The widespread distribution of EMV/Chip payment cards and the October 1 shift of liability away from those with the latest technology have sure produced a lot of chatter.
Although much of the discussion has made for better understanding of the payments industry and security issues, some of it has approached hysteria on the part of sales people who want you, the retailer, to switch processors and buy a new machine from them.
As you probably noticed, the sun still rose normally on October 1 and your credit card terminal still worked the same. The customers who came into your store on October 1 were still able to use their cards. But despite that reality, there are a lot of people who want you to think that you need to switch processors – because if you don’t, the world as you know it is about to end.
Much like Three Card Monty, the rigged game of chance that is played with the intent of taking your money, there are some people pushing new terminals who will tell you whatever it takes to get you to switch.
Fact Not Fiction
The best advice in “2015: Year of Change” is to make sure that the basis of the conversation you have with processors bearing new terminals is built on fact, not fiction. Although it’s often wise to upgrade your technology, especially if your older terminal is no longer supported by its manufacturer, there are cases where you may not want to upgrade simply because of EMV.
As explained in previous columns, not all merchants that accept cards for payment will see a change in frequency of chargebacks or see the value of spending limited resources simply to upgrade.
No Free Lunch
There are a lot of sales people out there pushing “free” terminals as an inducement to get you to switch processors. But there is no free lunch!
If you are approached by someone offering you a “free” terminal, make sure you read and understand the fine print. Almost always, the free terminal is part of a bundled package and will require you to process with the new vendor for a long period of time. If you try to leave for any reason, you could get hit with often outrageous Early Termination Fees that lock you into a contract with that vendor.
While it is entirely appropriate to be required to compensate the vendor for the cost of the terminal you received for “free,” you need to know the calculation behind the amount you’re forced to pay in fees to cancel.
I found out during a recent conversation with a merchant that processed about $250,000 per year in volume that its bank told it the cost of getting out of its current contract would be $18,000. These “damages” were calculated on the future volume that the bank would “lose” because of early cancellation. Needless to say, this prevented the merchant from changing relationships.
In another conversation, I found out that a merchant was paying $55 a month for a terminal that can be purchased outright for less than $400. The catch was that the merchant was paying $55 per month for 48 months. That adds up to $2,640. Make sure you do the math.
The bottom line is to be sure you understand what you are signing up for, including all of the fees that go along with the not-so-free terminal you get from the vendor.
Michigan Retailers Association has published a worksheet you can use to make sure you ask all of the right questions. This will allow you to accurately compare programs. As always, our customer service team is available to help you review any offers or answer any questions.
John Mayleben CPP is Michigan Retailers Association senior vice president, technology and product development, and a national expert on electronic payment processing. He was the first person in Michigan and among the first in the nation to receive the Certified Payments Professional designation from the Electronic Transactions Association.