The Biggest Credit Card Processing Pitfalls

We’re intimately aware of how credit card processing can be a nightmare.

Why is that?

Because we’re familiar with the payments space. With 17 years of experience, we’ve seen how changes in the industry (and the industry’s inability to keep up with the times) can cause tension among business owners and consumers alike. A prime example of such tension is the recent shift from magstripe to EMV chip cards. Furthermore, we analyze thousands of merchant statements annually, so we see how other providers are charging their customers.

We’ve uncovered over a dozen unethical billing issues to help business owners determine whether their providers are charging them fairly (and we’re always looking to expose additional dishonest practices). That said, it’s not surprising that business owners have fallen victim to bad hardware, unethical billing and poor service.

Here’s a roundup of pitfalls to avoid when establishing a credit card processing partnership. For each, we’ll elaborate on how PayJunction handles the issue differently (hint: we resolve it completely).

One of the biggest issues I faced with my previous credit card processor was spending too much time processing the payments. The old and outdated credit card processor was not designed to facilitate hundreds of transactions per day. These errors created glitches and technical issues that affected the processing of payments. Not only that, the equipment was expensive and I had to pay a hefty commission to the agent.

There are a few issues to unpack here. On the one hand, Chu dealt with outdated software that increased payment friction and checkout times. In addition to this, the terminal was potentially under a lease, which can significantly increase the overall cost of the terminal.

Most terminals cost between $100 and $500 to purchase outright. However, unethical providers can make upwards of 20 times that amount through a lease, which deceives business owners with an attractive monthly cost of $20 to $40, but binds them in a two- to six-year contract.

It’s important to do your research when it comes to your credit card processing hardware. There are countless old-fashioned credit card readers on the market that can’t process EMV chip cards, rendering them useless moving forward. There are also numerous Smart Terminals on the market as well, which can (ideally) process EMV chip cards and NFC mobile payments, and possess auto-updating software that ensures you’re not getting hit with excessive downgrades.

A caveat is necessary because many EMV-ready terminals can’t actually process chip cards. Why? EMV terminals must undergo certification that can take over a year to complete due to crowded certification queues. To bypass this, we recommend choosing a semi-integrated Smart Terminal that reduces your PCI scope, is EMV Level 3 certified (the highest level) and can process transactions with lightening speed. PayJunction’s Smart Terminal clocks in at just 3.6 seconds for chip cards! That’s five times faster than competing models.

I have two issues with my credit card processor. One problem is the confusing billing structures. The billing is done in a way that even a forensic accountant would get confused by. I believe they do this on purpose so that they can bill more and the end user doesn't realize what's happening.

"The second issue that I have is the difficult log-in process. When I need to run a card, I have to go to a login screen on my computer and enter my username and password. The problem is, sometimes this login screen doesn't work. Sometimes it freezes, sometimes it doesn't let me log in. Sometimes I have to go through a second screen and confirm that my computer is legit via a text message sent to my phone. It's just frustrating.

This frustrated business owner isn’t wrong. The main reason providers successfully get away with unfair billing practices is the intentional complexity of merchant statements. It’s just too easy for credit card processing providers to bury a markup or add a fee without a clear description. As a business owner, you’re busy and want to trust your provider, which incentivizes you not to question each and every fee on your statement in detail.

Because merchant statements are so complex, this is an unreasonable ask even if you had the time to spare.

Additionally, some businesses just possess terrible software. Quality is simply lacking, which creates more tension and lost time than partnering with a provider that has impeccably coded web applications. Every part of PayJunction’s business was built in-house, meaning the creators of our Smart Terminal and integrated Virtual Terminal software are dedicated to the success and integrity of our products.

Our advice is to look at your provider’s mission statement and online reviews, and question their support staff about your billing. If you feel like you’re being lied to or that an answer isn’t genuine, it’s a good indication that you should seek help from an expert.

For the first few years we were open, if someone disputed a charge, we'd have 10 days or so to reply to it, to see if they should get their money back.

“About a year ago, we were notified that to make our life easier-they'd remove the money from our account, based on our customers word and also to help us, they'd give us 4 days to respond. Of course they also send the notifications via snail mail, so we're lucky to see it before the deadline.

“I do wish our processor had some online way to handle disputes — it would be a heck of a lot easier than mailing the notification and then having us fax back a copy of a signature copy from our UPS account.

Chargebacks are hard to spot for most businesses. In short, they’re the result of a transaction reversal by way of the customer filing a dispute with his credit card issuer. The process is lengthy, and business owners often have no idea a chargeback took place due to old-fashioned deposit reconciliation methods that rely on paper batch reports and month-end merchant statements to spot any withdrawals.

By partnering with a provider that offers a robust Virtual Terminal that can track and identify any fees, chargebacks or other costs that could be impacting your deposits, you can spot a chargeback quickly and react in a timely manner that gives you a better chance of winning the dispute (and keeping your hard-earned funds).

I have used a number of different Payment Facilitators, but faced a nightmare when a client initiated a dispute with me because of their own bankruptcy. Initially, my provider decided in my favor. I thought I was in love with them for that. But then, the client went through their credit card company to start a chargeback. My provider made this a nightmare for me.

“I had numerous documents to prove I'd been providing my service, but the website wasn't allowing me to upload the documents. I called and asked for help and they told me to email my documents. I did so, and received email back saying that they don't accept files via email and I should use their portal on their website for secure document uploading. When I called to address this, I was told not to worry and that the notes I'd submitted were enough to ‘save’ me from this client's fraudulent claims. They weren't.

"I lost the money because the client's card company decided in their favor. I have not used that Payment Facilitator since and don't know that they will ever get my business again. Service providers need more protection, not less.

Payment Facilitators are the Stripes, PayPals and Squares of the world that set up businesses with easy-to-access merchant services. The barrier to entry is low, which is great for new businesses that are just starting out, have lower credit card processing volume and might not pass a rigorous merchant underwriting process.

So what’s the problem? Because Payment Facilitators operate one merchant account that’s shared among all their customers, they can (and will) freeze your account if seemingly suspicious activity — like a high chargeback rate — occurs. This is hugely inconvenient for business owners and can result in your funds being held by the Payment Facilitator as a form of collateral.

We haven’t even addressed the customer service issue LaFevre faced. Because Payment Facilitators accept just about anyone as a customer, they tend to offer less robust support.

We recommend that more established businesses get properly underwritten by a Merchant Account Provider that can properly assess risk and won’t hold funds. Additionally, true Merchant Account Providers offer a boutique experience with better customer service.

Pick a Merchant Account Provider you can trust.

What issues have you had with your credit card processing? Were you able to resolve them with a different provider? We’d love to hear from you in the comments section below.

Editor's Note: This post was originally published in June 2017 and has been updated for comprehensiveness and accuracy.