Credit card spending has more than tripled in the last decade. And when we look at modes of payment in the US car wash industry, it comes as no surprise that cashless payments are leading the market with a projected growth rate of 8.6% by 2033 (fmi). For merchants accepting credit cards, that means billions of dollars in processing fees. While processing may be big money, very few people understand the ins and outs of this unregulated industry.

Car wash owners face even more issues than a typical business, including those related to monthly membership-based transactions, software integration challenges, and the potential for high chargeback volume. Let’s dive into how to protect your business 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.

Monthly membership payment challenges

Do you know the percentage of your business that is recurring membership transactions? Car wash membership programs have become increasing popular, up a staggering 43% between 2019 to 2022 alone (2022 ICA Study). While the steady revenue stream is beneficial, it can also lead to processing issues, including being penalized for card declines or not providing all required information at the time of the transaction.

If the decline is due to a card on file that will never be able to be successfully charged i.e.: the client cancelled it, issued a stop payment order, or the account was closed by the issuer, the charge will fail no matter how many times it is attempted—and you may be penalized for each attempt. That’s why it is important you or a third-party auditor reach out to your processor to better understand setup and any associated fees. Merchant Advocate has extensive experience in this area and can help insure your account is optimized for reoccurring membership transactions.

Software integration issues

Many of our car wash 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 and 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. The most frequent reason in the car wash industry has to do with the monthly membership charges discussed previously. Others 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 cap the percentage of a transaction merchants can charge and 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. Options include:

Sign up for a registered surcharge program that only passes the fee on credit cards.

Raise your prices, offer a cash discount yourself (no need to have the processor involved as they are just trying to make a commission), and keep the extra profit. All you need to do this is a well-priced merchant account. You’ll need to become more familiar with monthly statements—particularly potential hidden or junk fees—and use these data points to negotiate lower fees. You can do this through more vigilant auditing or working with an expert who can help decipher these confusing statements.

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 start by auditing your merchant statements, which will show noncompliance via a penalty fine. 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.

Protect your interests and 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.

The ever-evolving landscape of credit card security and compliance underscores the need for constant vigilance to safeguard both your financial interests. Increasing awareness leads to savings and less stress down the line and empowers car wash owners to navigate the credit card payment ecosystem with greater confidence.

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