Your Merchant Account is a powerful tool in your business. You have the ability to post charges and credits to credit card accounts. Just because you can perform a transaction, doesn’t mean that you should. Here are some examples of transactions you should stay clear of to avoid having your merchant account suspended or closed for a seemingly innocent transaction.
Never Run Your Own Card!
Why would you run your own card? The reasons range from wanting to make a legitimate purchase from your own company to the sinister transaction of loaning your business money from your personal credit card line. While it certainly might seem practical during these lean and mean times of the pandemic, the truth is, this is a violation of your processing agreement as well as card issuer rules. In some circumstances, this transaction may be considered illegal. If you need to infuse money into your business, this is not the way to do it.
Accepting Payment for Another
You have likely been asked by a friend if you can run a card through your Merchant Account, deduct the associated fees and then pay someone else. Perhaps you have a friend selling baked goods from home. Someone wants to pay for her for a large order by using a credit card. Your friend doesn’t have a way to run the card. While you might be tempted to help your friend – don’t do it! Once you transact a payment, you retain the liability for that transaction. If there is a chargeback, you are on the hook. While it is unlikely that Susie Homemaker might be involved in laundering money, transactions like this could be considered a form of money laundering. The bottom line: Do not ever mix in someone else’s transactions with your own legitimate transactions.
One Business – One Merchant Account
Perhaps you have opened a sideline business during the pandemic to help offset financial losses. Just because you have a Merchant Account does not give you the right to run transactions for other businesses you might own through one Merchant Account. Each Merchant Account is underwritten for a very specific business with its own set of risk profiles. Two or more businesses operating from a single Merchant Account can affect how the risk department reviews your transactions against the type it was approved for. If you start transacting a higher volume than you were in previous times, or your average transaction amount changes, it will raise red flags. If your account is suspended for this, neither of your businesses will be able to accept credit cards.
Never Accept Third Party Authorization Codes
Only the Authorization Code received from your processor’s Call Center or what is displayed on a terminal/POS should be used for processing transactions. Never fall for a fraudster telling you that they have an approval code for you to use from their bank.
This is an extremely common fraud technique. A customer enters a business claiming to have an approval code from their bank that needs to be entered into the terminal for payment to be authorized. Make sure all of your employees are warned to never accept this as legitimate! To make the scheme more elaborate, some fraudsters will pretend to call their bank while standing in front of you and give you an authorization code after the first transaction declines. This is a fraud attempt! If you don’t get the authorization code from your processor, you do not have authorization for the transaction.
Do not try to bypass the authorization process by calling the number on the back of your customer’s credit card to try and obtain an Approval Code. Use only the one from your own processor. The only two ways you should ever obtain an Approval Code is electronic via your terminal/POS device during the sales transaction or via your processor’s automated voice authorization system.
While you may have done some of these things in the past because you didn’t know better, that doesn’t mean you should continue simply because you didn’t get caught. It’s like playing Russian Roulette and you will get eventually get caught.