Credit card company contracts. Am I too parnoid?

[James Jaragosky]

I was looking into the possibility of taking credit cards for my business.
Today I had the opportunity to read Total merchants contract, and it scared the hell out of me.
Things like you can't sue us but we can sue you; and if we sue you, you have to pay all our lawyers and fees, even if you win.
If we deem it necessary we can take money from your account and set up a reserve account with your money to protect us, we can take whatever amount we deem necessary, we will not pay interest on your funds while we hold them, we do not need to give you notice.
If we deem it necessary, we can take money from any financial institution you have a account with, it does not need to be your business account, we do not need to give you notice.
Now I did paraphrase here, but the gist of what was hidden in the fine print was very frightening.
Basically you have to sign all your rights away.
I may just keep taking my chances with personal checks. at least someone writing a bad one looks you in the eye when they rob you.

Am I too paranoid?

[Joe Pelonio]

I have been taking credit cards for 16 years now, on my second provider, and have never had a problem. They are taking a lot of risk trusting us to be careful about accepting cards but as long as we make sure to follow the rules those fine print clauses are not going to become an issue. On the other hand, if it bothers you too much, go with PayPal, but they will take a higher percentage from you.

[Phil Thien]

+1 what Joe says. They assume lots of risks and are attempting to protect themselves.

There was a local (to Milwaukee) computer shop where the owners were hooked on cocaine. When their business started to deteriorate, they started running fraudulent charges to feed their habits. They hit over six figures, if I remember correctly. It was back in the 80's.

So all that fine print is there to allow the processor to do a cash grab out of your account if their fraud department determines they're being ripped off.

In the event that fraudulent charges occur, cardholders do chargebacks. Their issuing bank takes the money back from the processor. The processor attempts to get it from the merchant. If the merchant has vanished, the processor is out the moola.

[Randal Stevenson]

Let's see, I think you forgot some stuff.
They charge you for the machine. They charge you a percentage, then charge the customer a percentage. You have the expense of another business phone line, unless your small enough to only use/need one line. While you "get your money now", if the customer decides to scam you (there are people that do it), and starts a chargeback, you will be out both merchandise and money. Did you check their ID? (almost no one does anymore)
These are just the ones I can think of, off the top of my head (and my work gets asked this question, frequently).
With a bad check, a form and drop it off at the prosecutor's office, works nicely (and you can say you have a service, so it isn't personal).

[Scott Shepherd]

I'm battling a CC issue right now as well. We finished a large job and my phone rang. It was the customer wanting to pay for it by CC. Very old company, been in business for 50 years or more, solid, solid company.

Entered the info, the system accepted it. Next day I notice the money isn't in the account. Shortly after, I get a call from the "behind the scenes" company that clears all the transactions. They don't understand the charge and think it's too large of a sum compared to what we normally do (we rarely take CC's). They make us provide a copy of the contract for the work, the invoice, the contact information for our customer, etc. 3 days later, still not cleared. I call them. They want 3 months worth of bank statements. I tell them "nope, not gonna happen".

They tell me that if there is a charge back, then they will be on the hook for the amount, so they planned on denying the transaction. They call my customer to see if the work was done and if the customer is pleased. After a week of fighting with them, they tell me they are reluctantly releasing the funds.

I asked how long the chargeback window was and they told me 6 months. So from their standpoint, they are on the hook for the total amount of the invoice for 6 months after the transaction. If you close up shop and someone wants a chargeback, then they have to eat the cost of that transaction.

It's a ugly, messy, cut throat business if you ask me.

[Phil Thien]

With a bad check, a form and drop it off at the prosecutor's office, works nicely (and you can say you have a service, so it isn't personal).

It does depend a little on the type of business. As a retail business owner I just cannot forgo plastic.

Also, prosecutors won't universally collect a bad check for a business. You're pretty lucky to have that setup. Around here, we have to use collection agencies.

Finally, in over 20 years of owning my business, I've had a single CC chargeback (that my distributor ultimately picked-up because they didn't select "adult signature required" on an $800 drop-shipment). I've had probably 40 bad checks, which about half of which have been collectible. I've probably eaten about $5,000 in bad checks.

[Mitchell Andrus]

Let's see, I think you forgot some stuff.
They charge you for the machine.

Do it on-line. No machine - unless you like to swipe for personal gratification.

[Randal Stevenson]

It does depend a little on the type of business. As a retail business owner I just cannot forgo plastic.

Also, prosecutors won't universally collect a bad check for a business. You're pretty lucky to have that setup. Around here, we have to use collection agencies.

Finally, in over 20 years of owning my business, I've had a single CC chargeback (that my distributor ultimately picked-up because they didn't select "adult signature required" on an $800 drop-shipment). I've had probably 40 bad checks, which about half of which have been collectible. I've probably eaten about $5,000 in bad checks.

Since I don't know where you live (not listed), I can't find any information about your prossecutters office. I would be shocked that they don't have someone in the office doing it, as they collect taxes from the sale, and proceeds from the court, and check education schools.
I do work retail, and we get both shocked looks and comments, as well as "you could do more business if you took them". Problem is, if we did, we could be working 24 hours and not keep up.


Do it on-line. No machine - unless you like to swipe for personal gratification.

Online, still requires software, that they want to sell you. We don't even have a computer at the store. Still only use a cash register, no reason to make things more complicated then they need to be, and everything in the store is paid for when it comes in the door.

[Joe Pelonio]

Online, still requires software, that they want to sell you. We don't even have a computer at the store. Still only use a cash register, no reason to make things more complicated then they need to be, and everything in the store is paid for when it comes in the door.
My provider is web-based, the software is accessed not installed on my computer and I didn't have to pay for it. They tried to make me pay for a "security check" through a third party but when I refused did it free.

[David Keller NC]

James - One more "gotcha". In North Carolina, the banks rammed through a change to merchant's policies a couple of years back. The law states that if you accept credit cards, you must also accept debit cards.

The problem here is with small transactions. Every debit transaction has an associated service fee - typically $4, not less than $2. So if you're selling $10 items, you're paying 20% - 40% for each transaction. And debit cards are very popular.

I found out about this from the lady that cuts my hair (for the last 20 years). Most charges in her shop are $15 - $30, with the very occasional perm/color, etc... from her or the other female barber. The guys working in the shop, as you might imagine, don't do the women's haristyling bit, so all of their customers are paying $15-$30, depending on whether a shave is included.

She noted that about 70% of their business is debit cards, and they can't raise prices to compensate for the service charges because they're competing with national chains, which of course have a negotiated contract with their bank that's much lower than the typical debit card service fee.

Not sure about Indiana, but I know this law is common to quite a few states, so if you're selling small items in lower price ranges, consider this before you decide to accept credit cards.