Posts Tagged ‘merchant accounts’

Twitter creator Jack Dorsey may have just revolutionized the credit card industry with a piece of plastic the size of a sugar cube. Called Square, the little device will soon allow anyone — not just businesses — to accept credit card payments on their Apple iPhone or other mobile device.

How it Works

Square works by plugging into your mobile device’s audio-in jack. Run a customer’s credit card through Square’s card reader and it uploads the credit card information to a central database for approval. Receipts can be emailed to customers instantly.

Currently there are only 100 or so Squares in existence, as the company is running a pilot program for the service in Los Angeles, San Francisco, St. Louis and New York. But as Square (the company) starts to ramp up operations, these little plastic devices may soon become ubiquitous, as the limits on accepting credit cards quickly fall away. Most paradigm changing of all: Merchant accounts are completely unnecessary with Square.

Why it Matters

There are certain advantages Square has over the traditional credit card swipe machines and the very infrastructure of credit card administration today.

1. Square is simple to use. All you need at the moment is an iPhone, though soon the Square will work on several mobile communication devices. To use Square to accept a credit card payment, all the merchant or private citizen needs to do is swipe the card and input the dollar amount. The software does the rest, sending the information to the secure Square Web site, which processes the transaction.

2. Square is secure. No information is ever stored on the iPhone, and all data that is transmitted from the iPhone to the Square Web site is heavily encrypted.

3. Square is inexpensive. Even factoring in the cost of the iPhone, vendors will still come out ahead when compared with the cost of credit card swipe machines and credit card merchant accounts. With Square, the device itself is free, while the software may have a minimal cost of around $1. Square — the company — makes its business profitable by taking a small percentage of each transaction.

4. Square is for everyone, not just merchants. Dorsey envisions not only retail outlets, but also individuals using the Square for payments. Owe a friend money? Just enter the information into Square, and the money is on its way. It is also perfect for mobile vendors such as roadside stall keepers, farmers markets and other businesses where a wireless credit card terminal would be too much of an added expense and a traditional credit card terminal impractical.

Square makes everyone capable of accepting credit card payments, and makes it fast, simple, secure and inexpensive while it’s at it.

Eric Fleming

In these turbulent financial times, identity theft is rampant, and credit card fraud is a popular way for identity thieves to wreak havoc. Though many don’t realize it, credit card companies do not require consumers show their IDs when using a credit card to make a purchase. In fact, most specifically forbid retailers from asking for ID in their merchant agreements. There are two primary schools of thought on requiring IDs for credit card transactions: One is that requiring IDs helps prevent identity theft, while the other is that it can actually lead to identity theft.

Those who support the requirement of identification feel that it will help protect the card holder from identity theft. If the credit card falls into the wrong hands, the culprit could be caught more quickly if the cashier asks for their ID and sees that it does not match the name and other information on the credit card.

Secure Cards
While all credit card issuers have respectable policies for protecting their customers, Citibank and American Express are standouts. Be sure to check our Citi and Amex credit card deals section.

On the other hand, some believe that the more frequently IDs are used in public, the greater chance they have of being exposed to thieves. A card holder does not need to lose a credit card or ID for their information to be stolen. During a transaction, nearby thieves can quickly record information from IDs, including names, addresses and dates of birth, all of which can be used to steal an identity without the card holder’s realization.

Companies may choose to ask consumers for their identification when they use a credit card, but it is not essential for the transaction to be completed. Credit card signatures (i.e., the signature on the back of a credit card) are the preferred means of verification for most credit card companies as they provide decent protection against all but the best of forgers. Signatures are always required on credit cards.

The differences of opinion on requiring IDs are likely to continue. In the meantime, some retailers will request IDs from their customers and some consumers will encourage retailers to ask for their ID by writing “ask for ID” or “see ID” next to their signature.

Lindsay Woodland