Archive for Credit and Debt

Is Your Business at Risk from EMV Chip “Smart” Credit Cards?

EMV Smart credit cardsIf your business isn’t using a chip reader for credit card sales, you may be opening your business up to serious financial risk.

The EMV chip technology for credit cards shifts financial liability for fraudulent use to the retailer from the card issuer.

All credit card issuers are replacing existing credit cards with new ones using EMV chip technology.

What is an EMV Card?

EMV enabled cards (also known as Smart Cards) have a chip embedded in them to make it more difficult to steal a cardholder’s information. Credit card issuers are betting this will reduce their costs from fraudulent use.

But one of the ways they are doing that is by transferring some of that liability for fraudulent to your business.

Everything changed October 1st

Up until now, if a card was used fraudulently at your business, the credit card issuer took the financial hit to protect your customer.

Effective October 1st, 2017 that reality is changing big time as they are shifting the cost to your business.

Now if a customer makes a purchase using a smart card and you do not process the charge on an EMV enabled card reader, you may be on the hook for any fraudulent charges.

What’s the risk?

You could be left holding the bag if your customer’s charge turns out to be fraudulent. So instead of having a sale, you’ll be charged back for the money.

Considering the rampant credit card and identity theft fraud that goes on annually, that could be a real financial risk for your business. The odds are that some percentage of your sales each year are fraudulent.

Certainly not your fault as a business owner, but it definitely will be your cost going forward.

So even though it will cost you money to upgrade your card processing equipment to read EMV chips, you really need to understand the financial risks for not doing so.

Mobile Device Card Readers Need Upgrading Too

If you are a small business owner who uses card readers that attach to your mobile devices, you also need to upgrade that equipment. Check with your vendor to order your new mobile device EMV card readers.

EMV card readers will still be able to process the old magnetic strip cards, but eventually those cards will all be replaced.

Upgrade now to protect your business.

Check with your credit card processing company to get more details and to learn what you need to do to protect your business.


Accept Credit Cards? Learn How EMV will Impact your Business.

EMV smart cardsEMV is a credit card technology upgrade that helps to prevent fraudulent transactions. Commonly known as Smart Cards, they reduce the risk of credit card fraud for consumers and businesses.

While that’s good news for both credit card holders and credit card issuers, it brings some new risks for businesses that accept credit cards.

For business owners, this means it will take time and money to address.

What is EMV?

Credit cards enabled with EMV chips are a form of “smart cards.

EMV chips are embedded in your credit card and replace the magnetic strip. The EMV chip is actually a mini-microprocessor and significantly improves the security of your card data.

EMV chip enabled credit cards will make the magnetic strip on your credit & debit cards go the way of the rotary phone.

EMV’s Impact on Small Businesses

Credit card issuers in the U.S. are now issuing cards with EMV technology to replace the ones we all currently carry.

As a business owner who accepts credit and/or debit cards, you’ll need stay up to date on this technology transition because it will affect your processing systems.

Magnetic strip card readers cannot communicate with EMV chips. So you’ll need to upgrade to EMV enabled card readers. On a practical level, you’ll need to be able to process both types of cards until magnetic strips are historical artifacts.

Potential for Transfer of Liability

Don’t put the equipment upgrade off for too long though as it may leave your business at risk. In addition to dealing with the technology upgrade, be sure to keep an eye on the small print in your merchant services account agreements.

Some card issuers are considering transferring the liability for fraudulent transactions to the business owner if a customer uses a chip enabled card and the business does not have the capacity to read it. That’s because the security features are only effective if all parties to the transaction are able to access the EMV chip.

This would be a major change to a business’ potential financial liability for fraudulent card use.

We’ll have more information for you on this subject in the coming weeks, including best practices for analyzing and implementing the changeover.


Employee Credit Cards

Many small businesses provide employees with business credit cards. This can cut down on processing time for expense reports, improve documentation of expenses and reduce the need for petty cash.

There are a few caveats for the small business owner, however:

  • Credit cards are easy to use, but expenses are still subject to the same documentation requirements as all other tax records. You’ll need to implement a system to capture information such as: the business purpose of the charge, who was entertained, what business related discussion took place, which client or job it is for, and the business reason for the travel, etc.
  • Set up a way to periodically review and approve card usage by employees to insure accuracy and protect against loss or fraud.
  • Set credit limits on individual employee cards based on the employee’s business needs. For example, a salesperson with travel costs will need a higher limit than an administrative employee who is using it for office and printing supplies.
  • Keep control by limiting the number of employees who are authorized to issue cards and make sure you know who has cards.

Understanding the Financial Risk

One last item has to do with the small print, but can have a big impact. Most so called Small Business Credit Cards are actually personally guaranteed by the business owner – or whoever initially opened the account. It doesn’t matter that the business name is on the card; it matters who is liable for the debt.

This can expose you to a huge liability if your company should default on the balance. And the account will probably show up on your personal credit report as well. This can impact your ability to get personal credit or possibly damage your credit rating if there are any late payments or high balances.

Once a business has been in operation for a number of years and/or reaches a minimum annual revenue size, there are other truly “corporate” card options. Check with your bank or card issuer to make certain you know what type of business credit card account you have and get rid of the personal liability as soon as you can.

As a business grows, this detail can easily be overlooked, but that can be a very costly oversight as it exposes your personal assets to risk.