Accepting Credit and Debit Cards: What's New for You?
September 1, 2010
Businesses that allow customers to pay by credit or debit card can increase sales, avoid collection problems, and streamline cash flow. Several new law changes for such businesses may make things better -- or worse. Find out now how you may be impacted.
Changes in swipe fees
Officially known as interchange fees, swipe fees are a percentage of the transaction charged by card company banks every time a card is swiped to pay for a purchase. The fees average between 1% and 2% for debit cards and 2% or more for credit cards. Swipe fee revenues are shared by network operators such as MasterCard and Visa, and the banks that issue the cards.
The Wall Street Reform and Consumer Protection Act of 2010, also known as the Dodd-Frank Wall Street Reform Act, was signed into law on July 21, 2010. It includes a provision to reform credit card and debit card swipe fees. The Federal Reserve is charged with setting rules and regulations for "reasonable and proportional" swipe fees for debit cards.
The new law bars the card industry from interfering with merchants who offer a discount or other benefit to customers who pay by cash, check, or debit card rather than credit cards.
The new law also allows merchants to set minimum purchase amounts of up to $10 for accepting credit cards.
Compliance for credit card processing
As if you didn't have enough to do already, now you have to submit to your credit card processor an "attestation of compliance" to show that you have taken steps to protect credit card information provided by your customers. This generally requires you to use antivirus software and firewalls, data encryption, and ways to limit access to information. If you fail to comply, you could be slapped with thousands of dollars in penalties. Your bank likely will inform you of the need to submit your attestation of compliance and the deadline for doing so.
Solveras, a Tennessee-based payment solutions compliance company, has a five-step process that demonstrates how a business can satisfy the compliance requirement. To learn more, talk to your credit card processor or go to PCI Compliance Guide.
Information reporting to the IRS
Starting next year, if you accept credit cards, debit cards, and electronic payments (such as PayPal) in your business, the financial institution or organization processing your transactions must report the gross amount of the payments to the IRS.
There is a small business exception: No reporting about your activities is required if you have fewer than 200 payment transactions a year totaling less than $20,000. New Form 1099-K will be used for this purpose.