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Credit card transactions are an important and generally growing part of the way rental stores do business today.  It follows that they have become a significant part of the cost of doing business.  They also have the potential to do significant damage to rental businesses.   Discussed below are some proven strategies for both significantly reducing the costs associated with credit cards as well as ways to reduce the risks of fraud which can result in large losses.

Reducing Credit Card Processing Costs.
It is imperative that rental businesses conduct competitive bidding processes at least once every three years – more often is better.  It is really quite simple to do.  In fact, you can get a third party to do all the work for you.  All you need to do is hire a reputable Broker.
The broker will ask to see your current credit card statement.  The first thing he or she will do is compute the actual rate your current vendor is charging you; this may be different than you are currently being told.  Second you will be told if a lower rate can be obtained for you.  With your agreement he or she will take your current plan to several different merchant banks and ask them for a bid. When the lowest cost merchant bank is identified,  the broker  will calculate the savings you can expect and ask you if you want to switch.  Many of our clients have reaped very large savings from this process; some have saved many thousands of dollars per year.
I am guessing that there are many reputable Brokers who can perform this review for you.  Many of our clients are currently working with a company called Approval Code; their representative’s name is Kirk Moore.  He can be reached at (800) 535-6233. (As a matter of principle we do not accept kick backs from vendors.)

Protecting Yourself From Charge Backs.
As the use of credit cards rises, so too do consumer claims involving credit cards.  Some claims are honest and legitimate.  Others are fraudulent.  They are all potentially damaging to a small business owner.   Credit Card Insurance (Errors and Omission Insurance) is one way to help protect your business.  This approach is discussed in greater detail below.  Short of insurance, however, there are several important business practices that you can adopt to prevent or at least minimize consumer claims.

Practice safe credit card procedures. Many credit card companies give their customers the benefit of the doubt nowadays.  So, when a consumer claims a fraudulent charge, the credit card company quickly initiates a chargeback to the original merchant.  The way you handle credit card transactions can be a very effective defense against charge backs.  Are your employees currently practicing all of the following?
1.    Provide documentation for every credit card transaction you complete.
2.    Even when you process phone orders, make sure that your employees are completing paperwork and keeping it on file.  On the documentation, employees should make note if the sale was a phone order.
3.    When reasonable and possible, require the physical presence of the card at the time of the transaction.  A physical card-swipe or imprint is much more effective when defending your business against a chargeback.
4.    Always request the credit card’s security code on the back of the card
5.     Request a customer’s ID when they present their credit card.  Not only does this help you to ensure that the owner of the credit card is the same person using it, but it helps to raise that customer’s confidence in your safe business practices.
6.    Respond to customer calls promptly.  In the absence of a prompt return call, a customer may feel forced to call their credit card company, initiating a process that is much more difficult to reverse.
7.    Pay careful attention to payables.  Without careful attention you may not notice a chargeback, fraudulent or otherwise.

Errors and Omissions Insurance. Claims of fraudulent charges may sometimes get elevated to the point of a lawsuit.  In the event that the actions of your employees have caused the fraudulent charge, your business could be named and liable in the lawsuit.  This is a situation where Errors and Omissions Insurance, a specific type of liability insurance, can help by bearing some of the financial burden of a lawsuit.

Errors and Omissions Insurance should be your last line of defense.  It won’t solve every single problem.  The best way to determine whether Errors and Omissions Insurance is a good fit for your overall business needs is to speak to your insurance agent directly.

We welcome your feedback. Have you changed the way you handle credit card transactions?  Let us know by leaving us a comment!