What Every Auto Dealer Needs to Know About Processing

By: Merchant Advocate

Credit card spending has more than tripled in the last decade. For merchants accepting credit cards, that means billions of dollars in processing fees. But while processing may be big money, very few people understand the ins and outs of this unregulated industry.

Let’s dive into how to protect your dealership while increasing its value and reducing costs. We will also touch on two timely concerns for all merchants—data security and the rise in surcharging programs.

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Software Integration Issues

Many of our clients use a point-of-sale solution with integrated software. Typically, these software companies work exclusively with one processor, which can make it challenging for a business to secure optimal rates on their own.

Another major issue can involve the software itself. If you aren’t running the most recent upgrade (which may not be automatic and require an opt-in for install), all the information required by the processor at the time of the transaction may not be shared, resulting in additional charges that can really add up.

While we would recommend calling your provider to ensure you’re running the most recent version, they aren’t always aware if there’s a problem or how to fix it. Merchant Advocate understands not only what information the processor needs to avoid fees but can also ensure pricing is fair.

Chargebacks

A chargeback happens when the credited amount from the initial charge to your business checking account is reversed. The issuing bank reverses all or a portion of the transaction amount to your acquirer/processor, citing a violation of Payment Card Networks rules or regulations as the reason for the chargeback. This often occurs frequently for businesses who have a monthly membership program. Other reasons for chargebacks include suspected fraudulent activity with the card, non-receipt of the product or service, or cardholder disagreement regarding the quality/receipt of merchandise.

Managing chargebacks and engaging in representment can significantly reduce your expenses and improve your ratios, but these processes demand a considerable amount of time and resources. If you’d like to do so, check if your processor has a chargeback dispute manager tool. Merchant Advocate can also help set you up with a trustworthy chargeback company. No matter how you decide to handle, it is incredibly important to respond in a timely fashion.

In the past, merchants could disregard a response request, essentially defaulting to accepting the chargeback. No longer! To expedite the process, Visa has introduced time constraints. Failure to respond promptly will result in fines.

Unclear Guidelines Around Surcharges

Some business owners have turned to cash discounts and surcharges to cover increases in processing costs, passing the cost to their customers. The guidelines and laws surrounding these programs are unclear, ever-changing, and vary by state and area. Many states, including South Dakota, cap the percentage of a transaction merchants can charge. The surcharge itself is often set up incorrectly, leading to math errors and overcharging. There are serious tax implications and the possibility of fines in these cases. Keep in mind that changing the manufacturer sticker price on a car is not allowed. For these reasons, we recommend you contact an expert like Merchant Advocate to evaluate your current program and whether surcharging would make sense for your dealership.

PCI Compliance: Protecting your Data

Every merchant that stores, processes, or transmits cardholder data is responsible for its protection. The Payment Card Industry (PCI) Data Security Standard (DSS) was created to help protect consumer data. The good news is that it’s easy to become compliant by using a PCI-compliant hosting provider. EMV chip cards are an additional way to protect card-present transactions.

To ensure PCI compliance, you must implement the proper security policies, procedures, and staff training. You can find out if you are compliant by auditing your merchant statements, which will show a penalty fine for noncompliance.

Other simple steps include changing your user account passwords on a regular basis, using a third party to monitor your network security, and reviewing your physical security measures such as employee training and IT infrastructure.

Protecting the Interests of Your Business & Your Customers

Third-party auditors are often the best resources for understanding the credit card processing ecosystem, as processors often hide fees and make calculation errors in needlessly confusing monthly statements. It’s also normal for them to raise rates three to four times per year. Without due diligence and knowing how to read these statements, fees add up quickly.

Find out if SDADA partner Merchant Advocate can help your business with a free analysis.