Industry Perspectives

Retailers Can Avoid Merchant Account Scams

Any business that accepts credit card payments from their customers must take steps to avoid being the victim of a relatively new kind of crime being called merchant account scams. These scams target the businesses that pay merchant account fees to credit card processing companies in order to have their customers’ credit card transactions processed. These scams will often take the form of charging businesses too much for processing credit card payments and transactions, but some scams are designed to steal the identity information of a business or their clients.

Fortunately, there are ways for business owners and managers to avoid becoming a victim of these scams. Anyone who controls the finances for a business that has a merchant account payment option for their customer should follow these steps to keep their business data, identity and its money safe.

Before a business starts a new account with a merchant account payment option, it should check the credit card processing service’s status with government run business and consumer groups. Usually, companies and individuals are advised that as long as a company has no significant outstanding complaints against it the business or individual will probably be safe doing business with them. Since credit card processing is a relatively new industry, however, a business should be very cautious.

Many new credit card processors haven’t been around long enough to collect complaints from customers. Because of this, watchdog groups are usually not the best place to research a new company. Businesses are on their own to test out their credit card processor’s legitimacy.

Businesses who are wary of a new credit card processor should try to make a few small transactions with various credit cards during the first month they use a new service. These small transactions will serve as a trial for the new credit card processing service. When the business receives its first charge statement from its processor, be sure to carefully review the statement. To do this, start by comparing each transaction on the statement to the same transaction in your business records. Make sure that the time and amount of each transaction matches the time and amounts in the business records. Next, make sure that the fees charged for each transaction match what was agreed to in the original contract with the credit card service provider.

A typical merchant account payment option or credit card transaction fees charged by most credit card processing companies will range between one and five percent of the total amount of the transaction. Unfortunately for many businesses, one of the most common merchant account scams is overcharging a business on their merchant account fees. In order to make sure a business is not a victim of these scams it should compare statements as previously described.

While checking these records, a business should be sure to check the amount of each transaction fee that is being charged to the business. A business owner should also be sure to check the number and type of returns and charge back transactions that the business processed. A business needs to make sure that their records of these transactions match with the amount of these transactions that the business’ credit card processor has charged to the business’ account.

Unfortunately, for most businesses, adding additional charge back and return fees to a business’ merchant account is one of the most common scams. Particularly concerning is that this particular scam can go uncaught for months or years. Because these kinds of transactions do not greatly affect the financial bottom line of most businesses, very few businesses keep good records of them. Few business owners realize that every time they return money to a customer on that customer’s credit card the business is charged a fee from the credit card processor. This fee is usually equal to about 3% of the total amount returned to the card.

By making up return transactions, a scammer can rake in thousands of dollars a month with a very low chance of being caught. By repeating this scam with several different business, a scammer could potentially bring in millions.

Shannon Martin is the Editorial Content Manager for MerchantSeek.Com. Founded in August, 2000, MerchantSeek is a service that offers free information to help you search and find a merchant service provider so you can, in return, accept credit card orders from customers. We literally “plug you in to providers” that are willing to make your business a complete success. Our mission is to provide your business with a fast and easy way to locate the provider that best fits your businesses needs and budget.

 

Search Perspectives


View All