How Accepting Credit Cards Can Increase Customer Base

The day of unaffordable credit card processing is over.  In the past small businesses often found that a merchant services provider was too costly for their business to contract, due to their fees.  These fees ranged from a minimum monthly processing fee, a service fee for every swipe, and monthly rental fees.  This pushed many start-up and small businesses to hold cash only establishments.  With the emergence of e-commerce, an industry that allows consumers to shop from the comfort of their homes and pay by simply entering their credit card information into a secure server, these traditional brick-and-mortar businesses have no choice but to start accepting credit cards.  In fact during the beginning stages of the economic turmoil, the e-commerce industry posted a gain of 10.8 percent in 2009.

Although these numbers may cause one to draw the conclusion that e-commerce is going to overtake the traditional brick-and-mortar businesses, it’s wrong. Even with a 10.8 percent gain in 2009, a whopping 92 plus percent of retail transactions are still completed offline.  Americans still prefer shopping in person where they can physically see the items that are being purchased and monitor the processing of their credit/debit cards to ensure no fraud is taking place.  Many Americans still do not trust putting personal information on the internet even if the site is proven secure.

Shopping In Person

It is a proven fact that online sellers can offer a lower price to consumers and that they are more effective.  But this leads us to question why they only hold roughly 8 percent of retail sales.  If we American consumers are as shrewd as some say, wouldn’t we always be looking to the internet for better deals?  Especially with sites like Amazon and Overstock offering us basically anything we could ever want for a discounted price you would imagine that e-commerce would account for more than 8 percent of retail sales.  After all an over whelming amount of Americans (about 80 percent) have access to the internet on a daily basis.  The answer is simple: Americans are not consumers, they are shoppers.  What’s the difference one might ask?  A consumer purchases a service or a good because he/she needs it.  Yes, a shopper does do the same but there is a major difference.  The shopper enjoys the activity.  They get pleasure of going shopping, trying on new clothes, and conversing with salesmen.  To many Americans shopping is a hobby.  This claim has been backed by poll after polls.  Americans enjoy shopping, and would prefer to physically do the shopping to ensure everything is the correct; whether that is the fit of an article of clothing or the use for a good.  Who likes ordering a shirt online, waiting 5-7 business days for deliver only to find out the fit is wrong and it needs to be sent back for an exchange?  In instances like this it may take up to two weeks before you can actually wear the shirt you purchased.  Compare this to physically shopping in which one ensures the fit is right before purchasing and has the opportunity to wear it on the same day.

Credit and Debit Cards

Few modern businesses can survive off of a cash only check out policy.  Sure every neighborhood has those ma and pa nooks that have been around since what seems like the stone ages that are cash only, but they are already established and the customers going there already know that plastic is not an acceptable form of payment.  This is not the same when it comes to shopping.  Customers expect stores to cater to their wants and needs and in the end, want a pleasurable shopping experience.  If their experience is not pleasurable they will go elsewhere.

So why do some stores refuse to accept credit and debit cards?  In order to be able to process electronic transactions, a merchant service account must be obtained. These accounts are offered by banks and other authorized financial institutions, and they charge fees for each swipe of the card.  After the customers’ card is swiped the merchant service provider will either approve or deny the transaction.  When it is approved the provider will send an electronic bill to the cardholders company.  Once the necessary funds have been remitted the provider will transfer them into the merchants account with a fee deducted from the total deposit.  This process can take a few days.

Why are they Necessary?

If you want to see your small business grow, or your startup businesses succeed it is extremely necessary to accept plastic as a form of payment.  Six out of ten purchases are paid for with a credit or debit card.  Cash accounts for less than thirty percent of retail transactions, and that number has been steadily dwindling for the latter part of sixty years.


The main reason companies and businesses remain cash-only is they do not understand the fees associated with these accounts. Yes it is true that when a customer pays with plastic the merchant will receive less than if that customer paid with cash.  This is just an unavoidable part of this industry.  Providers charge transaction fees and discount rates on every single purchase.

However, when these payments are being made in person, the merchant is charged with lower servicing fees.  This is because the threat of fraud is at its lowest when a payment is made with a credit/debit card in person.  By simply choosing to accept credit cards a business’ customer bases grows as you provide more options of payment and create a more enjoyable shopping experience for all customers.


Visa Digital Wallet Just A Click Away

Visa Inc. is getting closer to launching its new digital wallet whereby people can make purchases online without having to pull out their credit or debit card to finalize payment. Visa is also working on solutions for people to use their smartphones to pay for in-store purchases at retailers. Visa’s digital wallet is set to launch in the U.S. and Canada this fall and may be looking to expand the technology to other countries in the future.

Mobile Payments

Visa isn’t the only company focused on expanding mobile payments. Other credit card companies, including MasterCard Inc., American Express Co. and Discover Financial Services have all been active in the field of mobile payments in the U.S. and overseas where debit and credit card use is not as prevalent. (read more about American Express mobile payment options). Mobile payments have offered convenience to both vendors and consumers, in that it enables businesses to process credit cards that do not otherwise accept them. And through the popularity of smartphones and browsing capabilities, mobile payments are becoming more available, according to Visa’s head of global products, Jim McCarthy, in an interview with Reuters.

The Digital Wallet

Visa recently announced its partnership with several large U.S. and international banks for the creation of the VISA Digital Wallet, which uses near field communications (NFC) and other technologies. Its partners include Barclay Card US, BB&T Corp., Pentagon Federal Credit Union, PNC Bank, Regions Bank, Royal Bank of Canada, US Bank, TD Bank Group and Scotiabank. Customers of these banks will have a digital wallet which securely stores credit and debit card information so the information doesn’t have to be typed in for every online or in-store purchase. This will include information for both Visa cards and other cards.

Visa is hoping merchants will revamp their websites to enable customers to pay for purchases with simply the click of a button. That should help reduce the number of abandoned shopping carts on websites and expedite customer payments.


Bad Credit Score Still Impedes Credit Card Approval

The Federal Reserve recently reported that banks have been easing their lending standards with their credit card offers. Unfortunately, this doesn’t apply to consumers with a bad credit score who are unlikely to get approved for new cards in the near future. Because banks continue to practice tight lending standards for consumers with poor credit scores, Moody’s Investors Service expects the default rate on low interest credit cards to drop next year to a 20-year low.

Credit Card Default Data

A cardholder’s balance goes into default and is charged off when the issuer deems it uncollectible. In 2009 and 2010, the top six banks which issue cards had defaults totaling $74.5 billion. These are the household names of credit-card issuers: Bank of America, Citigroup, JPMorgan Chase, Capital One Financial, American Express and Discover Financial Services.

Banks Ease Up For Some

A survey released by Credit Land recently revealed that banks have been easing up on lending standards, including approval of credit card applications. But this does not mean they are stretching their lending practices for consumers with poor credit scores. And especially not for consumers who were unable to pay their bills and were among the default accounts.  Banks have seen delinquency rates decreasing, though, as consumers improve their bill paying habits. Consumers who are paying their bills on time are the ones reaping the benefit of eased lending practices among banks. As for consumers who have recently had cards cancelled for lack of payment, it’s unlikely they will be approved for a new credit card anytime soon. But there are credit cards for bad credit, which could help consumers in repairing their credit history.

Moody’s Expects 20-Year Low

As banks tighten their lending belts for consumers with poor credit scores, Moody’s predicts a decrease in default rates. By denying high-risk consumers new lines of credit, banks are decreasing the number of balances they will have to charge-off in the future. An improvement in delinquency rates is also a sign that default rates should improve as time goes on. These factors have led Moody’s to predict a 20-year low of credit card default rates by next year.


3 Ways to Prevent Credit Card Identity Theft

While the likelihood of somebody stealing your entire identity has gone down in recent years, complaints of fraud have been on the rise. In other words, thieves are less likely to attempt to completely assume your identity, but they are more likely to steel just enough information in order to use it for their own purposes. Roughly nine million Americans are victimized by identity theft in one way or another each year. Here are some things that you can do in order to prevent this from happening to you.

Avoiding Online Fraud

One of the biggest reasons for the increase in credit card theft is the emergence of the internet. It doesn’t matter if you are using cash back credit cards or a debit card, you are putting yourself at risk if you enter in your information without taking a few steps to verify your security.

The threat of making a purchase online shouldn’t be overstated. It is generally safe to buy things online, but there are a few things you can do to keep yourself safe.

First of all, you should know who you are making the purchase from. Large, well known websites can generally be trusted. Before making a purchase, however, you should always check the site address in order to make sure that you are where you think you are. Site logos can be stolen and pasted on a false site, so verify the site address.

You can also check for security seals before making any purchase online in order to verify that the payment is going through safely. The bottom right corner of your browser should display a padlock that has been locked whenever you are asked for personal information.

Avoiding Phone Fraud

Never give out your personal information to somebody who calls you. It is safe to give this information over the phone, but only if you know exactly who you are talking to. If somebody calls you and asks you for your personal information, tell them that you will call them back at their corporate number to discuss the issue. If it is a legitimate call, they will understand why you are doing this.

Once a criminal has your credit card number, they can call you and pretend to be your credit card company. They may ask for personal information like your mother’s maiden name or even your social security number. They can use this information not only to use your credit card, but to take out additional loans and hurt your credit score, putting you in debt.

Protecting Your Cards

You should always keep your credit card and your other valuable information on hand when you are in public. This information should be where you can see or feel it at all times. When entering a PIN number at the store, cover your hand so that nobody can see what number you are entering.

Never leave your credit card in the car. It can be stolen, or the information on the card can be written down. Cut up old credit cards before you throw them away.

Take the same care to protect your children’s information. It is not unheard of for criminals to steel children’s social security numbers and use them to take out credit.


Alaska Airlines Wins “Best Loyalty Credit Card”

Alaska Airlines won the award for “Best Loyalty Credit Card” thanks to voters at the Frequent Traveler Awards for its Visa Signature® card. Some of the perks that this credit card offers are 25,000 miles upon approval, attractive award levels when booking online and the ability to purchase a discount companion ticket of $99 once per year. This was the second year in a row that Alaska Airlines has been voted one of the best credit cards.

The Card

Alaska Airlines Visa Signature® cardholders receive 25,000 miles upon approval and a discount code each year for the purchase of one roundtrip companion ticket for only $99. Amazingly, this perk is not limited by blackout dates or other travel restrictions. For every $1 cardholders spend on Alaska Airlines and Horizon Air tickets and Vacations packages, they earn three miles. For all other purchases, cardholders earn one mile for every $1 they spend. The airlines also offers award levels when booking online. With their user-friendly online booking, it’s easy for customers to see all their award-seat options for one-way and roundtrip flights.

Frequent Traveler Awards

The Frequent Traveler Awards were created by the Frequent Traveler Educational Foundation in 2010. The awards ceremony was held last week, when 1.3 million frequent fliers rated airline and hotel programs. These awards honor excellence in travel programs worldwide and include an airlines and hotel winner for each category in three different regions, including the Americas, Europe/Africa, and the Middle East/Asia/Oceania. This is the second year Alaska Airlines has been the favorite among voters in the category of “Best Loyalty Credit Card.”

About Alaska Airlines

Alaska Airlines and Horizon Air, subsidiaries of Alaska Air Group, serve 90 cities between Alaska, the United States, Canada and Mexico.


Credit Card Companies Ease Standards

Banks took a softer view toward consumers seeking new credit cards in the first three months of the year, according to the Federal Reserve’s April 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices.

The survey, which addresses the market of loans for businesses and households during the first quarter of 2011, found that lending standards used by credit card companies had eased, which means it was easier for consumers to get approved for new plastic. Ironically, though, the demand for new credit cards has been lethargic.

The Survey

Every three months the Fed requests feedback from banking executives in order to zero in on changes in the supply and demand of loans to businesses and households during the previous quarter. The Fed’s April Survey included responses from 55 domestic banks, plus 22 U.S. branches and agencies of foreign banks. According to the survey, 20% of banks reported easing their approval standards for consumers seeking new credit cards in the first quarter of 2011.

This is a dramatic improvement from the fourth quarter of 2010, when less than 10 percent reported a loosening of credit standards.. Additionally, about 6% of banks lowered the minimum credit score needed to get approved for a card, while no bank reported increasing the required score. Although 9% of banks reported increasing interest rates on new or existing accounts, this was equal to the percentage of banks that decreased them.

Consumer Credit Card Demand

According to the survey, it seems consumer demand has not increased along with the easing of credit approval standards, at least the demand for new plastic. On net, banks reported little change in credit card loans. However, when asked about new credit card accounts and credit increases for existing accounts, banks reported the demand rose by 16%. While only a net fraction of banks reported an increase in the number of credit card applications in the first quarter, it seems consumers are looking for higher credit limits on existing cards rather than opting for new ones.

The Good News

The good news for consumers is that this is a good time to shop around and check out various credit card offers with one in three major banks reporting an easing of credit standards. However, part of the reason the number of consumers seeking new credit cards has not increased might be due to the fact that companies are targeting low-risk borrowers, or people who are in a better overall financial position. Yet these consumers probably already have multiple cards and are not necessarily looking to add to their collection.


Mobile Payment Wars: Credit Card Companies Arming for Battle

Payments are going mobile, and credit card companies do not want to be left behind. The big players are arming themselves to make sure that wherever the mobile payment field is headed, they get a little piece of the action.

Visa Invests in Square

Square is a mobile payment system that launched last May and allows anyone to accept payment through their mobile device. Square appeals to merchants who otherwise do not accept credit cards through a merchant account, such as small businesses, artists, or other vendors that want to avoid paying monthly fees to credit card companies. In the first three months of 2011 alone, Square processed $66 million in transactions. Not bad for a start-up company. But things are getting even better for Square as Visa announced this week plans to invest an undisclosed amount of money. In return, Visa gets a small piece of the action and has joined Square’s Board of Advisors.

Visa’s recent move will also open up new doors for the credit card company, as more merchants will be accepting credit cards for payment. According to the Central Penn Business Journal, this market includes some 27 million small businesses.

MasterCard in the Mobile Field

Visa isn’t the only company aiming to go big in the mobile payment field. MasterCard has been working its game since 2002 when it developed its PayPass system. PayPass-enabled cards contain a chip that allows shoppers to wave the card in front of a terminal in order to make charges. This takes advantage of a technology called radio-frequency identification, or RFID. The company now has 88 million PayPass cards and devices in use at nearly 300,000 merchant locations.

MasterCard is also teaming up with Google to allow Android users to make mobile payments. The Android device would contain everything a consumer needs, from being able to make payments to receiving offers and discounts after they make a transaction.

American Express Won’t Be Left Behind

As for American Express, it just launched Serve, a new payment network that lets people pay each other online through mobile phones or at merchant locations. Serve users manage their accounts through a smart phone app or with a prepaid card. Users can transfer funds from their debit cards, bank accounts or credit cards.

American Express also plans to partner with the start-up mobile payment company called Payfone, which also enables users to pay through their mobile phones.


Americans Shopping for Credit Cards — Again

According to the results of a recent survey by comScore, the findings reveal that Americans are feeling more optimistic about the economy. The optimism seems to be leading Americans to take on more debt. According to the comScore study of almost 2,000 Internet users and a research panel of 1 million U.S. consumers, 34% percent of respondents said they were feeling more confident about the economy. About 20% of survey respondents shopped around for a new credit card last year. There were several important factors consumers looked for most frequently when credit card shopping.

Primary Feature

According to survey respondents, the primary importance was a low interest rate. It seems to indicate that while consumers are once again looking to take on debt, they want to do so at the lowest interest rate possible. About 38% stated a low interest rate as the most important factor in choosing a credit card.

Second and Third in Importance

After a low interest rate, the next most significant feature credit card consumers are seeking is a card without an annual fee. Approximately 25% of survey takers said that they are looking for credit cards that come without an annual fee associated with it. Coming in third as the most important factor for choosing a credit card is a rewards program. About 16% of the survey respondents cited this as the most important factor when deciding on a credit card.

Consumer Spending Behavior

Sentiments on the economy apparently are not stopping short with applying for new credit and new credit cards either. A MasterCard survey in December 2010 also revealed that 61% of customers said they had not intentions on cutting back on spending in 2011. Of shoppers earning $100,000 to $150,000, 73% said they would not cut spending. So far, consumers are keeping true to their word, which is resulting in a return to applying for credit cards.


Drop in Credit Card Defaults Points to Economic Recovery

March has proved to be a tricky month in recent years for consumers to keep on top of their credit card payments after holiday shopping trips. This year, delinquency and default rates in March dropped, and the balances that credit card issuers had to charge off as uncollectible declined.

Assuring Lows in Credit Card Industry

The top credit card companies — Chase, Bank of America, Discover, Capital One, Citibank and American Express — reported a drop in delinquency and charge-off rates in March. In fact, both rates are the lowest they’ve been since mid-2008.

Capital One and Discover boasted the greatest improvements in delinquency rates and credit card defaults this month, according to The Associated Press. Bank of America reported the highest delinquency rate at 4.82% of balances, while American Express reported the lowest delinquency rate at 1.8% of balances.

According to the Federal Reserve, overall charge-off rates dropped in the fourth quarter of 2010 to 7.7% of balances from a high of 10.9% in the second quarter of that year. Bank of America and Discover reported the greatest improvements in their charge-off rates. Bank of America’s charge-off rate was still the highest among top credit card issuers at 8.18%, while American Express had the lowest rate at 3.7%.

According to Moody’s Investors Service, it is likely we will see this trend continue in the coming months. The drop in delinquency rates is a particularly good sign, a Moody’s analyst told The AP.

Consumers Improve Delinquency Rates

The post-holiday months can be a challenging time for consumers, yet they seem to have a stronger foothold in the management of their bills as the economy gradually recovers. The increase in employment rates certainly helps consumers to better manage their finances, but many of us have also learned to be smarter, more cost-efficient shoppers in the face of economic challenges. Both these factors might contribute to the drop in delinquent payments, which is defined as a payment that is at least 30 days late.


Recent California Supreme Court Ruling Drives Lawsuits

After a ruling in February in the California Supreme Court, it is now illegal for a retailer in the state to request the zip code of customers paying with a credit card. Apparently this information was being used for marketing purposes although consumers were led to believe otherwise. The result: more than 150 class-action lawsuits have been filed in California against numerous companies. The retailers include Kohl’s, J.C. Penney, Bed Bath & Beyond and Wal-Mart.

More than 40 of these lawsuits were filed in San Francisco Superior Court but include other jurisdictions in California as well.

Consumers claim the basis for these lawsuits is they were deceived into providing personal information under the assumption it was pertinent to finalizing the credit card transaction or for fraud prevention. Instead, consumers are learning this information seems to have been used for marking purposes.

The court ruled that collecting zip codes is illegal under a law that bars stores from collecting “personal identification information” when it is not needed for a transaction. The law was originally put in place to prevent customers’ personal data from being misused. But that is the same justification stores are using for taking zip codes; they say it is an anti-fraud measure.

In the Supreme Court Case, Pineda v. Williams-Sonoma Stores, Inc., a woman sued the home store Williams-Sonoma after the company used her name and zip code to find her address and added it to a marketing database.

Clearly most consumers would not have divulged personal information, such as their zip code, if they knew what it was really being used for. Stores in California certainly won’t be asking for zip codes moving forward, but that isn’t enough for many consumers who feel they’ve been violated and deceived in a big way.

Bill Dombrowski, president of the California Retailers Association told The San Francisco Examiner: “Most of the time, it’s being used to verify the credit card is your credit card, so it’s for fraud prevention.”

But the California Supreme Court disagrees.