Many people who carry a balance on a credit card may be familiar with the consumer-friendly changes enacted with the Card Act of 2009. For ski area operators, there have been other changes going on that are going to impact your bottom line. It is important to be aware of and understand how these changes affect the way your ski area processes credit cards.

There are three relevant changes—two that have already taken place, and a third scheduled to take effect Apr. 21, 2011.


Justice Is Served
On Oct. 4, 2010, there was a monumental settlement between the Department of Justice and Visa and MasterCard. Visa and MasterCard issue a variety of cards that carry processing rates ranging from one to almost three percent for merchants. The difference in cost is determined by factors such as risk and the rewards linked to each card type, and this added cost is passed on to the merchant.

The settlement basically allows merchants to incentivize or steer customers to use cards that process at lower interchange rates. Previously this practice was forbidden by Visa and Mastercard; the Department of Justice determined this violated antitrust laws.

This is great news in theory, but it is not practical for most merchants to benefit. To do so would require the cashier to know the difference in rates between two different cards, calculate the cost difference to the merchant, and quickly offer a discount without losing the sale. That’s not likely to happen on a busy weekend day at your ticket window!

Once the dust settles with the legislative changes scheduled for Apr. 21, however, we’ll see more innovative solutions for implementing an incentive-based program that is advantageous for both the merchant and the paying customer, and practical to use. More on that below...


Changing the Rules
On Oct. 16, 2010, Visa and MasterCard enacted regulations that expand the time window consumers have to dispute charges on their credit cards, from 45 days to 90 days. Issuing banks (the cardholder’s bank) are also no longer accepting substitute drafts to settle a disputed charge. This means merchants will see an increase in disputed charges, and will have to deal with 100 percent of the retrieval requests—thus increasing the time spent by personnel gathering info and generating more potential chargeback fees (a chargeback fee is assessed to the merchant if they cannot disprove a customer’s disputed charge).

There are steps resorts can take to keep chargebacks low. For one, a signature capture terminal can help reduce the time and costs associated with chargeback retrieval requests. In a matter of seconds, the merchant can log-in, locate, and print a securely-stored original receipt, perhaps even remotely from a centralized web-based system. The alternative—locating and retrieving a stored receipt (often times in a box somewhere)—is a very inefficient and costly way to reproduce an original receipt.

Additionally, signature capture can help save enormous time and cost in the event of an audit, where thousands of receipts must be presented to an auditor.

Signature capture terminals are easy to implement in an indoor environment, but would be a challenge in a typical outdoor ticket window environment. Still, it may be worth the cost and time savings as well as for more secure storage of credit card receipts.


Durbin Amendment
The Durbin amendment, part of the financial reform act, passed the Senate in May 2010 and is scheduled to take effect Apr. 21. But a battle was raging between the big banks and retail industries in the House of Representatives as this article went to press, and the banks may yet water down the amendment.

The Durbin amendment addresses the issue of fair and reasonable fees to merchants for processing debit cards. This is crucial legislation, because Visa and MasterCard are currently charging much higher rates than are justified by the risk and cost associated with a debit card transaction. The cost of clearing a check, which is a similar process, is between $.05 and $.07—and the check could still bounce, while the debit transaction won’t. To process a debit card, the network checks the person’s bank account, and if the money is there it is immediately pulled out.

To quote Senator Durbin, “Passage of this measure gives small businesses and their customers a real chance in the fight against the outrageously high swipe fees charged by Visa and MasterCard. It will prevent the giant credit card companies from using anti-competitive practices, allow merchants to offer discounts to their customers, and restore common sense and fairness to this broken system.”

The Durbin Amendment will make it advantageous to process a card by having the customer enter their pin number at the time of the transaction. That way, the charge is processed through the debit network instead of the credit card network. If no pin number is entered, the processing cost jumps.

Example: A family of four purchases $280 in lift tickets. Paid with a debit card, the approximate merchant cost if PIN is entered will be capped between $.10 and $0.30 under the Durbin Amendment. Without a PIN, the cost is $2.86. If 5,000 lift tickets are sold in just one day via debit card with PIN, the cost savings are approximately $3,200!


Push the PIN
Now, in order to benefit the most from the preliminary pricing structure, merchants must convert as many transactions as possible to PIN-based debit. According to the January 2011 issue of Digital Transaction, though, the national average for PIN-debit conversion is only 38 percent. Why such a low amount, when debit cards account for about 60 percent of all cards? That’s because, once again, merchants must rely on cashiers and “basic” terminals at the point of sale to ask the consumer: “Is this debit or credit?” and then quickly calculate what the break-even point is, and ask the customer to please enter a PIN when PIN-debit is the least expensive option.

Equally important, the amendment will require that MC and Visa use more than one network to clear a debit transaction. That’s the opposite of the current system, which forces merchants to use a specific network with fixed prices. This change will provide much-needed competition in the debit market, and allows merchants to choose the network with the lowest cost.

This legislation is very promising, but to take full advantage of it, technology is a must. Speaking of which: the new law should bring about innovation in the form of payment acceptance platforms.

One company that has a processing platform already in place to address these legislative changes is CenPOS. Check out www.CenPOS.com for additional information on how you can benefit from the new law and prevent Visa and MasterCard from cutting into your profit margins.

David Eldredge is the internal auditor for Wachusett Mountain Ski Area and has a passion for credit card processing. He can be contacted at Davide@wachusett.com.
Norberto “Tito” Gil has more than 10 years experience in banking and credit card processing and is currently national sales director for CenPOS. His contact info is tgil@cenpos.com.