilaterally request a review of a merchant's business at his expense and expense.

Credit card sales do not always result in actual cash receipts for a merchant, and even if the merchant is paid, the payment can be made much later than the actual underlying sale.

In short, credit card sales do not always result in actual cash receipts for a merchant, and even if the merchant is paid, the payment can be made considerably later than the actual underlying sale. Here are five recommendations that a merchant should consider when attempting to effectively manage credit card transactions for their business because credit card sales are required and complex:

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1.Read and understand the processing agreement.

This may seem obvious, but it is crucial that a trader really understands the terms of his credit card processing contract. For example, most credit card settlement arrangements provide a maximum "combined estimated monthly volume" and an "estimated highest ticket / sale amount" for each credit card facility. If the merchant exceeds these amounts, the credit card processor may hold the merchant funds pending further activity. Consequently, a trader should ensure that these conditions are consistent with his planned sales.

 For example, if a merchant determines that their forecasted credit card sales are over $ 100,000 for a given month, they should not agree to a combined estimated monthly volume of $ 70,000. Likewise, a merchant with large ticket items should ensure that the estimated highest ticket / sales volumes work for his sales. In addition, credit card processing companies charge a lien on credit card accounts. A trader must ensure that the imposition of this lien is not in conflict with other loan documents and loan arrangements.

2.Set up internal coordination.

Successful traders do everything they can to move within the "four corners" of their processing agreements to maximize the ability to pick up (and thus minimize potential refund claims). Set up processes and procedures related to credit card sales under applicable processing agreements to maximize the recovery of all sales and ensure efficient and effective resolution of potential disputes.

3.Be proactive and plan ahead.

Successful traders who know about their credit card settlement arrangements tend to: (a) carefully consider and, if necessary, immediately challenge the collection of fees and expenses not otherwise provided for in the arrangements; (b) charge compensatory bookings (c) the retention of additional amounts in the reserve accounts and (d) the retention within the reserve accounts to avoid unnecessary delays in payment. In addition, successful traders develop meaningful cash flow forecasts, which typically include some "reserve" for credit card sales based on past experience. Realizing that some sales do not lead to immediate cash inflows can help a trader effectively manage his cash flows.

4.Evaluate the payment history with different processors

Monitor performance. Review the chargeback and payment history with various credit card processors. Distinguish between credit card processing companies offering low rates and credit card processors offering more favorable terms and how each credit card processor complies. In some cases, despite stringent conditions, a credit card processor will not seek to withhold the maximum allowable amount, but instead withhold an appropriate amount consistent with the financial risk. Develop a means of assessing the appropriate behavior of the processors.

5.Buy for the best deal.

Negotiate the best possible terms, paying particular attention to the time that the credit card processor may retain money in the reserve account for possible chargebacks. Also, be aware of the behavior of a credit card processor in the past. Sometimes it makes the most sense to work with a processor that in the past has only made provision for the actual credit risk reserve (as opposed to general business) risk). Credit card processing is a competitive industry - use the competition to do your best business. Of course, pay attention to the best prices!

The sale of credit cards is an important source of working capital for today's traders. The final decision for a credit card agreement depends on finding a processor that offers both reasonable terms and a consistent willingness to collaborate with its merchants. Look for the right credit card processor for your business. It may not be enough to set only the best rate!