4 Credit Card Processing Rules Retailers Must Not Break

When you first began accepting credit cards from your customers, the procedure likely seemed simple. You process the customer's payment, and your merchant account provider charges a few fees for the privilege. However, if you're like most small business owners, you may not have taken the time to read the entire agreement issued by your provider. That can cause problems.

Thousands of business owners routinely violate their merchant account agreements without realizing they're doing so. Unfortunately, this can jeopardize their accounts. If enough customers complain to the issuer about recurring violations, the issuer may close the account. Below, we'll provide a quick overview of 4 credit card processing rules that you must not break.

#1 - Minimum And Maximum Charges

A lot of retail business owners refuse to process credit card payments if the amount of the transaction is lower or higher than a given dollar figure. The reasons they impose minimum and maximum charges are understandable. For example, if a customer's purchase is only a few dollars, the merchant account fees generated by processing the payment may make the transaction unprofitable.

On the other hand, imposing a ceiling over which a customer's purchase cannot exceed seems to provide an added level of security against fraud. However, doing either is a violation of the provider's agreement.

#2 - Adding Fees

You might be tempted to charge your customers an additional fee if they choose to buy something with a certain type of credit card. This is actually a common practice with small retailers. They do it in order to recoup the fees charged by their issuing bank. As you might suspect, charging extra fees places you out of compliance with your provider's agreement.

However, this rule deserves clarification. As a retailer, you can charge your customers a convenience fee under certain circumstances. If you offer customers the flexibility of using their credit cards as an alternative method of paying for something that you don't normally provide, you can charge the convenience fee. Confused? Making matters worse, the major issuing companies (i.e. Visa, MasterCard, etc.) define "convenience fee" differently. Ultimately, check your agreement to make sure you stay in compliance.

#3 - Refunding Cash

This happens surprisingly often. A customer will purchase an item with their credit card and return it for a refund. However, they'll ask the retailer to refund the purchase in cash rather than making it to the card used for the purchase. Retailers will do so because they believe it is not a violation and there is no financial risk.

Both are untrue. Not only does it violate all merchant account providers' agreements, but it provides an opportunity for fraud.

#4 - Making The Payment Choice For Customers

The fees that are charged to retailers for the privilege of processing credit card payments vary between companies. Visa charges different fees than American Express. Discover charges different fees than MasterCard. Business owners will often tell customers which option to use for purchases in order to reduce the retailer's fees. This is a violation of the provider's agreement; customers must make the choice themselves.

Staying In Compliance

There are more rules hidden deeply in merchant account agreements than most small retailers realize. Even so, staying in compliance is essential. If you currently have a merchant account, it's worth spending time to review your agreement. On the other hand, if you're shopping for a merchant account provider, this is the ideal time to make certain you understand what you can and cannot do.

Remember, accepting your customers' credit cards and processing their payments is critical to your business. Don't risk that privilege by unwittingly falling out of compliance.