Merchant Protection & Credit Cards 101:

Massage Charge is in the business of providing mobile credit card services to licensed massage therapists throughout the United States. And, in all modesty, we do a good job of it. Part of the reason we do a good job is because we do everything we can to protect our massage therapists against credit card charge backs and retrieval requests.

When you open a Merchant Account with Massage Charge, you will receive a Cell Charge User’s Guide. This guide will spell out the “Do’s” and “Don’ts” of both face to face and mail/telephone order (MOTO) credit card processing. It will thoroughly explain why it is so important to have your Merchant account correctly constructed.

Have questions? Contact us at 866-735-5292.

The more you know about consumers, who try to get something for nothing by using fraudulent means, the more you will enjoy the benefits of expanding your business with credit card processing.

“If it looks too good to be true – It probably is”

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Credit Cards 101:

Whether you’ve just opened or you’ve been in business for years, since you're here, we can assume you're ready to expand from a small, "cash-only" business to a full-service enterprise that accepts and electronically processes and deposits checks. Congratulations! CellCharge is ready to help you take that next big business step, but before we go on, we'd like to give you a general overview of the benefits...and hazards... of accepting credit cards in your business.

Some Definitions
Every business has its vocabulary and the credit card business is no different. In order to better assure that we're all on the same page, here are some common terms and their definitions you'll be using.

•Cardholder Your customer, the Cardholder obtains his/her MasterCard or Visa credit card from an “Issuing Bank” which is the bank that issued the card to the Cardholder.

•“Merchant Account" You, the Merchant, obtain your Merchant Account from a “Sponsoring Bank” or an “Acquiring Bank” (both referred to as “Merchant Banks”). Merchant banks “sponsor” you as a business qualified to accept credit cards.

•“Processors” are companies such as CellCharge that process the credit card transactions through the bank system for you. Merchant banks use CellCharge and its affiliate companies as a third-party service.

•“Net Settlement Amount” is the amount deposited into your account after a sale. It’s the transaction amount less the “Discount Amount.” Part of the discount amount is your “Discount Rate,” a small percentage of each credit card sale set by your sponsoring bank.

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5 Steps to Credit Card Processing
When a credit card is used for payment, the following process occurs (usually in a matter of seconds!):

1. You submit an “Authorization Request” to CellCharge through your telephone.

2. CellCharge electronically links to the Visa/MasterCard network to transmit the authorization request to the issuing bank.

3. The bank verifies that the account number is valid and that the transaction amount does not exceed the cardholder’s credit limit. The authorization also puts a “hold” for the funds on the cardholder’s credit limit.

4. You transmit a deposit transaction. Note: If you operate face-to-face with customers and deliver the merchandise or service immediately, the authorization and deposit occur simultaneously as a “sale” transaction.

5. CellCharge instructs the issuing bank to deposit the net settlement amount into your bank account at your sponsoring bank.

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Protection
That's how transactions work. Now we’ll step back and review what keeps the whole credit card system together, namely Built-in Protections and Trust.

Credit cards offer protection for you, your customers and the banks involved. In fact, protection is why credit cards are safer for everyone.

• Merchants
When you accept a credit card and the transaction is authorized, you can be 100% sure you’ll receive the funds. (Later, we’ll discuss disputes where funds go back to the consumer.)

• Banks
The credit card system protects issuing banks from unscrupulous merchants. When you submit a deposit, you are promising the issuing bank that you have delivered the goods and services promised to the cardholder. If you don’t, the issuing bank has the right to "charge back" the transaction.

• Consumers
Cardholders are protected from merchants who fail to keep their promises. They’re not liable for payment if a merchant fails to deliver as expected.

• Trust
Trust holds the credit card world together. The issuing bank doesn’t ask a cardholder if he is satisfied before you get your money. They TRUST that the cardholder will be satisfied and you earn that trust by delivering on the cardholder’s “expectations” (note that word!) of your goods and services.

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“What expectations?” Think about it. Either by policy or by practice, implicitly or explicitly, you tell customers that they can expect a level of quality, delivery times, etc. By accepting a credit card for payment, you are promising the issuing bank that you are going to “make good” on those expectations. If not, your customer can get his money back.

Chargebacks - Customer Wanting Refunds
Almost everyone has an idea of how a credit card sale works but even some experienced merchants don’t know the other side of the system; chargebacks. Understanding chargebacks can save you a lot of money and help to salvage customer relationships.

If a cardholder believes a charge isn’t legitimate, or that her expectations weren’t met, he or she could come to you for a refund. But the customer has another, more troublesome, option for you; the chargeback.

Regardless of merit, the issuing bank is obligated to investigate complaints from cardholders, including:

• You never delivered the goods and services you promised.
• The customer never ordered the goods that showed up on her credit card bill.
• The customer received the goods and services but they didn’t meet their expectations so they want a refund.

In these circumstances, the issuing bank initiates a Retrieval Request and/or a Chargeback to resolve the matter.

Common Causes of Chargebacks
Some common causes of chargebacks can be easily avoided.

• One is by having your company name appear on the credit card statement. Let's say you are Sally Grant and you own a corporation, Grant Services. Under Grant Services, your husband operates Bob's Mobile Electrical and you operate Sally's Mobile Pet Grooming. If the customer knows that he or she had you out to the house for a pet grooming, make sure the CellCharge Merchant Account is listed as Sally's Mobile Pet Grooming and not Grant Services. The customer won't recognize Grant Services but he or she will remember the day the dog got groomed after he or she called Sally's Mobile Pet Grooming.

• When you charge the customer before the goods have been shipped. In other words, don’t submit the “deposit” transaction before you have shipped the goods or performed the service.

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Credit Card Disputes and Retrieval Requests.
Traditionally, the dispute process begins with a Retrieval Request that asks for documentation.

1. The issuing bank usually sends a Retrieval Request to CellCharge but sometimes they start with a chargeback and skip the Retrieval Request altogether.

2. CellCharge sends the retrieval to you. The retrieval asks for proof that you delivered the disputed goods or services to the cardholder.

3. When you provide proof that you delivered the goods or services to the cardholder, CellCharge forwards it to the issuing bank that informs the cardholder. The proof is usually a document (delivery receipt, credit card receipt and/or your store receipt) signed by the cardholder.

TIP: Reply PROMPTLY to these requests. Late responses almost always result in chargebacks.

4. At this point, the complaint is usually dropped (but not always).

When You Can't Prove the Customer is Wrong
If you don’t have documents for the retrieval or if you don’t deliver a copy of the documents to CellCharge in time, the cardholder is deemed to be right. This is why using the CellCharge imprinter is so important. When this happens, several things occur:

1. The issuing bank submits a chargeback to CellCharge through the Visa/MasterCard network.

2. Visa/MasterCard debits the original transaction amount from your bank account. (Or, it is deducted from your most recent deposit transactions).

3. Your sponsoring bank records the chargeback on your account record. Besides the obvious financial loss to you, chargebacks are also bad because of that final step because everyone in the credit card system knows that eventually a few transactions will result in chargebacks. They’re a cost of doing business. But, if you cause too many chargebacks, the credit card system will start to doubt you and your standing as a credit card merchant. When chargebacks become too prevalent, your merchant account may be terminated by your sponsoring bank. Then you may find it impossible to find another sponsoring bank. In other words, no more credit card acceptance.

Chargebacks and Timing
In most cases, chargebacks must be initiated within 120 days of the original transaction. However, if a merchant is alleged to have violated Visa or MasterCard rules, a “compliance” case can be disputed up to 180 days after the rules violation.

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Fraud: The Best Way to Avoid Chargebacks
Preventing credit card losses is not only good for you; it is also part of your responsibility. Here are some general guidelines on how to prevent fraud and avoid chargeback situations.

• Make sure that the credit card is from the legitimate cardholder, not just someone who knows the card number or has stolen the actual card.
• Compare. Verify the signature on the back of card matches the receipt signed by the customer.
• Know your cardholder personally … if at all possible.
• If applicable, use the Address Verification System and verify the Security Codes (also known as “Validation Codes”) on the card. This prevents many pass-through fees.
• Obtain a signed receipt from the cardholder and, if applicable, a signed proof of delivery from the shipper for delivered goods.
• Protect your merchant ID so no one submits transactions without your permission.
• Don’t accept expired cards or accept cards before the effective date. The date shown on the card is the “good thru” date and is good through the last day of that month.

More Tips to Avoid Chargebacks
• Make sure shoppers know your warranty and return policy. Make sure YOU consistently live up to it. When consumers can resolve problems directly with you, you avoid the hassles of dealing with chargebacks.
• If you have a “no refund policy,” the customer must acknowledge this with a signature. The words “No Refunds” must be printed at least 1/4" high and be within 1/4" from the signature space.
• Do not submit a deposit transaction until you deliver the goods or services.
• If you rent equipment or sporting goods, do not attempt to cover damage to your products by charging the customer’s credit card without running a separate transaction for the damage after keying in the card again and having the customer sign a separate sales draft and invoice for the damage claim. You must never attempt to charge for damage or loss using only the credit card draft obtained when performing your rental transaction . . . NEVER.

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Keys to Maintaining a Good Account Standing
CellCharge, its affiliates and sponsoring bank expect you to be honest with your customers thereby managing “expectations". And you’re expected to live up to your end of the sale.

This translates into four requirements:

• Fulfill your shipment dates and commitments to your customers.
• Promptly respond to requests for refunds according to your policy AND submit the appropriate credit transactions to CellCharge. Do not refund a customer with a check or cash.
• Prevent fraud
• Only charge cardholders after delivery of the goods or services.

Conducting Credit Card Transactions: Authorizations
Rule No. 1: Every sale requires both an authorization and a deposit.

Rule No. 2: Always note the Authorization Code. An Authorization Code indicates that the cardholder has the credit to pay for the purchase. This assures you of payment, as long as:

• A valid card was used by the authorized cardholder.
• The cardholder (not someone else) has signed a sales draft.
• The signature on the sales draft was matched against the signature on the back of the card.
• You have proof that the card was present (a receipt created by your imprinter which has an imprint of the card created by your imprinter.)

• The transaction is not disputed later by the cardholder. (If this happens, you’ll have to fight for your money through the chargeback process.)

When the goods or services are provided at the time of the sale, the authorization and deposit are simultaneous. However, if the customer is paying hours or days before she’ll receive the goods or services, transact the authorization first: this reserves the amount from the cardholder’s credit balance for you. Perform the deposit transaction when the goods or services are delivered.

TIP: To avoid a pass-through fee on the transaction, make sure you deposit as soon as possible after the goods are delivered. After three days, the pass-through will be applied, but that’s no excuse to make the deposit before the goods are shipped. Do not wait longer than 30 days, or you’ll need to obtain a new authorization.

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Deposits
Deposits take funds from the cardholder’s credit line and deposit them into your account. For purchases, the deposit is simultaneous with the authorization (unless the goods will be delivered at a later date). Purchases are a single SALE transaction.

REMEMBER: In mail order or telephone order businesses, the deposit must not be run until the goods are shipped

When Are Funds Available? We thought you’d ask. Visa/MasterCard funds are posted to accounts at the sponsoring bank two business-days after the date of the transaction. There’s one additional business day if you are eligible to have funds deposited to your local bank.

Handling Sales Drafts
A sales draft is a legal and binding contract between you and your customer. If you have a retail store, a sales draft must be completed and imprinted for every credit card sale. So, use your CellCharge imprinter to imprint the card and obtain a customer signature on a sales draft.

Information That Must be on a Sales Draft
• Credit card number (recorded by the imprinter)
• Authorization Code and Reference Numbers
• Signature of customer
• Card expiration date (recorded by the imprinter)
• Date of sale
• Amount of sale, including tax and tip
• Description of goods/services

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Storage of Sales Drafts
Keep drafts for three years, even if you sell your business, and even then, check with your accountant for guidance before destroying them. In case of a chargeback, you may be required to produce sales drafts quickly so file them so they’re easy to find.

Keep the white copy of all receipts; they photocopy better. Also, handle carbonless paper and carbon/silverback paper carefully. Pressure on the paper during handling causes black blotches that make your documents illegible.

You will be asked to find chargeback documentation based on the card number, transaction date and amount of the transaction. Therefore, filing your retrievals by cardholder name will make your research process more difficult unless you also have a cross-reference system.

Protecting Cardholder Information
We’ve all heard about companies who have become victims of thieves who steal credit card information stored by merchants. To avoid this, your responsibilities to safeguard data include the following:

• Don’t share, sell, purchase or exchange cardholder names and account numbers in any form.
• Secure all records, electronic or otherwise, that include cardholder names, account information, transaction information etc. to prevent access by anyone other than your processor.
• Limit personnel access to computers and other repositories of customer data.

Balancing Receipts and Records
You should review your credit card drafts at the end of each day or the beginning of the following day. No matter how reliable your processor (and we ARE reliable), you want to make sure that each transaction was properly processed. This can save you lots of grief at the end of the month and help ensure you’re getting proper credit for your sales.

Compare the total dollar amount of the drafts to the total amount you processed for the day.

Your Merchant Account and Bank Balance
When you begin processing with CellCharge, you designate the bank account where your funds will be deposited (the sponsoring bank or, when permissible within underwriting guidelines, another bank of your choice). No matter where your funds are deposited, we recommend you always leave a balance in your bank account as a “buffer” to ensure funds are available for monthly transaction fees, chargebacks, etc.

Each day’s VISA/Master Card transaction total will appear on your bank statement as a deposit described as “CellCharge V/MC Trans.” Since your VISA/MasterCard discount fee is deducted daily, the deposit shown is your net deposit. Discover and American Express deposits are listed separately. Your processing agreements with these companies control the payment of your funds.

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CellCharge Billing
You will receive a have access to your online statement detailing the month’s total debit to your account. That debit to your bank account occurs on the first banking day of each month for CellCharge's transaction fees, Visa/MasterCard pass-through fees, supplies, etc.