This tax would be levied against digital ad providers who make more than $100M a year in ad revenue nationwide, and could be up to 10% on the revenue that they generate on said ads running in Maryland. For context, Facebook and Google made roughly $2.5B in ad revenue in Maryland last year, which would’ve generated $250M in tax revenue. The obvious downside is that this tax imposed on the tech giants would undoubtedly be passed along to small businesses using the ad services who are already struggling.

The good news for Maryland small businesses is that this lawsuit will probably be tied up in courts for the foreseeable future.

BEGIN TRANSCRIPT:

Ladies and gentlemen, boys and girls, it’s your boy Jaron Rice, founder and CEO of Magothy Payments, Maryland’s highest-rated merchant services provider. I came back today to give you an update on the Maryland digital ad tax.

If you don’t know and you’ve been living under a rock or you don’t live in Maryland, the Maryland legislature passed a bill that would impose a tax on revenues that are generated for online ads here in Maryland when the company imposing them has more than I think it’s $100 million a year in ad revenue. So it targets big tech companies like Facebook and Google and places like that, and it would levy up to a 10% tax on the revenues generated for digital ad sales here in Maryland.

They were estimating that it would raise about $250 million in tax revenue which, of course, anybody with a functioning brain understands would be passed on to the small businesses who are actually using these services. So that was the bad news.

The good news as of right now is that companies are coming out of the woodwork to sue the state of Maryland because of this unconstitutional and asinine piece of legislation. Notably, the U.S. Chamber of Commerce and the Internet Association, they are obviously suing the state of Maryland because the law is unconstitutional. It’s predatory, and it specifically targets digital ads while ignoring print and television and other avenues like that.

So this legal battle could be in the works for a while, and so the good news is hopefully it gets overturned and is deemed to be unconstitutional so that small business owners like us don’t have to shoulder those costs.

Keep your fingers crossed. We’ll bring you any updates as they happen, and I hope you guys are having a wonderful day. I’ll catch you in the next one.

The post **UPDATE** Maryland’s Digital Ad Tax appeared first on Magothy Payments.

When a consumer purchases something from a business, they expect the item to be shipped and delivered in a timely fashion. Unfortunately, the USPS has had problems losing packages and not updating the tracking information, which in turn causes the consumer to think that the business ripped them off and took their money without ever sending their items.

This is a widespread, common problem. If you’re a consumer, please be patient. This isn’t the fault of the business, and issuing a chargeback with your bank is hurting that small business for something that’s not their fault. If you’re making a purchase online and you have the option to select the shipping provider, we advise you to use one other than the USPS. Yes, USPS is [usually] a lot cheaper. But as the old saying goes, you get what you pay for.

BEGIN TRANSCRIPT: 

Ladies and gentlemen, boys and girls, it’s your boy, Jaron Rice, founder and CEO of Magothy Payments,  Maryland’s highest-rated merchant services provider.

I want to take a moment and talk to you about the USPS, the United States Postal Service. I have no idea what is going on over at USPS, but it is causing a problem for a lot of businesses and a lot of merchants, especially eCommerce merchants who ship goods to their clients.

I know we personally have a number of clients right now who are dealing with chargebacks from their customers because the USPS wet the bed on doing what they’re supposed to do, which is delivering packages. This is not a direct insult to USPS employees who are doing their job. If you are a good worker and you are doing your job, I am not talking about you, so please don’t take offense to this. But the organization as a whole has a history of incompetence.

When a merchant ships an item and gets a tracking number and it goes off and USPS does what they do and that tracking number doesn’t update for weeks or months, then that customer who is expecting those goods, turns around and issues a chargeback on the merchant as if the business didn’t do their part when in actuality it is the post office who sucks. This is happening a quite a bit.

The advice that I have is if you are consumer, please, please, please be patient with these businesses. It is not the business’ fault. I understand that you purchased something. You’re expecting it. It’s not their fault, OK? Issuing a chargeback only hurts the business.

If you are a business, we can help you with the chargeback portion. Our clients, we offer chargeback assistance at no additional cost. Just an update to our existing clients in how we do our order of operations for chargebacks, we’ve recently updated it so that we, Magothy Payments, are notified via email the moment a chargeback comes across so that we can begin that process for our clients.

It’s very, very difficult right now for eCommerce merchants, and a lot of them, a lot of our clients are dropping USPS as a service provider because they’re not doing their jobs properly. When an eCommerce merchant has multiple providers, as a consumer you go the website and it says, “FedEx is this much. UPS is this much. USPS is this much.” USPS is usually the cheapest option, and so people by default are like, “This one is cheaper. I’m going to choose this one.” A lot of times in life you get what you pay for, and it’s causing problems.

Again, we want you to be aware of an issue that is happening quite a bit. If you’re having an experience like that right now either as a business or a consumer, tell us about it down here in the comments. Leave us a note, and I hope this information was helpful. I hope you understand why things are happening the way that they are.

If you have any questions, you can always reach out to us. So if you enjoy the content, please consider subscribing and liking and sharing this video. Hope you’re having a great day. Take care.

The post The USPS Is Causing Chargebacks! appeared first on Magothy Payments.

BEGIN TRANSCRIPT:

Ladies and gentlemen, boys and girls, it’s your boy, Jaron Rice, founder and CEO of Magothy Payments, Maryland’s highest-rated merchant services provider, back for another episode of whatever this is. I haven’t quite figured it out yet. But I’ve got a lot of good information that you, the people, the small business community, need to know and need to understand.

Today I want to talk to you about Maryland’s House Bill 777, which is now signed into law, and what it does to protect you, the small business owner, from the predators in our industry, whether it’s the banks or the merchant services provider.

When I got into this industry a little over six years ago, I noticed a huge, huge problem. I would meet with a business owner who wanted to switch their payment processing over to us. We were saving them a couple hundred dollars a month. Then when they went to go cancel the service with their previous provider, their previous provider attempted to levy fines upwards of thousands of dollars for switching their services.

What happens here is oftentimes a merchant services provider or a bank on their agreement for merchant services on the signature page, there’s a line that says, “By signing this document, you are agreeing to our terms and services, which can be located here.” And on the piece of paper, there is a written-out URL that has a link to an often 75 to 100-page document which is their terms and services. Buried in the middle of that huge document in 6-point font, there is a clause that says, “This agreement is good for three years. If you cancel before three years, we will charge a cancellation fee of $499 and liquidated damages penalties of $100, $200, $300 a month for all the remaining months left on the agreement.” In essence, the merchant services provider is saying, “By you taking your business elsewhere, you are causing us financial harm, and so we are going to bill you for our lost profit.” Of course, they’re causing you financial harm because you suck. If you didn’t suck, they wouldn’t leave.

But that’s a huge problem that we were dealing with. Merchants were getting stuck in these agreements, and the merchant services providers would give them literally a 30-day window where they were allowed to cancel that agreement, or it would automatically renew.

I am a mission driven type of person. It’s in my nature. I cannot see a wrong being done and just be quiet and be silent about it. Providentially, I ran into a gentleman who was a referral. He owned a cigar shop. I was telling him stories of things that I had seen in the industry about big banks and merchant services providers ripping off small businesses. We were trading horror stories and things he had seen, and I jokingly said to him, “I wish I could make that illegal” or “I wish I could write a law to make that illegal,” or something to that effect. He looked at me and said, “Did I mention to you that I’m a state delegate?” And I said, “No, you did not. But that would be useful.” He is delegate Seth Howard here in Anne Arundel County, and he invited me down to Annapolis. I met with his legislative team. We hammered out a bill, and it took us three years, three legislative sessions, to get this bill passed.

Basically what it does is if you are a small business in Maryland, you have fewer than 50 employees and you are processing less that $2 million in credit card volume a year, this is designed to protect you. The majority of our clients are those small businesses. What it does is it caps all of the fees, fines, penalties, liquidated damages that a company can charge you at $500. It levels the playing field and makes it more competitive in our industry so that if you are a small business owner and you’re not happy with the service that your merchant services provider is providing, you can then shop elsewhere without fear of a huge financial retribution being levied on you for taking your business somewhere else. it also makes it so that if your agreements automatically renew, once it automatically renews, there can be no fees, fines or penalties levied once you’re in the renewal period. The information about your cancellation fees, it has to be in 12-point, bold font on the actual agreement that you sign. The renewal date, the penalty for cancellation, the contact information of the merchant services provider, all of those have to be on the actual agreement that you sign in 12-point, bold font. Each individual clause has to be initialed by the merchant. This was huge in bringing transparency to our industry, which is obviously not known for being transparent.

In the first couple of years, we had a lot of opposition. First Data and the Maryland Banker’s Association and all of these big, huge corporations who didn’t want us to go forward with this legislation, even though I work in the industry, my industry hates me because this legislation in Maryland affects how merchant services providers can compensate their sales agents because they know that they can no longer slam a merchant for thousands of dollars. They can’t afford to pay this merchant sales rep several hundred dollars, a thousand dollars in up front bonuses knowing that they can recoup the money if the business takes their business elsewhere.

It really ruffled some feathers and pissed off a lot of people, but, frankly, I don’t care. I believe that this is the right thing to do. I am a free market capitalist. I believe in the less government the better, but the payments processing industry is like the wild west. And these merchant services providers and big banks were running rough shod all over the small business community. I think that merchant services providers, banks, and their clients, the actual small businesses, that we should be on the same side of the table. We have a vested interest in the long-term growth and success of their business. Why are you trying to violate the people who are your customers? I don’t get that. I don’t understand that, so we took steps to change that.

If you are a business owner in Maryland, again, you have fewer than 50 employees and you’re processing less than $2 million a year, this applies to you. This was signed in April of 2019. It went into effect in October of 2019. As of this recording, this is the last day of November 2020, it is in effect, and it is protecting you right now. If you have any other questions about that legislation, you can visit www.mdhb777.com and there’s more information about that and how you can file a claim if you have a merchant services provider who is violating that regulation.

So I hope that information was helpful, and we’re continuing to commit to bringing you some useful content. I hope you guys are having a great day.

The post What Every MARYLAND Business Owner Needs To Know About Their Credit Card Processing. appeared first on Magothy Payments.

A card should always be run for the full amount owed, splitting a charge into lesser amounts on the same card simply increases the risk that you as a merchant will not receive your full payment in a timely manner.

If a card declines the card holder should be notified immediately and asked to contact their issuing bank to resolve any issues that may be triggering the decline.

A card should only be attempted a second time if the card holder comes back and states that all issues have been resolved with their credit card issuer.

A card should not be attempted again if it declines more than twice in a day, you should either request a different form of payment from the customer or wait 24 hours.

If you choose to wait 24 hours and the card declines a third time a new form of payment should be requested.

Following these steps will reduce the risk of receiving a false authorization which can be triggered by multiple attempts to authorize a card in a short period of time and give the merchant greater security in their payment processing.

BEGIN TRANSCRIPT:

Ladies and gentlemen, boys and girls, my name is Jaron Rice, and I am the founder and CEO of Magothy Payments, Maryland’s highest-rated merchant services provider.

Today I want to go over VISA and Mastercard regulations as it relates to declined transactions. We at Magothy Payments work a lot with card-not-present merchants, so businesses who are not physically present in front of their client when their clients are paying with a credit card. These might be home improvement companies, home services companies, people who are taking payments over the phone, eCommerce transactions, gateway transactions, payments through invoices. Things like that when the card isn’t physically there.

Because the card isn’t physically there, inherently there is more risk to that transaction and that risk for fraudulent transaction increases if the card is declined and the merchant continues to run the card. An example would be let’s just say a plumber finished a job, got your payment information, went back to the office and went to run the transaction and it was $500, and that $500 transaction was declined. He’s already done the work. You owe him the money. He’s trying to run that transaction and it gets declined. Oftentimes, he will attempt to run the transaction again and then again, and then again.

There are times when businesses in that situation, if they run it for the total amount that is due and it is declined, they will decrease the amount. Let’s say he runs it for $500. It doesn’t work. He tries it again. It doesn’t work. He runs it for $400 it doesn’t work. He tries $350 and then it finally goes through. From the payment processor side of that, the acquiring bank and the issuing bank will look at that as highly suspect. It looks fraudulent. It looks like you found a credit card on the ground and you’re trying to run it for as much as you can possibly get off of it.

VISA and Mastercard have specific regulations and protocols that you should follow to avoid having funding delays or delays in getting your money after the fact. The first thing it says is, “A card should always be run for the full amount that is owed. Splitting a charge into lesser amounts on the same card simply increases the risk that you as a merchant will not receive your full payment in a timely manner.” When a merchant services account is initially approved, most of the time it will have a high-ticket limit.

If your account says that you can run a transaction as high as $5,000, if you get an $8,000 transaction, running it $4,000 twice, you’re not fooling anybody. Sometimes merchants will break it up into smaller transactions because they don’t want to exceed that limit. Their software is going to recognize this is the same card number being run in quick succession and you’re more likely to get the transaction flagged than if you were to run it as one transaction and exceed the limit.

It says, “If the card declines, the cardholder should be notified immediately and asked to contact their issuing bank to resolve any issues that may be triggering the decline.” This is where it’s really important to look at the processor response. If you’re using a virtual terminal and you’re actually the one keying it in because they’ve provided the card number on a payment form or you’re getting it over the phone, there’s usually a processor response that will say, “declined” or it’ll say, “over the card limit.” And this is often the case if you’re running a debit card and it’s a transaction and it sees $1,500 because most debit cards will have a daily limit on them. You might have $20,000 in the bank account that debit card is attached to but if you try to run it for a single transaction over $1,500, it would decline. You have to call the bank and ask them to temporarily remove that hold. That’s a fraud deterrent mechanism that the bank has.

They’re saying, “If a transaction is declined, verify with the cardholder, ‘Did I get the card number right? Is this the right information? You need to call your bank because it’s getting declined.’” A card should only be attempted a second time if the cardholder comes back and states that all the issues have been resolved with their card issuer.

If you verify with the cardholder this is the correct information, you can try it again. But it goes on to say, “A card should not be attempted again if it declines more than twice in the same day. You should either request a different form of payment from the customer or wait 24 hours before attempting it again.” That is really, really important because we’ve seen scenarios where a merchant will attempt the same card, two, three, four, five, six times until it goes through. If it does eventually go through, more than likely those funds are going to be held because the transaction itself seems suspicious and you’re going to have to turn in supporting documentation like a signed agreement, a payment authorization form and things like that.

If you choose to wait 24 hours and the card declines a third time, a new form of payment should be requested. And then it goes on to say, “Following these steps will reduce the risk of receiving a false authorization which can be triggered by multiple attempts to authorize a card in a short period of time and give the merchant greater security in their payment processing.” According to VISA and Mastercard, and maybe this is if you’re trying to run a transaction fraudulently, apparently repeating it over and over and over again can potentially overwhelm the issuing bank’s approval process and get a false authorization where if you run it enough times it’ll eventually go through but it could be potentially a fraudulent transaction.

Just wanted to provide you with a little bit of information regarding those declines. If this is something that you’ve experienced as a merchant, this is why. If your decline percentage gets too high, your account as a whole could be suspended and reviewed for fraudulent activity because again from the acquiring bank’s standpoint, if 15% of the transactions that you’re running are declines, that looks suspicious. The higher that percentage goes, the worse it looks.

If you want to have smooth sailing with your merchant account, you can certainly abide by those regulations and you shouldn’t have problems going forward.

I hope that was some good information for you. If you have any questions, you can certainly reach out to us at info@magothy.biz or magothy.biz obviously is the website. Please subscribe and like the video if you like the content, and hopefully we’ll get some more out to you pretty soon. Have a good one.

The post Visa & Mastercard Guidelines for Declined Transactions appeared first on Magothy Payments.

BEGIN TRANSCRIPT:

Ladies and gentlemen, boys and girls, I’d like to welcome you back. I am Jaron Rice, aka Ronny Ruckus, the founder and CEO of Magothy Payments, Maryland’s highest-rated merchant services provider. I want to take a minute on this COVID-19 update and tell you why you should not use GrubHub or DoorDash when you’re ordering from your favorite local restaurant.

The reason is simple: these companies charge an arm and a leg. We visit a Korean fusion place. They have amazing bulgogi and bibimbap, and we order from there roughly once a week. It’s called Red Tigers in Pasadena, MD. I believe it’s DoorDash that they’re using.

Normally when we do carryout orders, I go to the restaurant. I stand in line. They make my bowl. I pay, and I leave. Sometimes there’s a bit of a line because they’re fulfilling DoorDash orders for the drivers to come and pick up or for other people to come and pick up. This last Friday before I left the office, I placed an order so it would be ready when I got there.

When I walked in, they recognized me. They know that I’m a regular. She said, “Oh, you’re a regular.” I said, “Yeah, I placed the order already.” She looked at it, and she literally looked at me the way that I’d imagine my wife looked at me if I told her I was in love with another woman. She looked so betrayed that I’d ordered on DoorDash. She said, “No, why did you order? You can call us. You can use our website. We’ll place the order. We’ll have everything ready.” She said, “They charge us 30% to process orders through them.”

Thirty percent, right? We’re going to use a round number on a $30 order for my wife and I to make two bowls. DoorDash got $9 out of that just for using their mobile app. I picked it up. They didn’t send a driver. They didn’t do any of that. It was literally using their platform to place the order.

If you care about small businesses, you should absolutely order from them directly when you have that opportunity. Now I understand there are certain cases if they don’t offer delivery themselves and you want it delivered. If they don’t have a website or a way for you to place an order directly with them, then DoorDash, GrubHub, places like that, are the only option that you have. But if you can do it outside of those organizations and go directly with the small business, more of that is going to the actual business because it’s literally killing them. Their margins in the restaurant industry are small as it is. Using that type of service really is only hurting them.

I’m begging you. Please, please, please place your orders with your local carryout place instead of using one of those big software platforms.

I hope everybody is staying safe. I hope that’s some valuable information and we’ll catch you in the next one.

The post Don’t Use DoorDash or GrubHub for Carryout! appeared first on Magothy Payments.

BEGIN TRANSCRIPT: 

Good afternoon. Jaron Rice, founder and CEO of Magothy Payments. Today is April 17th and I wanted to give you an update of what is going on in the payment processing industry as it relates to COVID-19, coronavirus, whatever you want to call it.

We are in Maryland. The state is still in a state of emergency. It’s effectively shut down. This emergency has caused a ripple effect in the payment processing industry that nobody expected or foresaw but we’re experiencing right now on the front lines. And so, I wanted to give you an update of how that is looking.

One of the first things is that a lot of the processors right now are experiencing a ton of chargebacks. If you’re new and don’t understand the merchant processing industry, a chargeback is when a cardholder essentially tells their bank, “I didn’t authorize this transaction,” or “This company, person, ripped me off. This is not what I paid for.”

Normally, the chargeback window for VISA and Mastercard is 120 days from the date of the transaction or the delivery of goods and services, whichever is later. For AMEX and Discover, it’s actually one full year. Let’s say there’s a home improvement company. They replace a roof for somebody and three months later it’s leaking, and that home improvement contractor doesn’t answer their phone, doesn’t have any sort of customer service, that customer can call their bank and say, “This company ripped me off.” The bank will then forcefully take those funds from the business and hold them in escrow for 30 days while they explain themselves.

Now if the company doesn’t have the money, then the acquiring bank that authorized the transaction is responsible for paying back the cardholder. That’s what we’re seeing a ton of right now. There are a lot of business that are experiencing higher chargebacks than normal.

If you are in the wedding planning industry or you’re an event planner, you have a venue or you’re a caterer, you’re a losing company, or something like that, and people are booking deposits months in advance and COVID-19 comes around and basically cancels every event that you’ve had planned for the next several months, there are going to be a lot of cardholders that want their money back. Even in this situation, the best customer service is not going to prevent chargebacks because there are some cardholders who are just not in a position to be patient. They need their money back because their daughter’s wedding has been canceled or postponed, and that several thousand dollars that they shelled out? They want their money back.

What we’re seeing is that a lot of these processors are getting hit with tons and tons of chargebacks that their clients, the merchants, the businesses don’t have the money to fund. And so, we’re seeing a lot of the banks circle the wagons and scrutinize transactions a lot more.

At Magothy Payments, we focus a lot on the card-not-present high-dollar transaction space, and so we’re seeing it a lot with our clients where they’re running large transactions. Even with proper documentation, they’re showing a signed agreement, they’re showing a payment authorization, the processor is holding funds until they get confirmation from the cardholder that the service has been performed or that the items have been delivered.

In times past, they didn’t require all of that confirmation. But now they’re starting to protect themselves. We’re dealing with a situation with companies that sell and supply medical devices and COVID-19 masks and things like that. In times past, that business, when they were ordering from their supplier, they were on a net 30 or net 45 payment window where they can order 1,000 masks and then their supplier would give them 30 to 45 days to pay that. They would order the masks. They would have them in stock, and then when their customer comes around and wants to buy masks, they sell them. They have them in stock. They collect the money from their customer, and then they pay their supplier. What is happening is these suppliers are now requiring that the merchants pay up front. So instead of being net 30 or net 45, it’s, “No. Pay me now.”

Business that are going through a cashflow crunch are having to shell out up front for their supplier. And then when they collect from their customer, if it’s a large transaction, those funds are being held. They’re having to ship out the goods and make sure that their customers get it. And the acquiring bank is calling their customer to make sure that the items have been delivered and that they’re happy with it before they’re releasing those funds. It’s creating a huge crunch because now the processors are not allowing prepayments on large transactions.

What’s happening is a lot of manufacturers of COVID-19 masks and personal protective equipment, they are running out of stock. They can’t provide. If you have a business that collects from their client, “We’re going to sell you 1,000 masks,” their client pays with a credit card and it’s let’s say at $10 a piece it’s a $10,000 transaction and they’ve got the money from their client, they place the order with their supplier and then their supplier takes their money, but then there’s a backorder. And their supplier is saying, “Oh, we can’t get it to you for 30 days,” which causes a crunch because they haven’t gotten the money from their client. They can’t deliver, and it creates this ridiculous cycle that is affecting everybody.

This is very common right now, unfortunately. If you work with any of the major processors, any of them, all of them will tell you that they’re dealing with the same thing right now. If you’re dealing with it, hopefully you have a merchant services provider or a rep that is very communicative and let’s you know what’s going on and updates you on the progress of getting these funding delays rectified.

It exacerbates the problem because most of these processors, the people in their loss prevention department, are working remotely, and so they oftentimes are not available by phone. It’s a difficult mess. This is happening across the country, across the world. It is a big problem that we’re seeing right now.

If you’re experiencing it, you’re certainly not the only one. Eventually we’ll get past this as things improve and people start going back to work and there’s less of a cashflow crunch. But if you’re dealing in the space where your customers are accepting large card-not-present transactions, prepare yourself for funding delays because this is just par for the course.

I hope that was useful information. If you have any questions about it, you can email us at info@magothy.biz. Check out the website, www.magothy.biz and I hope you’re having a great day.

The post How COVID-19 Is Affecting The Payment Processing Industry appeared first on Magothy Payments.

Have you ever heard the saying, “One bad apple spoils the barrel?”  It’s true, ya know.  An overripe, spoiled apple will emit significantly higher levels of ethylene gas causing other apples around it to overripen as well.  We often use this saying or variations of it to describe how low character people can be bad influences on those around them.  So, what does this have to do with payment processing?  Well, to be honest, quite a bit.  You see, there are a lot of bad apples in the payment processing industry.

Somewhere a long the way, many merchant services providers forgot that they should be on the same side of the table as their clients – and they allowed their own greed to drive their decision making.  Because of that, we’ve seen many companies employ agents who have lied to clients, fraudulently forged signatures on agreements, or even changed the terms of an agreement afterwards by turning 1’s into 4’s or 7’s.

The most common practice is to not disclose the term(s) of a merchant services agreement.  For example, many businesses have no idea when they’re locking themselves into a 3 year agreement with a $495 cancellation fee and liquidated damages. We’ve also met several merchants who didn’t know that they were signing up for a long-term, non-cancellable lease because they agent told them it was a month-to-month rental or that it was “free.”

Sadly, over the years we’ve seen all of this and worse. So, we’ve compiled a checklist of things to consider before signing a new merchant agreement:

• Have you researched the company online? If they have no online presence or their reviews are overwhelmingly negative, that’s cause for concern.
• Are they members of a local chamber of commerce or an accredited business with the BBB? Fly by night companies almost never go through the vetting process required for these kinds of organizations.
• Do you know of any other businesses who use their services and can provide a reference? Knowing someone who can vouch for them goes a long way when it comes to trust.
• Is the company easily accessible?  Do you know where their office is or have any other contact information for them?  It’s important to be able to reach the company, not just the sales rep.
• Have you thoroughly read through the entire agreement presented to you?  It may sound elementary, but you should never sign anything you haven’t read or don’t understand.

If you’ve answered no to any of these questions, that should give you pause and should prompt some more investigating.

So, what happens if you’ve made these kinds of mistakes already and find yourself being taken advantage of by con artists who now have access to your bank account?  If fraud has been committed by a sales agent and/or the company they represent, it’s important that you contact the state’s attorney’s office in your state, the Better Business Bureau, the Federal Trade Commission, and even the Consumer Financial Protection Bureau.  We’re located in Maryland, so the contact information listed below is for the Maryland Attorney General and the BBB of Greater Maryland.  The FTC and CFPB are national organizations.

Maryland Attorney General’s Office
410-528-8662
www.marylandattorneygernal.gov

BBB of Greater Maryland
410-347-3990
www.bbb.org/greater-maryland/

Federal Trade Commission
877-382-4357
www.ftc.gov

Consumer Financial Protection Bureau
855-411-2372
www.consumerfinance.gov

The post Cause for Advocacy appeared first on Magothy Payments.

I’ve been reviewing processing statements for years now and I still see things that make me scratch my head. Part of it is because this is an incredibly complex industry to begin with, and part of it is because many companies exploit that complexity to hide more fees in order to make more money. Recently, I was reviewing the statements of one my clients and saw that they had a number of EIRF charges. After talking to them and letting them know why they’re occurring and how to prevent it, I figured I’d write about it to share my experience with others.

EIRF stands for Electronic Interchange Reimbursement Fee. It’s a pricing downgrade for certain Visa transactions. Typically, these occur because the batch wasn’t settled in a timely fashion (2 days for EIRF, 3 days for standard), the settlement amount is different than the authorized amount (only for merchant types that don’t allow for variances like places that accept tips or gas stations), or you have missing information when the transaction is submitted (usually the cvv code or address verification information).

Let’s address these one at a time. First, you should be batching out every day that you have transactions. Never, ever let batches go unsettled. Whether you have a virtual terminal, mobile application, or a traditional terminal you should be able to set it to batch out automatically. Restaurant and salon owners (or any business that accepts tips) may not want to auto batch their transactions because if you batch out a tipped transaction without adjusting the total amount to include the tip, it’s a royal pain in the arse to go back and do it afterwards. You’ll need to send in signed receipts to the processor and wait several days to get that money back. That’s the one exception I can think of, but all other merchants need to automatically batch out daily.

Secondly, you shouldn’t settle a transaction for a different amount than what it was authorized for. Let’s say you own a limo company and you’ve booked a party for four hours. You’ve taken the payment information over the phone and processed it through your virtual terminal. Then, a few minutes later you get a call back and the customer tells you they want to book you for 6 hours instead of 4 and want to pay the difference. Because the transaction is still sitting in your current batches, you’re tempted to go in and adjust the price after the fact because that seems like a logical solution. Don’t do it. Void that transaction and authorize a new one for the updated amount. If you adjust the settlement amount after the authorization, you will get hit with an EIRF downgrade. Typically, cases like this have a much higher rate of chargeback due to miscommunication between the merchant and the customer, so the processors charge more to offset the risk involved. Voiding the transaction and starting over is the safer and cheaper way to go.

Lastly, the more information you can provide on a keyed in transaction, the better off you are. Most virtual terminals and mobile applications will require the cvv code (the 3 digit code on the back of a Visa/MasterCard/Discover, and the 4 digit code on the front of an AMEX) to process a transaction. However, many retail terminals don’t require that. So when you call to place a Chinese food order and you give them your card over the phone and they don’t ask for the cvv code, they’re paying more because of it. Where virtual terminals and mobile applications fall short is on the address information. By default, many of them will allow you to process a transaction without address verification information (typically all they need is the numerical house number, but you should enter the entire address to be safe). This was the case with my clients. They were using Converge, both the virtual terminal and the mobile application, and to save time they were just skipping the address information to process the payment and move on. Once I brought it to their attention, they started inputting the information properly.

In this particular example, they were paying the rate of 2.30% for their EIRF downgrades. The actually interchange rate for those cards could’ve been as low as 1.54%, which means they were paying an extra 76 basis points just because they didn’t take the extra few seconds to enter the address. In this example, 76 basis points on $8162 equates to $62.03 extra, worst case scenario. So it can get pretty expensive, pretty quickly. It’s also worth noting that this downgrade happens at the interchange level. Many merchant services providers will inflate the downgrade even more or have you on a tiered pricing system that automatically puts you on the non-qualified tier to exploit the mistake.

That brings me to my last point: always always always take the time to review your monthly statements and ask questions if something doesn’t look right. You’d be surprised how much money MSP’s get away with taking from their clients simply because people aren’t paying attention. Don’t let that happen to you.

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