Keying in Credit Card Numbers Adds Expense During COVID-19

NEW ORLEANS – It’s a common practice these days: a restaurateur will receive a takeout or delivery order over the phone, charge a customer’s credit card and get the food into the customer’s hands with a minimum of contact to keep everybody safe. The only problem with that scenario? Business owners are probably paying too much in credit card processing fees – and making themselves vulnerable to fraud – every time they punch in a card number manually instead of using a chip reader.

The reason?

“The fraud potential is perceived by underwriters to have increased significantly when a merchant punches [a card number] in,” said Alison L. Burns, a Metairie-based independent broker of merchant service providers and point of sale systems. “Thus, to compensate for the extra potential risk, rates are higher. It’s very similar to someone who’s gotten into an accident before; rates go up because there’s greater risk.”

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Burns said that small businesses revving back up after the COVID-19 slowdown will need to make every penny count – and avoiding paying excessive credit and debit card processing fees will be one way to do that.

“Business owners’ models have changed overnight so it’s at the forefront of our minds to keep generating revenue and we don’t really have the time to sit and think about what are the costs associated with that,” said Burns. “If you’re taking your sales by keying everything in, punching the card in, you’re generating revenue but you’re also losing more revenue because you’re paying higher fees … so then the question becomes, ‘What solutions are out there for us to keep our distance, stay sanitary, keep our employees and customers safe so we don’t have to be paying a lot more in fees while we are trying to rebuild the revenue we lost.”

Burns recommends a couple of solutions: the more affordable one is a mobile pay system set up on a phone or tablet, which can process chip cards at the curb or during a home delivery. These start at around $100 and may or may not require monthly fees. For a company that does more volume, a better option might be a handheld wireless terminal, which performs all of the function of a standard terminal wirelessly. These are more expensive, starting at around $500 and with an additional $15 monthly service fee charged by a wireless carrier.

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Both of these systems will allow the vendor to read a credit card’s chip and thereby lower their fraud liability. Specifically, this shifts the liability of a chargeback to the credit card processor and/or card-issuing bank. (A chargeback is a refund for a credit card purchase initiated by a bank.)

“That’s a huge cost and especially in this climate for those bad actors who are well versed in this, I see a lot of that happening,” said Burns. “I see the writing on the wall. More will be happening. You have this perfect storm in the environment.”

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