Acceptance of Credit Cards at Merchants

The credit card company will not necessarily wish to sign up every merchant. At one extreme there may be a history of malpractice and at the other he may be operating immorally or in some business with which the company does not wish to be associated with.

In between the merchant may be untrustworthy in the sense of being unreliable and this may lead to claims against the company. Simply put that the merchant may not be creditworthy.

The card company’s procedures therefore have to be adequate enough to check up on all the above factors and before accepting a merchant. The company may well make some basic credit checks, a bank reference and perhaps a recent balance sheet in order to verify the merchant’s creditworthiness.

Where the goods and/or services are likely to be subject to customer complaint, the card company are especially careful to ensure that the merchant has a reasonable reputation for its work and that is is financially sound enough to withstand likely claims against them.

Mail Order / Telephone Order Merchants

Particular caution is exercised when the outlets operates a mail-order business. Previous experience has caused the card company to be careful. The problems arose from the merchants being under-capitalized and not having adequate stocks of goods advertised.

The customers ordered by using the special mail-order procedure (just giving the credit card number and security code) or by telephone. The merchant immediately debited the credit card account and received the money but several weeks could elapse before the goods ordered were dispatched. On occasions the goods were not posted.

The card company inevitably received complaints. A special procedure now exists whereby the merchant agrees not to debit the credit card account until the goods have been dispatched. Another check also applies in that all transactions are authorized individually i.e the floor limit is nit and the merchants has to get authorization from the company on each occasion.

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