Cash only businesses lose an estimated $100 billion in sales to businesses who accept credit card payment. If you’re opening a new shop or transitioning to accepting credit cards, you’re making a smart choice. However, if you don’t understand the complexity of credit card regulations, you could violate the law or the trust of your customers.

Here are 5 steps to understanding how to abide by credit card regulations.

1. Knowing Your Position

If you’re a merchant who is accepting credit card payment of any kind, you need to understand what’s expected of you. Whether you rent, buy, or simply use credit card processing equipment or software for your business, you’re entering into a legal framework. There are rules and regulations that are applicable to every merchant who takes part in these transactions.

Even if you only accept one kind of card under certain conditions, you’re going to be subject to these rules. You need to abide by federal regulations as well as any rules that are set out by the credit card company you’re accepting payments from. There’s a lot that goes on behind the scenes when you offer credit card convenience to your customers.

While it might make sense for credit card companies and federal regulators to work together to craft the rules and regulations, unfortunately, that’s not the case. They try to avoid giving out conflicting information or creating confusion with contrasting rules, it does happen from time to time. Since the processing rules are up to credit card companies, they’re subject t change at any time.

2. Understanding Compliance

Knowing how to comply can make the process of accepting payment and following regulations much simpler. In order to become an approved merchant, you need to file your application with the Financial Management Services office.

If you plan to apply for transactions that happen within your own company, you need to mark that on your application. Even internet purchases, mail order, or delayed debit purchases will need to be indicated via your application.

Every time you add a new type of cash flow to your company or a separate type of transaction, you need to fill out a new application.

3. Running In-Person Transactions

When you choose to accept a certain card for transactions, you need to honor every valid card that customers present. When you’re processing signature-based transactions, you need to verify the validity of the card.

Check the face of the card for a valid date and name. Make sure that the four digits that are below the account number on the transaction are the same as what’s on the card.

If the card is signed, make sure that the signature reasonably matches what you see on the card. If it appears to be altered, you can refuse it. Watch that the signature is performed in front of you and that no one sneaks off with the receipt that you need to have signed.

If you accept a return for a purchase made with that card, you’re within your rights as a merchant to ask to see the card. You can often apply the return directly to the purchasing card with your digital transaction equipment.

If you’re accepting a PIN-based transaction, most of the same rules apply. You need to have a device that your customers can use to enter their pin privately on their own. It shouldn’t ever get stored on any forms or transmitted through an unencrypted channel.

If you end up giving out customer PINs or credit card information through negligence, you could end up getting sued.

4. Running Online or Phone Transactions

For internet transactions, you need to make sure that your company is set up with a secure system. As stated above with in-person transactions, failure to employ adequate security measures will leave you open to being sued.

You should have all of your transactions take place over a Secure Sockets Layer or SSL for security purposes.

If you display any portion other than the last four digits to a card on receipts, the rest of the card numbers should be replaced with asterisks. Your receipts should include both the date of the transaction and the full amount charged, including all shipping and handling fees.

Include your organization’s name, address, and contact information so that any disputes can be easily clarified. If someone is looking to report their payments to the IRS, they might want to contact you to confirm payment.

5. Understanding the Settlement Process

After your transactions are completed, you should then transmit all of the information you’ve collected for all of your transactions to card companies. This process is called “settlement.” Most companies and businesses will settle all of their accounts at the end of business for the day.

You should process your credits and debits within one business day as part of a regular rhythm to ensure that you don’t lose track of any transactions.

You’re allowed to delay your processing if the cardholder themselves agrees to a delayed delivery of products or services when the transaction is made. If you request and get authorization from credit card companies to delay transactions, you can settle later.

Sometimes a transaction is made to be retained by law, making the settlement process take longer than a business day. If you have multiple branches to your business and process from a central location, you might get up to three calendar days for processing transactions.

Credit Card Regulations Can Be a Minefield

Understanding credit card regulations and how they apply to you can be complicated and difficult for any merchant new to any industry. Credit card regulations require an understanding both of what your customers expect and feel comfortable with. When you abide by the law, you make customers feel secure in handing over their information to you.

In order to avoid losses and issues accepting credit cards, follow our guide for making sure your e-commerce transactions are secure.

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