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or ("My Money For Credit Card Orders Never Reached My Bank Account!")

What happens when you process credit cards for approval and then find out later the money never reached your bank account? This can be a very frustrating experience and can be avoided with a little knowledge.

Many business owners don't realize that the credit card processing company is at considerable risk for credit card orders that are processed. Imagine this scenario...

A fraudulent business owner (Mr. Crook) applies for a Merchant Account to accept credit cards and tells the salesperson that he sells "vitamins" over the phone, through the mail, or on the internet. The Salesperson is very happy because it is an easy sale. Mr. Crook takes orders for about six months and he even sells the vitamins at his cost. This results in getting a lot of orders. After six months Mr. Crook "pretends" everyone who placed an order has re-ordered and keys in thousands of orders into his software or terminal; but Mr. Crook "forgets" to send the vitamins. People start calling Mr. Crook but Mr. Crook just tells them that the vitamins are on back order to buy some time to process more fake orders.

The credit card processing company deposits all the money for credit card orders taken in Mr. Crook's bank account 24 to 48 hours after each daily batch of orders. After Mr. Crook processes a few thousand orders over the next couple of weeks Mr. Crook empties his checking account and leaves town; never to be seen again (until he calls the next eager Merchant Services Sales Representative with another company...)

So what happens? All the honest customers who paid Mr. Crook start calling Mr. Crook's company only to find out the phone number has been disconnected. The next call most customers will make is to the bank that issued them the credit card that they used to place the order. The bank typically tells the customer that if they didn't get the vitamins then they will get a credit on their next credit card statement. The Bank then contacts the credit card processing company that processed the order to alert the company of a "dispute". The credit card processing company tries to contact Mr. Crook and gets the same disconnected phone number! Guess what? The Merchant Account Provider probably takes the hit and has to reimburse the thousands of customers who didn't get their vitamins. This can be devastating to the credit card processing company.

This is just one scenario but the exact same thing can happen even if Mr. Crook is honest and simply mismanages his business and declares bankruptcy as example.

These situations and others result in credit card processing companies always being on the lookout for the next Mr. Crook. One of the ways they do this is by approving each Merchant with a monthly estimate of volume and an average order size or ticket (like a credit line) and assessing risk factors to the type of business, etc. It's easier for Mr. Crook to get a Merchant Account with a lower monthly volume approved and a low average ticket approved but Mr. Crook will try for the highest monthly volume that he can get approved and the highest average order size that he can get approved.

The credit card processing company looks for "spikes" in processing volume or a series of one or more large orders that are much higher then the average order size approved. Large average order size businesses are particularly scrutinized. When these "spikes" occur the bank of computer monitors at the Merchant Account Provider alert the "Loss Prevention" department. Imagine, if you will, the overhead monitors in the movie "War Games" ;-).

When a suspect transaction (or suspect transactions) occurs the credit card processing company will typically want to check it out. They will want to protect themselves by possibly not sending the money to the business owner's bank account. Wouldn't you do the same thing if Mr. Crook was YOUR last experience? They may want to call the customer to make sure the customer placed a legitimate order. You, the Merchant, may be looked at as guilty until proven innocent.

So how do you, the business owner, prevent this from happening?

Make sure you know what the monthly volume and average order size are that the credit card company has approved you for and stay within these limits on a prorate daily basis - particularly at first. Remember, the credit card processing company looks at this as sort of a credit line. Do NOT stack up a bunch of orders by accepting credit cards before you are approved for a Merchant Account and then key all the orders in the day you go live. This is exactly what Mr. Crook might do and you are asking for trouble. DO call the credit card processing company with large orders that are much higher then your average approved order size and tell them you would like to process the larger order. It probably helps if you have a signed invoice. DO let the credit card processing company know about increases in business do to your success, the season, or special promotions, etc. Keep the credit card processing company informed. Again, this is especially true early in your Merchant Account relationship.

Make sure you are dealing with a competent Sales Representative who is properly advising you. That "cheap deal" may become very expensive later when you find out your account was incompetently set up. As a final caution, make sure you are doing business with a financially sound credit card processing company. Check them out. It's YOUR money that the credit card processing company has their fingers on. This is far more important then ordering office supplies as example from the cheapest source. It doesn't take very many botched orders or "lost money in the system" to make you quickly forget that "give away" up front pricing.

ABOUT THIS GUIDE
About the Author
A Word About Our Membership Community
Frank Merchant knows how to get the best price
The Internet Marketplace
   
UNDERSTANDING IT ALL
What are the advantages (and disadvantages) of accepting credit cards for your business?
6 Benefits of Accepting Credit Cards
Disadvantages of Accepting Credit and Debit Cards
Who are the players? How does the money get in your bank account?
Credit Card Transactions Step By Step
Should I go visit my banker for my merchant account?
How can I tell if I will get good customer service?
Be on the Lookout for Deceptive Sales Practices
How to Avoid Your Money Being Held By Your Non-Cash Transaction Processing Company
Banking Terms You Need To Know
Benefits of Debit as a Payment Option
What You Need To Know About Leasing a Credit Card Terminal
Fraud Protection 101
Cardholder Security: Avoid Monthly Fees, Fines, and Penalties What Is PCI Compliance (PCI DSS)?
   
THE PROCESSES
Four Key Components to Conduct eCommerce Successfully: What They Are, and How They Work
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Should I use a third party processor like PayPal?
   
ANALYZING IT ALL
Quick Summary of Costs
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Total Risk Estimate (TRE)
Total Risk Estimate Worksheet (Low-Medium-High)
   
THE DETAILS
Are you being stung with "Non-Qual" fees for keyed orders?
Have You Ever Felt Betrayed By Your Credit Card Processing Company?
Your Customers' Credit Card Numbers at Risk
Visa: Heartland, RBS WorldPay no longer PCI compliant
PayPal
Marketing 101: Gift and Loyalty Smart Card Technology Ensures Customer Loyalty
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How Can I Prevent Credit Card Fraud?
Identity Theft
Merchant Account Comparison Worksheet
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