Q) I’ve heard it said that it’s illegal for businesses to have a credit card minimum, yet many local shops in my area (mostly mom-and-pop stores), have $10 or $20 minimums. Is that within their right?

A) As of 2010, a merchant is legally allowed to charge a minimum of no more than $10. However, the merchant must apply this rule to all the cards they accept if they do decide to have a minimum fee.

The details can be found on this legal document, page 698: http://www.gpo.gov/fdsys/pkg/BILLS-111hr4173enr/pdf/BILLS-111hr4173enr.pdf

Q) Beyond Visa, Mastercard, and Amex, do you think it’s even possible for a new credit card brand to enter that market?

A) It appears unlikely at this point in time…

Q) Do businesses just SELF-REPORT their line-of-business to the CC agencies? Is fraud in that area really prevalent? Isn’t that how a lot of online casinos got in trouble?

A) When funds are processed by a merchant, all their sales are reported to the IRS and the CC processing companies issue a 1099 of the total funds collected on their account. Since the total funds collected are included in the merchants gross sales, it is now optional to enter the amount on the 1099K for 2012. Every merchant should consult with their tax professionals on the proper reporting of their credit card sales. I can’t speak to any research on the level of “fraud” on this topic…. not sure.

PDF Download: http://www.irs.gov/pub/irs-prior/i1099k–2012.pdf

Q) What are the worst false promises or blatant rip-offs you’ve seen from credit card processors?

A) Personally, I have seen many merchants getting ripped off – and the best thing they can do is read the contract they are signing. if they don’t understand something, ask until all your questions are answered. If you don’t understand the contract – have someone you trust review it.

Typically they sign up with the understanding of getting one thing and get something else entirely. The breakdown here is the merchant not knowing the terms of their contract and unfortunately being legally bound to the terms regardless of what song and dance the sales rep gave them.

Biggies are: any undisclosed fees in the sales pitch, “Leasing Equipment”, Auto-Renewing contracts with only a small window to cancel.

Q) How much do vendors pay to credit card companies per transaction? Does it vary with size of the transaction?

A) When a business signs up for a merchant account, all the terms including the cost per transaction (per item fee plus the rates associated with that card) are set by the processing company. The cost from Visa and MC (known as Interchange Fees) is passed along to the merchant as well as the mark up added by the processing company.

There are little restrictions on how much a processor can charge a merchant in fees. Yes, depending on the volume of the transaction, the amount paid by a merchant for any one transaction can can range from a few cents to over 5%.

It’s best to find some free advice on the particulars of each business – so that you can be sure to get the right program with a fair and ethical pricing structure. In the very least as a general rule, Interchange Plus programs offer a clear break down of pass through costs and mark up.