ccfinder lists credit card offers from all of the major credit card distributors. A scoring system rates cards based upon their annual percentage rates, introductory offers, balance transfer rates, and features
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There is certainly no shortage of credit offers these days, no one will argue about that. We receive countless credit offers every day in the mail and a barrage of offers online. But, if you really need a credit card, how do you discern the details from the hype, the fact from the fiction? A new web site called ccfinder.com is dedicated to wading through the hype.ccfinder lists credit card offers from all of the major credit card distributors. A scoring system rates cards based upon their annual percentage rates, introductory offers, balance transfer rates, and features. ccfinder identifies cards with the lowest rates and the best features and makes them easily accessible. And, you can apply online and in a lot of cases know in minutes whether or not you’ve been accepted.

Jennifer Griffin, a new user that recently started exploring the net, has this to say about ccfinder.com, “This is a great site for finding deals on credit cards regardless of your credit. When I got into something I wasn’t sure about [ccfinder] got me out by providing the information I needed. Thanks. I would recommend this site to anyone.”

Even if you don’t know what features and benefits you’re looking for in a credit card or line of credit, ccfinder.com can help. On the home page, there are links to the featured card, the top 20 cards visited by other users, links to the cards with the lowest rates, and a list of categories.

ccfinder.com is designed to make it easy to find what you need. “This site is very well organized, and can help you find a credit card to fit almost any need. Whether you’re looking for a card with no annual fee, one to build your credit, one with low introductory rates for balance transfers, one with special bonuses/points, or one for poor credit, you’ll find the right card”, says Michael Coley, the savvy entrepreneur that brought uswww.amazing-bargains.com and www.magazinepricesearch.com.

If you’re looking for credit, this author believes that you should wander over tohttp://www.ccfinder.com and check out their credit card database.

To process online orders, you must offer online payment options. The most widely used form of payment currently is merchant credit card processing. Marketing studies show that you’ll lose 60 percent to 80 percent of your potential orders if your Web site is not set up to accept credit cards; they also show that if you offer credit card payment and use merchant credit card processing, not only will you receive more orders, but those orders will be substantially larger. 

Credit cards enable impulse buying, reassure customers of your legitimacy, and simplify your billing. Other methods of collecting payment are becoming available and include charging purchases to a phone bill, using electronic funds transfers (EFT), paying by electronic check and various forms of prepayment. Each of these methods requires payment processing either in the form of software added to your Web site or by linking to a payment processing service. 

Understand Merchant Credit Card Processing Accounts and Their Fees
To accept credit cards, you must establish a merchant account, a special bank account for handling the revenue (and fees) from credit card transactions. Your merchant account provider (MAP)-a bank or other institution that processes online credit card transactions-will verify the credit card, process the transaction, and deposit the results into your account, usually within two to four days. 

Evaluate Alternative Online Payment Methods
eCommerce credit card processing still reigns as the leading method of payment for online purchases, but other payment options are available. Your product and your customers’ buying preferences will influence which payment methods you accept. In other countries, ecommerce credit card processing is not as pervasive, so you may want to consider offering alternatives for your international customers. Offering multiple payment options on your Web site, if you can afford it and maintain your profit margin, is a means to increase sales by increasing customer convenience and confidence. Many alternative methods are better suited to micro-payments, charges under $1, because the processing costs are often lower and credit card merchant-account fees don’t apply. 

Determine The Fee Structure That Maximizes Your Profit Margin
Not every product sells the same way, and not every ecommerce credit card processing provider charges you the same way. Choose a provider that suits your business. Begin by considering the nature of the products you sell-are they large and expensive? Perhaps then you ought to seek a MAP that offers a higher flat-rate transaction fee and minimizes the discount rate, since even a hefty $1 transaction fee will be far lower than a 2.5 percent deduction from the charge. On the other hand, if you rely on small, high-volume sales, even a $0.30 transaction fee can erase your profits. 

Specify Your Technical Requirements
Different MAPs require different “gateways” on your site. These gateways are the pieces of code that transmit your customers’ orders to and from your bank’s transaction authorizing agent. If you plan to manually process your orders, a secure Web form might be good enough to capture credit card information that you can process offline. 

Evaluate Your Business’s Credit-Worthiness
MAPs, like most banks, pay close attention to the companies with which they do business. Such factors as your company’s length of time in business, outstanding debt, debt payment history, goods and services offered and even your personal history (for new businesses) will affect the fees your company pays to process credit card transactions on the Net. 

Find MAPs You Can Work With
Many merchant account credit card processing providers refuse accounts to start-up firms or firms and individuals with bad credit histories. Some MAPs will not accept “high-risk” accounts, a term that usually encompasses adult sites, online casinos, and sites operated by firms outside the MAP’s own nation. Other merchant account credit card processing providers refuse to process any transactions that originate on the Internet-even from their own existing brick-and-mortar clients-or may require that you create a separate merchant account to process orders that are not taken face-to-face but are received by mail, phone, or via the Internet. 

Compare Fees and Technical Capabilities
Once you’ve developed a list of merchant account credit card processing providers who might offer you an account, you need to compare the different MAP offerings. Be certain to ask detailed questions about each MAP’s technical requirements, and make sure your system can work with your MAP’s gateways-the software that actually submits your customers’ credit card information for payment authorization. 

Minimize Credit Card Chargebacks
Discussion about consumer credit card protection for Internet purchases has become intense. But the fact is that U.S. federal law limits a consumer’s liability for unauthorized charges to $50, whether the purchase was made face-to-face or on the Internet. No such protective legislation exists for merchants, however, and they bear the full cost of fraudulent charges as chargebacks from their banks. When a fraudulent credit card transaction takes place without the physical card being presented to the merchant, or funds are uncollectible for some other reason, merchants are charged the sale amount by the cardholder’s bank. This is known in the industry as a chargeback. Merchants may also be asked to pay penalty fees in addition to the cost of the original charge. Though it has not been as hot a topic for e-tailers, credit card chargebacks pose a serious threat to profits. To reduce revenue losses due to credit card fraud, online businesses need to take steps to reduce the risk they take with every order received through their Web sites. Find out how credit card chargebacks occur and what you can do to protect yourself. 

Secure All Your Transaction Data and Prevent Fraud
Credit card information is extremely sensitive, and plenty of villains are waiting to exploit any breach in your security. Additionally, online merchants are as susceptible to credit-card fraud as face-to-face retailers. Make sure your merchant account provider has addressed these issues. 

Prepare for International Payment Processing
Some payment processing and merchant account providers do not accommodate international commerce. If you plan to market your product globally, you may need to search specifically for an international provider

Officer.

Applicability This policy applies to all Stanford entities that accept payments via credit cards or pin-less debit 

cards. 

Summary This policy provides guidelines on acceptance and processing of credit cards or pin-less debit 

cards at Stanford.  Section headings are:  

 1. DEFINITION 

2. PURPOSE  

3. POLICY 

4. IMPLEMENTATION GUIDELINES 

5. SOURCES OF MORE INFORMATION 

1. DEFINITION 

For purposes of this policy, credit card acceptance and processing is defined as the use of mechanisms such 

as a point-of-sale terminal or a payment page on a web site to accept credit cards for payment of goods or 

services sold by a Stanford University entity.  The term “credit cards” as used in this policy includes the use 

of pin-less debit cards bearing a credit card company logo.  This policy does not apply to the 

StanfordCardPlan or to the University’s PCard or Travel credit card programs. 

2. PURPOSE  

Credit cards provide a convenient way to handle business transactions such as conference registration,  the 

purchase of course materials, or the purchase of meals at a campus dining facility.  Acceptance of credit 

cards is subject to the Payment Card Industry’s prescriptive requirements for safeguarding cardholder 

account numbers and other sensitive data.  It is also in the University’s best interest to facilitate the transfer 

of credit card transaction data to its financial systems. The purpose of this policy is to establish guidelines 

for credit card acceptance and processing. 

3. POLICY  

a. Relation to University Mission — Any use of credit card acceptance and processing methods at 

Stanford must be consistent with Guide Memo 15.3, Unrelated Business Activity, 

http://adminguide.stanford.edu/15_3.pdf, which prohibits the use of Stanford resources for any 

activity not related to the University’s mission. 

b. Authorized Vendor — Departments must use a Stanford authorized payment application, hosted 

service provider, or point-of-sale terminal hardware vendor.  These are listed at 

http://merchantservices.stanford.edu. 

c. University Merchant Agreement – Departments wishing to engage in point-of-sale or internet 

electronic commerce must be approved by the Controller’s Office Credit Card Merchant Services and 

comply with all terms of the University’s Merchant Agreement. 

d. Confidentiality of Data — Credit Card Data is classified as Restricted Data.  Departments are 

responsible for safeguarding the confidentiality of Restricted and Sensitive Data related to purchases of 

goods or services as stated in Guide Memo 63, Information Security, 

http://adminguide.stanford.edu/63.pdf .  Specific credit card acceptance and processing guidelines 

are:  

(1) Use secure and/or encrypted connections to the transaction service vendor (such as the ones 

provided to Stanford by its authorized vendors).

If you have a Citibank credit card, you can use the Virtual Account Number feature to generate temporary “alias” numbers to give out in place of your actual number. Why would you want to do that? Well, there are lots of reasons… read on and I’ll give you a few.

First, the bad news. The terms of use of the Virtual Account Number service have a dark hidden secret. In essence, Citibank is allowed to update them at any time without ever notifying you of the change. Updates become effective immediately. 

So, in theory, they could add something into the user agreement like:

There will be a $10 per transaction fee imposed on the use of any Virtual Account Number. In addition, the interest rate for charges will be 5% higher than your normal base rate.

Are they likely to do it? Probably not, but I’m sure any good attorney would advise us that anythings possible.

Now, on to the good news… The service is very easy to use.

1. Log into the CitiCards.com site and find the link for Virtual Account Numbers.
2. With one click, you can generate a random credit card number.
3. Use that number whenever you make a purchase online.

So, why would you want to use this service when you’ve already got fraud protection built in?

• Lets say you want to buy a magazine subscription online (or any type of potentially recurring subscription). If you use your real card number they may try to auto-renew you down the road. Can’t do that with a disposable number!
• You want to order from a catalog or some other source that you have to mail in an order form with your credit card info included. Use a VAN in case someone intercepts the mail.
• Each virtual account number is set to expire at the end of the following month and can only be used at a single merchant. This means if someone steals it, the number can’t be used anywhere else.
• Fighting fraudulent charges is a pain in the ass! It takes time and energy and there is always at least a chance that you could lose in the end. Why not prevent it altogether?

Keep in mind the announcement in June 2005 that 40 million credit card numbers were hacked. If those people had used a Virtual Account Number they wouldn’t even break a sweat!

If you want to use this service you’ve got two options. They offer a download-able version for the PC which will automatically pop up and fill in check out forms for you, or they offer a Web based version that you can access online.

Go check it out at CitiCards.com.

When a purchase is made, the credit card user agrees to pay the card issuer. The cardholder indicates his/her consent to pay, by signing areceipt with a record of the card details and indicating the amount to be paid or by entering a Personal identification number (PIN). Also, many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet, known as a ‘Card/Cardholder Not Present’ (CNP) transaction.

Electronic verification systems allow merchants to verify that the card is valid and the credit card customer has sufficient credit to cover the purchase in a few seconds, allowing the verification to happen at time of purchase. The verification is performed using a credit card payment terminal or Point of Sale (POS) system with a communications link to the merchant’s acquiring bank. Data from the card is obtained from amagnetic stripe or chip on the card; the latter system is in the United Kingdom and Ireland commonly known as Chip and PIN, but is more technically an EMV card.

Other variations of verification systems are used by eCommerce merchants to determine if the user’s account is valid and able to accept the charge. These will typically involve the cardholder providing additional information, such as the security code printed on the back of the card, or the address of the cardholder.

Each month, the credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed. After receiving the statement, the cardholder may dispute any charges that he or she thinks are incorrect (see Fair Credit Billing Act for details of the US regulations). Otherwise, the cardholder must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher amount up to the entire amount owed. The credit provider charges interest on the amount owed (typically at a much higher rate than most other forms of debt). Some financial institutions can arrange for automatic payments to be deducted from the user’s bank accounts, thus avoiding late payment altogether as long as the cardholder has sufficient funds.

Interest charges

Credit card issuers usually waive interest charges if the balance is paid in full each month, but typically will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid.

For example, if a user had a $1,000 transaction and repaid it in full within this grace period, there would be no interest charged. If, however, even $1.00 of the total amount remained unpaid, interest would be charged on the $1,000 from the date of purchase until the payment is received. The precise manner in which interest is charged is usually detailed in a cardholder agreement which may be summarized on the back of the monthly statement. The general calculation formula most financial institutions use to determine the amount of interest to be charged is APR/100 x ADB/365 x number of days revolved. Take the Annual percentage rate (APR) and divide by 100 then multiply to the amount of the average daily balance (ADB) divided by 365 and then take this total and multiply by the total number of days the amount revolved before payment was made on the account. Financial institutions refer to interest charged back to the original time of the transaction and up to the time a payment was made, if not in full, as RRFC or residual retail finance charge. Thus after an amount has revolved and a payment has been made, the user of the card will still receive interest charges on their statement after paying the next statement in full (in fact the statement may only have a charge for interest that collected up until the date the full balance was paid…i.e. when the balance stopped revolving).^[1]

The credit card may simply serve as a form of revolving credit, or it may become a complicated financial instrument with multiple balance segments each at a different interest rate, possibly with a single umbrella credit limit, or with separate credit limits applicable to the various balance segments. Usually this compartmentalization is the result of special incentive offers from the issuing bank, to encourage balance transfers from cards of other issuers. In the event that several interest rates apply to various balance segments, payment allocation is generally at the discretion of the issuing bank, and payments will therefore usually be allocated towards the lowest rate balances until paid in full before any money is paid towards higher rate balances. Interest rates can vary considerably from card to card, and the interest rate on a particular card may jump dramatically if the card user is late with a payment on that card or any other credit instrument, or even if the issuing bank decides to raise its revenue.

Benefits to customers

Because of intense competition in the credit card industry, credit card providers often offer incentives such as frequent flyer points, gift certificates, or cash back (typically up to 1 percent based on total purchases) to try to attract customers to their programs.

Low interest credit cards or even 0% interest credit cards are available. The only downside to consumers is that the period of low interest credit cards is limited to a fixed term, usually between 6 and 12 months after which a higher rate is charged. However, services are available which alert credit card holders when their low interest period is due to expire. Most such services charge a monthly or annual fee.

Grace period

A credit card’s grace period is the time the customer has to pay the balance before interest is charged to the balance. Grace periods vary, but usually range from 20 to 40 days depending on the type of credit card and the issuing bank. Some policies allow for reinstatement after certain conditions are met.

Usually, if a customer is late paying the balance, finance charges will be calculated and the grace period does not apply. Finance charges incurred depend on the grace period and balance; with most credit cards there is no grace period if there is any outstanding balance from the previous billing cycle or statement (i.e. interest is applied on both the previous balance and new transactions). However, there are some credit cards that will only apply finance charge on the previous or old balance, excluding new transactions.

Benefits to merchants

An example of street markets accepting credit cards

For merchants, a credit card transaction is often more secure than other forms of payment, such as checks, because the issuing bank commits to pay the merchant the moment the transaction is authorized, regardless of whether the consumer defaults on the credit card payment (except for legitimate disputes, which are discussed below, and can result in charges back to the merchant). In most cases, cards are even more secure than cash, because they discourage theft by the merchant’s employees and reduce the amount of cash on the premises. Prior to credit cards, each merchant had to evaluate each customer’s credit history before extending credit. That task is now performed by the banks which assume the credit risk.

For each purchase, the bank charges the merchant a commission (discount fee) for this service and there may be a certain delay before the agreed payment is received by the merchant. The commission is often a percentage of the transaction amount, plus a fixed fee. In addition, a merchant may be penalized or have their ability to receive payment using that credit card restricted if there are too many cancellations or reversals of charges as a result of disputes. Some small merchants require credit purchases to have a minimum amount (usually between $5 and $10) to compensate for the transaction costs, though this is not always allowed by the credit card consortium.

In some countries, for example the Nordic countries, banks guarantee payment on stolen cards only if an ID card is checked and the ID card number/civic registration number is written down on the receipt together with the signature. In these countries merchants therefore usually ask for ID. Non-Nordic citizens, who are unlikely to possess a Nordic ID card or driving license, will instead have to show their passport, and the passport number will be written down on the receipt, sometimes together with other information. Some shops use the card’s PIN for identification, and in that case showing an ID card is not necessary.

Parties involved

• Cardholder: The holder of the card used to make a purchase; the consumer.
• Card-issuing bank: The financial institution or other organization that issued the credit card to the cardholder. This bank bills the consumer for repayment and bears the risk that the card is used fraudulently. American Express and Discover were previously the only card-issuing banks for their respective brands, but as of 2007, this is no longer the case.
• Merchant: The individual or business accepting credit card payments for products or services sold to the cardholder
• Acquiring bank: The financial institution accepting payment for the products or services on behalf of the merchant.
• Independent sales organization: Resellers (to merchants) of the services of the acquiring bank.
• Merchant account: This could refer to the acquiring bank or the independent sales organization, but in general is the organization that the merchant deals with.
• Credit Card association: An association of card-issuing banks such as Visa, MasterCard, Discover, American Express, etc. that set transaction terms for merchants, card-issuing banks, and acquiring banks.
• Transaction network: The system that implements the mechanics of the electronic transactions. May be operated by an independent company, and one company may operate multiple networks. Transaction processing networks include: Cardnet, Nabanco, Omaha, Paymentech, NDC Atlanta, Nova, Vital, Concord EFSnet, and VisaNet.^[2]
• Affinity partner: Some institutions lend their names to an issuer to attract customers that have a strong relationship with that institution, and get paid a fee or a percentage of the balance for each card issued using their name. Examples of typical affinity partners are sports teams, universities, charities, professional organizations, and major retailers.

The flow of information and money between these parties — always through the card associations — is known as the interchange, and it consists of a few steps.

Transaction steps

• Authorization: The cardholder pays for the purchase and the merchant submits the transaction to the acquirer (acquiring bank). The acquirer verifies the credit card number, the transaction type and the amount with the issuer (Card-issuing bank) and reserves that amount of the cardholder’s credit limit for the merchant. An authorization will generate an approval code, which the merchant stores with the transaction.

• Batching: Authorized transactions are stored in “batches”, which are sent to the acquirer. Batches are typically submitted once per day at the end of the business day. If a transaction is not submitted in the batch, the authorization will stay valid for a period determined by the issuer, after which the held amount will be returned back to the cardholder’s available credit (see authorization hold). Some transactions may be submitted in the batch without prior authorizations; these are either transactions falling under the merchant’s floor limit or ones where the authorization was unsuccessful but the merchant still attempts to force the transaction through. (Such may be the case when the cardholder is not present but owes the merchant additional money, such as extending a hotel stay or car rental.)

• Clearing and Settlement: The acquirer sends the batch transactions through the credit card association, which debits the issuers for payment and credits the acquirer. Essentially, the issuer pays the acquirer for the transaction.

• Funding: Once the acquirer has been paid, the acquirer pays the merchant. The merchant receives the amount totaling the funds in the batch minus the “discount rate,” which is the fee the merchant pays the acquirer for processing the transactions.

• Chargebacks: A chargeback is an event in which money in a merchant account is held due to a dispute relating to the transaction. Chargebacks are typically initiated by the cardholder. In the event of a chargeback, the issuer returns the transaction to the acquirer for resolution. The acquirer then forwards the chargeback to the merchant, who must either accept the chargeback or contest it.

Secured credit cards

A secured credit card is a type of credit card secured by a deposit account owned by the cardholder. Typically, the cardholder must deposit between 100% and 200% of the total amount of credit desired. Thus if the cardholder puts down $1000, they will be given credit in the range of $500–$1000. In some cases, credit card issuers will offer incentives even on their secured card portfolios. In these cases, the deposit required may be significantly less than the required credit limit, and can be as low as 10% of the desired credit limit. This deposit is held in a special savings account. Credit card issuers offer this because they have noticed that delinquencies were notably reduced when the customer perceives something to lose if the balance is not repaid.

The cardholder of a secured credit card is still expected to make regular payments, as with a regular credit card, but should they default on a payment, the card issuer has the option of recovering the cost of the purchases paid to the merchants out of the deposit. The advantage of the secured card for an individual with negative or no credit history is that most companies report regularly to the major credit bureaus. This allows for building of positive credit history.

Although the deposit is in the hands of the credit card issuer as security in the event of default by the consumer, the deposit will not be debited simply for missing one or two payments. Usually the deposit is only used as an offset when the account is closed, either at the request of the customer or due to severe delinquency (150 to 180 days). This means that an account which is less than 150 days delinquent will continue to accrue interest and fees, and could result in a balance which is much higher than the actual credit limit on the card. In these cases the total debt may far exceed the original deposit and the cardholder not only forfeits their deposit but is left with an additional debt.

Most of these conditions are usually described in a cardholder agreement which the cardholder signs when their account is opened.

Secured credit cards are an option to allow a person with a poor credit history or no credit history to have a credit card which might not otherwise be available. They are often offered as a means of rebuilding one’s credit. Secured credit cards are available with both Visa and MasterCard logos on them. Fees and service charges for secured credit cards often exceed those charged for ordinary non-secured credit cards, however, for people in certain situations, (for example, after charging off on other credit cards, or people with a long history of delinquency on various forms of debt), secured cards can often be less expensive in total cost than unsecured credit cards, even including the security deposit.

Sometimes a credit card will be secured by the equity in the borrower’s home.^[3][4] This is called a home equity line of credit (HELOC).

Prepaid “credit” cards

See also: Stored-value card

A prepaid credit card is not a credit card,^[5] since no credit is offered by the card issuer: the card-holder spends money which has been “stored” via a prior deposit by the card-holder or someone else, such as a parent or employer. However, it carries a credit-card brand (Visa, MasterCard, American Express or Discover) and can be used in similar ways just as though it were a regular credit card.^[5][6]

After purchasing the card, the cardholder loads the account with any amount of money, up to the predetermined card limit ^[7] and then uses the card to make purchases the same way as a typical credit card. Prepaid cards can be issued to minors (above 13) since there is no credit line involved. The main advantage over secured credit cards (see above section) is that you are not required to come up with $500 or more to open an account. ^[8] With prepaid credit cards you are not charged any interest but you are often charged a purchasing fee plus monthly fees after an arbitrary time period. Many other fees also usually apply to a prepaid card.^[5]

Prepaid credit cards are sometimes marketed to teenagers^[5] for shopping online without having their parents complete the transaction.^{[9][10][11][12]}

Because of the many fees that apply to obtaining and using credit-card-branded prepaid cards, the Financial Consumer Agency of Canada describes them as “an expensive way to spend your own money”.^[13] The agency publishes a booklet, “Pre-paid cards”,^[14] which explains the advantages and disadvantages of this type of prepaid card.

Features

As well as convenient, accessible credit, credit cards offer consumers an easy way to track expenses, which is necessary for both monitoring personal expenditures and the tracking of work-related expenses for taxation and reimbursement purposes. Credit cards are accepted worldwide, and are available with a large variety of credit limits, repayment arrangement, and other perks (such as rewards schemes in which points earned by purchasing goods with the card can be redeemed for further goods and services or credit card cashback).

Some countries, such as the United States, the United Kingdom, and France, limit the amount for which a consumer can be held liable due to fraudulent transactions as a result of a consumer’s credit card being lost or stolen.

Security

Credit card security relies on the physical security of the plastic card as well as the privacy of the credit card number. Therefore, whenever a person other than the card owner has access to the card or its number, security is potentially compromised. Merchants often accept credit card numbers without additional verification for mail order purchases. They however record the delivery address as a security measure to minimise fraudulent purchases. Some merchants will accept a credit card number for in-store purchases, whereupon access to the number allows easy fraud, but many require the card itself to be present, and require a signature. Thus, a stolen card can be cancelled, and if this is done quickly, no fraud can take place in this way. For internet purchases, there is sometimes the same level of security as for mail order (number only) hence requiring only that the fraudster take care about collecting the goods, but often there are additional measures. The main one is to require a security PIN with the card, which requires that the thief have access to the card, as well as the PIN.

An additional feature to secure the credit card transaction and prohibit the use of a lost credit card is the MobiClear solution. Each transaction is authenticated through a call to the user mobile phone. The transaction is released once the transaction has been confirmed by the cardholder pushing his/her pincode during the call.

The PCI DSS is the security standard issued by The PCI SSC (Payment Card Industry Security Standards Council). This data security standard is used by acquiring banks to impose cardholder data security measures upon their merchants.

Problems

Main article: Credit card fraud

A smart card, combining credit card anddebit card properties. The 3 by 5 mm security chip embedded in the card is shown enlarged in the inset. The contact pads on the card enable electronic access to the chip.

The low security of the credit card system presents countless opportunities for fraud. This opportunity has created a huge black market in stolen credit card numbers, which are generally used quickly before the cards are reported stolen.

The goal of the credit card companies is not to eliminate fraud, but to “reduce it to manageable levels”.^[15] This implies that high-cost low-return fraud prevention measures will not be used if their cost exceeds the potential gains from fraud reduction.

Most internet fraud is done through the use of stolen credit card information which is obtained in many ways, the simplest being copying information from retailers, either online or offline. Despite efforts to improve security for remote purchases using credit cards, systems with security holes are usually the result of poor implementations of card acquisition by merchants. For example, a website that uses SSL to encrypt card numbers from a client may simply email the number from the webserver to someone who manually processes the card details at a card terminal. Naturally, anywhere card details become human-readable before being processed at the acquiring bank, a security risk is created. However, many banks offer systems where encrypted card details captured on a merchant’s webserver can be sent directly to the payment processor.

Controlled Payment Numbers are another option for protecting one’s credit card number: they are “alias” numbers linked to one’s actual card number, generated as needed, valid for a relatively short time, with a very low limit, and typically only valid with a single merchant.

The Federal Bureau of Investigation and U.S. Postal Inspection Service are responsible for prosecuting criminals who engage in credit card fraud in the United States, but they do not have the resources to pursue all criminals. In general, federal officials only prosecute cases exceeding US $5000 in value. Three improvements to card security have been introduced to the more common credit card networks but none has proven to help reduce credit card fraud so far. First, the on-line verification system used by merchants is being enhanced to require a 4 digit Personal Identification Number (PIN) known only to the card holder. Second, the cards themselves are being replaced with similar-looking tamper-resistant smart cards which are intended to make forgery more difficult. The majority of smartcard (IC card) based credit cards comply with the EMV(Europay MasterCard Visa) standard. Third, an additional 3 or 4 digit code is now present on the back of most cards, for use in “card not present” transactions. See CVV2 for more information.

The way credit card owners pay off their balances has a tremendous effect on their credit history. All the information is collected by credit bureaus. The credit information stays on the credit report, depending on the jurisdiction and the situation, for 1, 2, or even 10 years after the debt is repaid.

Profits and losses

In recent times, credit card portfolios have been very profitable for banks, largely due to the booming economy of the late nineties. However, in the case of credit cards, such high returns go hand in hand with risk, since the business is essentially one of making unsecured (uncollateralized) loans, and thus dependent on borrowers not to default in large numbers.]Costs

Credit card issuers (banks) have several types of costs:

Interest expenses

Banks generally borrow the money they then lend to their customers. As they receive very low-interest loans from other firms, they may borrow as much as their customers require, while lending their capital to other borrowers at higher rates. If the card issuer charges 15% on money lent to users, and it costs 5% to borrow the money to lend, and the balance sits with the cardholder for a year, the issuer earns 10% on the loan. This 5% difference is the “interest expense” and the 10% is the “net interest spread”.

Operating costs

This is the cost of running the credit card portfolio, including everything from paying the executives who run the company to printing the plastics, to mailing the statements, to running the computers that keep track of every cardholder’s balance, to taking the many phone calls which cardholders place to their issuer, to protecting the customers from fraud rings. Depending on the issuer, marketing programs are also a significant portion of expenses.

Charge offs

When a consumer becomes severely delinquent on a debt (often at the point of six months without payment), the creditor may declare the debt to be a charge-off. It will then be listed as such on the debtor’s credit bureau reports (Equifax, for instance, lists “R9″ in the “status” column to denote a charge-off.) The item will include relevant dates, and the amount of the bad debt.^[16]

A charge-off is considered to be “written off as uncollectable.” To banks, bad debts and even fraud are simply part of the cost of doing business.

However, the debt is still legally valid, and the creditor can attempt to collect the full amount for the time periods permitted under state law, which is usually 3 to 7 years. This includes contacts from internal collections staff, or more likely, an outside collection agency. If the amount is large (generally over $1500 – $2000), there is the possibility of a lawsuit orarbitration.

In the US, as the charge off number climbs or becomes erratic, officials from the Federal Reserve take a close look at the finances of the bank and may impose various operating strictures on the bank, and in the most extreme cases, may close the bank entirely.

Rewards

Many credit card customers receive rewards, such as frequent flier points, gift certificates, or cash back as an incentive to use the card. Rewards are generally tied to purchasing an item or service on the card, which may or may not include balance transfers, cash advances, or other special uses. Depending on the type of card, rewards will generally cost the issuer between 0.25% and 2.0% of the spread. Networks such as Visa or MasterCard have increased their fees to allow issuers to fund their rewards system. However, most rewards points are accrued as a liability on a company’s balance sheet and expensed at the time of reward redemption. As a result, some issuers discourage redemption by forcing the cardholder to call customer service for rewards. On their servicing website, redeeming awards is usually a feature that is very well hidden by the issuers. Others encourage redemption for lower cost merchandise; instead of an airline ticket, which is very expensive to an issuer, the cardholder may be encouraged to redeem for a gift certificate instead. With a fractured and competitive environment, rewards points cut dramatically into an issuer’s bottom line, and rewards points and related incentives must be carefully managed to ensure a profitableportfolio. Unlike unused gift cards, in whose case the breakage in certain US states goes to the state’s treasury, unredeemed credit card points are retained by the issuer.

Fraud

The cost of fraud is high; in the UK in 2004 it was over £500 million.^[17] When a card is stolen, or an unauthorized duplicate made, most card issuers will refund some or all of the charges that the customer has received for things they did not buy. These refunds will, in some cases, be at the expense of the merchant, especially in mail order cases where the merchant cannot claim sight of the card. In several countries, merchants will lose the money if no ID card was asked for, therefore merchants usually require ID card in these countries. Credit card companies generally guarantee the merchant will be paid on legitimate transactions regardless of whether the consumer pays their credit card bill.

Revenues

Offsetting costs are the following revenues:

Interchange fee

Main article: Interchange fee

In addition to fees paid by the card holder, merchants must also pay interchange fees to the card-issuing bank and the card association.^[18][19] For a typical credit card issuer, interchange fee revenues may represent about a quarter of total revenues.^[20].

These fees are typically from 1 to 6 percent of each sale, but will vary not only from merchant to merchant (large merchants can negotiate lower rates^[20]), but also from card to card, with business cards and rewards cards generally costing the merchants more to process. The interchange fee that applies to a particular transaction is also affected by many other variables including the type of merchant, the merchant’s total card sales volume, the merchant’s average transaction amount, whether the cards are physically present, if the card’s magnetic stripe is read or if the transaction is hand-keyed or entered on a website, the specific type of card, when the transaction is settled, and the authorized and settled transaction amounts.

Interchange fees may consume over 50 percent of profits from card sales for some merchants (such as supermarkets) that operate on slim margins. In some cases, merchants add a surcharge to the credit cards to cover the interchange fee, enouraging their customers to instead use cash, debit cards, or even cheques.

Interest on outstanding balances

Interest charges vary widely from card issuer to card issuer. Often, there are “teaser” rates in effect for initial periods of time (as low as zero percent for, say, six months), whereas regular rates can be as high as 40 percent. In the U.S. there is no federal limit on the interest or late fees credit card issuers can charge; the interest rates are set by the states, with some states such as South Dakota, having no ceiling on interest rates and fees, inviting some banks to establish their credit card operations there. Other states, for example Delaware, have very weak usury laws. The teaser rate no longer applies if the customer doesn’t pay his bills on time, and is replaced by a penalty interest rate (for example, 24.99%) that applies retroactively.

Fees charged to customers

The major fees are for:

• Late payments or overdue payments
• Charges that result in exceeding the credit limit on the card (whether done deliberately or by mistake), called overlimit fees
• Returned cheque fees or payment processing fees (eg phone payment fee)
• Cash advances and convenience cheques (often 3% of the amount)^[21]. Transactions in a foreign currency (as much as 3% of the amount). A few financial institutions do not charge a fee for this.
• Membership fees (annual or monthly), sometimes a percentage of the credit limit.
• Exchange rate loading fees (these may sometimes not be reported on the customer’s statement, even when they are applied)^[22]

Neutral consumer resources

Canada

The Government of Canada maintains a database of the fees, features, interest rates and reward programs of nearly 200 credit cards available in Canada. This database is updated on a quarterly basis with information supplied by the credit card issuing companies. Information in the database is published every quarter on the website of the Financial Consumer Agency of Canada (FCAC).

Information in the database is published in two formats. It is available in PDF comparison tables that break down the information according to type of credit card, allowing the reader to compare the features of, for example, all the student credit cards in the database.

The database also feeds into an interactive tool on the FCAC website.^[23] The interactive tool uses several interview-type questions to build a profile of the user’s credit card usage habits and needs, eliminating unsuitable choices based on the profile, so that the user is presented with a small number of credit cards and the ability to carry out detailed comparisons of features, reward programs, interest rates, etc.

History

The concept of using a card for purchases was described in 1887 by Edward Bellamy in his utopian novel Looking Backward. Bellamy used the term credit card eleven times in this novel.^[24]

The modern credit card was the successor of a variety of merchant credit schemes. It was first used in the 1920s, in the United States, specifically to sell fuel to a growing number ofautomobile owners. In 1938 several companies started to accept each other’s cards. Western Union had begun issuing charge cards to its frequent customers in 1914.^{[citation needed]}Some charge cards were printed on paper card stock, but were easily counterfeited.

The Charga-Plate was an early predecessor to the credit card and used during the 1930s and late 1940s. It was a 2 1/2″ x 1 1/4″ rectangle of sheet metal, similar to a military dog tag, that was embossed with the customer’s name, city and state (no address). It held a small paper card for a signature. It was laid in the imprinter first, then a charge slip on top of it, onto which an inked ribbon was pressed.^[25] Charga-Plate was a trademark of Farrington Manufacturing Co. Charga-Plates were issued by large-scale merchants to their regular customers, much like department store credit cards of today. In some cases, the plates were kept in the issuing store rather than held by customers. When an authorized user made a purchase, a clerk retrieved the plate from the store’s files and then processed the purchase. Charga-Plates speeded back-office bookkeeping that was done manually in paper ledgers in each store, before computers.

The concept of paying different merchants using the same card was invented in 1950 by Ralph Schneider and Frank X. McNamara, founders of Diners Club, to consolidate multiple cards. The Diners Club, which was created partially through a merger with Dine and Sign, produced the first “general purpose” charge card, and required the entire bill to be paid with each statement. That was followed by Carte Blanche and in 1958 by American Express which created a worldwide credit card network.

Bank of America created the BankAmericard in 1958, a product which, with its overseas affiliates, eventually evolved into the Visa system. MasterCard came to being in 1966 when a group of credit-issuing banks established MasterCharge; it received a significant boost when Citibank merged its proprietary Everything Card, launched in 1967, into Master Charge in 1969. The fractured nature of the U.S. banking system meant that credit cards became an effective way for those who were traveling around the country to move their credit to places where they could not directly use their banking facilities. In 1966 Barclaycard in the UK launched the first credit card outside of the U.S.

There are now countless variations on the basic concept of revolving credit for individuals (as issued by banks and honored by a network of financial institutions), including organization-branded credit cards, corporate-user credit cards, store cards and so on.

In contrast, although having reached very high adoption levels in the US, Canada and the UK, it is important to note that many cultures were much more cash-oriented in the latter half of the twentieth century, or had developed alternative forms of cash-less payments, such as Carte bleue or the Eurocard (Germany, France, Switzerland, and others). In these places, the take-up of credit cards was initially much slower. It took until the 1990s to reach anything like the percentage market-penetration levels achieved in the US, Canada, or the UK. In many countries acceptance still remains poor as the use of a credit card system depends on the banking system being perceived as reliable.

In contrast, because of the legislative framework surrounding banking system overdrafts, some countries, France in particular, were much faster to develop and adopt chip-based credit cards which are now seen as major anti-fraud credit devices.

The design of the credit card itself has become a major selling point in recent years. The value of the card to the issuer is often related to the customer’s usage of the card, or to the customer’s financial worth. This has led to the rise of Co-Brand and Affinity cards – where the card design is related to the “affinity” (a university, for example) leading to higher card usage. In most cases a percentage of the value of the card is returned to the affinity group.

Collectible credit cards

A growing field of numismatics (study of money), or more specifically exonumia (study of money-like objects), credit card collectors seek to collect various embodiments of credit from the now familiar plastic cards to older paper merchant cards, and even metal tokens that were accepted as merchant credit cards. Early credit cards were made of celluloid plastic, then metal and fiber, then paper, and are now mostly plastic.

Mesh is a popular file-sharing application that has recently started to bundle a piece of software inside its P2P tool called Marketscore.

Marketscore is a privacy nightmare: What this program does is akin to monitoring each and every possible activity you carry out on your computer. Marketscore in fact routes all of a user’s surfing destinations through its own servers. There it analyzes the data to “create research reports on internet trends and e-commerce activities,” according to Marketscore itself.

Even data entered on secure websites – such as passwords, credit card numbers and bank account numbers, information that is supposed to be viewable only by the sender and the intended recipient – is accessible to Marketscore, as the company has developed a technology that allows it to view encrypted information.

But the most interesting part is that some users don’t seem to be concerned about this, and consider such practices part of what is to be expected by Internet companies that offer free services.

E-commerce and content publishing are at the heart of the web. 
That’s why Adult Host’s toolset includes applications that speed the development of these applications while providing flexibility in adding features and functions. 

Adult Host’s E-Commerce applications feature online management of members and rebills, payment processing using Ibill. We can also program with any kind of payment processor. 

E-Commerce Solutions 

Our E-Commerce Solutions provide your adult website with the tools it needs to become an online commercial success. You have a terrific website with great content you need us to make sure that you get paid for what you are offering.

Secure On-line Ordering 

On-line Ordering Consumers do not have much regard for sites that don’t allow them to join your site securely and easy. We can help you with the setup of your member processing. 

Merchant Accounts 

Many people when faced with a question of “do you have a merchant account” do not know where to turn to, especially when dealing with the fact that there business is adult oriented, We can help you get a merchant account thru our partners. 
Contact us to see how we can help you. 

Credit Card Processing 

Credit card processing is the #1 way to process member registration. We guide you thru this process. If you don’t know how to program the pages at all, we can setup the pages for you as well. Once your customers have made the decision to buy you direct them from your web site to a secure Web page. Customers then simply:

• Input their credit card info on the credit card collection page.
• Submit the transaction
• Await verification
• Click back to your site
• Login To Your Members Section
• Contact us to see how we can help you.

900 Line Processing 

With the Adult Host Telephone Billing Service, you modify your web site’s price-list page to seamlessly direct customers to a secure web server. The Telephone Billing Instruction Page then tells your customers how to dial an appropriate 900 toll telephone number, to pay for their purchase. 

When the customer dials the 900 number, an automated voice system provides customers with a series of numbers. The customer then returns to your site and enters these numbers in order to redeem their purchase. 

Charges must be for a fixed dollar amount. Your site must explicitly communicate the specific service or duration of web site access the charges will purchase. Telephone Billing charges will appear on customer telephone bills as “Web Access.” 

With Online Checks, you modify your web site’s price-list page to seamlessly direct customers to a secure web server. The Checks Collection Page then requests the MICRline, or routing and account numbers that appear on the bottom of the customer’ s check. 

The data collected is passed through a risk management database and a third party validation database. Upon positive validation, the customer receives a “redemption code” . This “redemption code” acts as the customer’s “Proof of Purchase”, authorizing them to return to your site (seamlessly, of course) and retrieve whatever content or service they purchased. 

One of the most valuable ways to use online Checks is to advertise the service following an unsuccessful credit card transaction.