Required To Upgrade Your Credit Card Terminal? Says Who?

Can you imagine if you had your cell phone service with AT&T and you got an official sounding call saying that your phone isn’t compliant and you are forced to upgrade? Fair enough, I guess phones must be upgraded. But what if you found out that it was going to cost you? Additionally, what if you figured out it wasn’t AT&T calling at all, but actually it was Verizon and they were going to switch your service to them? And the icing on the cake would be if you later found out that the upgrade wasn’t even necessary! Well, I’ve never heard of this happening in the wireless industry. Unfortunately this trickery is very prevalent in the merchant services industry.

Again this week I heard from another one of my clients asking me about a call that she received indicating that her credit card terminal is not compliant and must be upgraded. The caller made it seem as if he was from her current processor. Perhaps he wasn’t out right lying, but certainly intentionally misleading her. These kinds of calls have been happening for years, but with recent developments with increased PCI Standards and the upcoming Europay MasterCard Visa (EMV) push, they are becoming more prevalent. In order to protect business owners from the misinformation campaigns, I’m going to explain the truth about upgrading credit card terminals.

First, a merchant needs to know how to protect themselves if they ever get a call from the merchant services provider. It’s important to verify that they are actually your service provider. The simplest way to do this is to ask them to verify your merchant ID number, which is typed on the side of the terminal and also on the monthly merchant statement. It’s important that staff NEVER volunteers this information OR the type of terminal to an unsolicited caller.

In case you’re wondering, this ploy is prevalent enough to warrant FTC charges against one of the many companies engaging in this unscrupulous act. It is effective because it’s thinly veiled in some truth and some companies are using this to profit at small business owners’ expense. Most companies are using this to get a merchant to purchase or lease unnecessary equipment. Others are more interest in getting the merchant to switch to their processing. (Beware, I also have heard horror stories of merchants’ own sales organization selling unneeded terminals to their own existing customers!)

So, is a terminal upgrade necessary? Short answer: no. As long as a processor will still run transactions through a terminal, an upgrade isn’t required. The only circumstances at this time that would require a terminal upgrade is if the terminal didn’t truncate, meaning that the whole credit card number showed up on the receipt. The odds that a merchant still processes with a terminal that is so ancient that it cannot be programmed to truncate is incomprehensible to me.

However, an upgrade may be very beneficial for a merchant’s protection and convenience in the future with EMV (Europay, Mastercard and Visa) enabled terminals. The U.S. is among the very last countries to adopt this more secure, smart chip based technology that will reduce fraud. It may also be used in conjunction with NFC (Near Frequency Communication), depending on whether the terminal and card is equipped. NFC is a convenience that allows proximity based transactions such at the highly advertised ‘tap and go’.

Although the new terminals that are EMV and NFC compatible are already being deployed, they aren’t mandatory. It’s not until October 1st, 2015 that a liability shift occurs. After that date, if a counterfeit card is used at a non EMV terminal, then the merchant will incur the full penalty for the losses on that transaction. Even after that date, the existing terminals will continue to function, however some merchants may be incurring more risk than necessary.

Furthermore, when it does become necessary to upgrade a terminal, your processor will notify you by mail. At that time, I would expect that if a merchant is in a free terminal agreement, such as the majority of my clients have, the expense of upgrading will be greatly subsidized by the Sales Organization.

As always, if you have any questions on these issues, talk to your qualified sales agent to get the facts before making a costly mistake. If you still have doubts, contact your processor directly or seek out a Certified Payment Professional’s advice.

Dianne, the terminals don’t actually have expiration dates like on a milk carton :-). The lifespan of these terminals is incredible, often spanning over 10 years. As far as when the equipment must be replaced, if ever. I’ll quote from an Aug. 28th article in ISO & Agent that explains it’s far from being ready for an upgrade, “Yet, despite having the equipment ready, acquirers have not yet begun to make significant sales pushes to replace older terminals, Aite’s report shows. A sticking point is that even if every merchant in the U.S. had EMV-capable terminals today, the industry is still a ways away from being able to process chip card transactions. Indeed, many loose ends need to be tied up before that can happen.”
Now, even though it’s not necessary and won’t give you any more functionality, if you’d like a free upgrade, I can certainly help you out with that. There’s just no reason to fall for the ploy that I’ve described in my article.

I have been told I have to buy a new EMV terminal on the phone & by a company called “Merchant Service”. They are also trying to get me to switch to their Company they say to save me money. If I have to have one can’t I just buy one without switching banks? They want $400.00 for a new one or $30.00 a month to lease with a 49 month contract! My bank hasn’t send me anything on the subject. I own the one I use now. I don”t know what to believe. What should I do? I don’t want to be fined.

Laurie, you’re suspicions and instincts are right on target. First, there are no ‘fines’, just a liability shift which means it probably makes sense to upgrade by October. This article will help answer some questions http://bizzgrizz.com/cost-for-chip-card-emv/ . So, yes, you certainly don’t have to change processors. You could purchase an EMV terminal on your own, or many providers, including myself, will give you one for free with their processing. My recommendation is to call the number on your merchant services statement and ask your processor how they are handling your upgrade. If they aren’t offering a free terminal upgrade to their clients, then it might make sense to shop around for a free terminal with a better rate. If that happens, I wouldn’t go to a sales organization that uses deceptive practices. I’d recommend a Certified Payment Professional and I’m glad to help!

Thank you! I’ve been getting calls for months about this! First they said they were from my actual merchant service company (Xenex)… Then I started getting calls saying they were from Advanced merchant services. I knew it seemed fishy. It’s unfortunate these companies can get away with this.

Ariel, I’m glad I was able to help you out and I appreciate the feedback. I couldn’t agree with you more about how appalling these dishonest tactics are. And this is just one of the deceiving ploys that are used to trick merchants into switching services! I’ve written about some of the others. As you can see by these recent FTC charges, at least one organization is being held responsible for these scams. There are more. I’ll just repeat, who you are doing business with and credentials is more important than slick marketing tactics and empty promises.

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