Electronic Exchange Systems
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Operating Guidelines

Although credit and debit cards offer one of the simplest, most risk-free forms of payment in existence today, there are some guidelines and precautions that you should consider to help prevent inaccurate or fraudulent transactions.

Month-End Settlement Adjustments

EXS normally debits month-end fees from your deposit account during the first week of every month. One way to ensure that sufficient funds exist in your bank account to cover chargebacks or reversals and discount fees is by keeping an amount equal to your average monthly discount range on deposit in your account. When planning for the possibility of chargebacks, a good rule of thumb is to keep at least twice your average ticket amount in your account.

Draft Laundering or Factoring

Depositing drafts belonging to another business is in violation of your EXS Merchant Agreement and is against the law in many states. “Helping out” another merchant who offers to pay you a fee or commission by depositing his/her MasterCard or Visa drafts in your account can be very dangerous and is strictly prohibited. The transactions are often questionable or even fraudulent. Schemes such as this are often referred to as “draft laundering” or “factoring” and typically result in a flood of chargebacks. It could cause automatic funds reversal from your bank account. Remember, the merchant who deposits another merchant’s drafts is ultimately legally responsible for any problems resulting from the deposit.

We want to help protect you from this dangerous fraud scheme and the potential devastating losses. Draft laundering will likely result in the termination of your card acceptance privileges. We urge you to educate your staff about this serious problem and report third party draft laundering propositions to EXS and to the U.S. Secret Service immediately.

Charge Restrictions

Please realize that MasterCard and Visa regulations prohibit assigning a minimum or a maximum purchase amount or adding a surcharge to credit card transactions. Regulations also prohibit the use of credit cards for cash advances, collection of bad debt (e.g., returned checks), or damages, theft, etc.

Charge customers typically spend more than cash customers because of the available line of credit and the purchasing freedom credit cards represent. Encouraging patronage and not penalizing customers for paying with a credit card makes good business sense. If you feel strongly about compensating your cash customers for the discount fee you pay on charge purchases, you may want to consider offering a cash discount.

Adding a surcharge to credit transactions is against the law in many states and violates Visa and MasterCard rules.

Protecting Cardholder Privacy

Both customers and merchants often overlook the fact that the addition of personal or confidential cardholder information on the credit card draft can open the door to fraud or other criminal activity. New MasterCard and Visa regulations prohibit listing the cardholder’s personal information on the credit card draft, and require that the card expiration date be suppressed and the account number be truncated on the cardholder copy of electronically printed receipts.

Keep cardholder numbers and personal information confidential. This information should be released only to your merchant bank or processor, as specifically required by law, or in response to a government request. Safeguard your customers by ensuring that you provide confidential cardholder information only to authorized sources. You must have written agreements with a provider supported by EXS for loyalty program or fraud control services.

You must not request or use account number information for any purpose the cardholder did not authorize or that may be fraudulent. If you accept other card types (American Express, Diners, Discover, JCB, etc.) you may release transaction information to them as required.

You must not sell, transfer, purchase, provide, exchange or in any manner disclose account number information, a cardholder’s name, or other personal information, even in the event of failure or other suspension of business operations. This prohibition applies to card imprints, transaction receipts, carbon copies, mailing lists, tapes, or other media obtained as a result of a card transaction. The card association penalty for noncompliance is up to US $50,000.

If you use a third party terminal provider and they have access to cardholder account information, then your agreement with them must indicate that you retain legal control of the data. If information can be accessed over the Internet, then adequate controls must be adhered to and a third party security audit may be necessary. If cardholder transaction data or personal cardholder information is compromised, card association penalties for noncompliance will be assessed.

Never retain or store the:

  • Complete contents of a card’s magnetic stripe (subsequent to the authorization)
  • CVV2, CVC2, or CID (American Express and Discover) card validation code numbers
  • Listing cardholder information, such as a phone number, driver’s license or social security number, on the charge draft is unnecessary and discouraged. If you are suspicious that the transaction is not valid, do not hesitate to ask for additional identification -- preferably a photo ID. If you must list the identifying data, write it elsewhere (such as your copy of the sales receipt) rather than on the charge draft where vulnerable account number information is printed.

Thousands of dollars worth of damage can be done with only a few pieces of personal information. Keeping a cardholder’s information confidential is a service that your customers will appreciate.

Proper Display of Signage

When you agree to accept Visa or MasterCard at your placeof business or Web site, you should display the proper signage to indicate that service is available. Visa and MasterCard require that you clearly display signs at the point of sale. Use the sign and decals included in your merchant welcome kit. (See “Supplies” section for information on ordering additional signs and window decals.)



CONTACT US |  EXS is a registered ISO of Wells Fargo Bank, N.A., Walnut Creek, CA