Credit Card Authorization Forms and private events go together like white on rice - and for good reason! Up until recently, it was all but impossible to easily and securely collect credit card payments for deposits prior to an event.
However, Credit Card Authorization Forms have several major drawbacks despite being common in the industry. Fortunately, event management software tools like Perfect Venue can help you easily avoid these drawbacks and allow you to easily collect payments securely online at a rate that is often cheaper than using a Credit Card Authorization Form.
Why Credit Card Authorization Forms Are Screwing Over Your Events Business
Here are the main drawbacks to continuing to use Credit Card Authorization Forms for your business when using them to process deposits. Some venues choose to simply keep CC Auth Forms on hand and not charge a deposit, which does avoid some of these issues, however by not collecting funds before an event, you may have a much larger risk of a group canceling at the last minute and losing valuable revenue.
Although you probably don't know it since credit card processors are very sneaky at hiding their fees, you are actually paying alot more when you type a credit card number into your POS using a CC Auth Form as opposed to having a guest pay online or swiping a card.
The reason keying in a credit card is more expensive is because credit card companies tack on fees like: Keyed, Non Qualified, or Non Swiped. According to Card Payment Options website:
"The Non-Qualified surcharge is the most expensive of the tiers and can cost merchants an average of 1.5% -2.5% on top of the Qualified rate. [...] The Non-Qualified surcharge may be applied to retail merchants that type in a transaction instead of swiping it."
For example, the popular restaurant POS system Toast advertises a standard plan of 2.49%, but if you look at the fine print:
- Toast Keyed Visa/Mastercard/Discover are 3.5%
- Toast Keyed Amex is 3.89%
When you're booking hundreds of thousands of dollars in events each year, that added expense can really add up. For example, $500,000 in event bookings could add up to $5,000 per year in added costs - simply from using CC Auth Forms as opposed to a system like Perfect Venue that has the option to only pay a low processing rate of 2.9% for all cards, including Amex.
In addition to being expensive, you must manually enter in the credit card information to be able to charge the card. While this may seem like a simple step, it can often be anything but easy.
First, you need to have a POS system handy - which can mean that you need to travel to the restaurant just to charge the card if you don't work onsite. Even if you do work onsite, you need to enter in the credit card information and it is not uncommon that it is hard to read so an error is made and the card gets declined. If all of the information is correct, there is still a chance the bank will decline the transaction because banks (rightfully) see keyed in transactions as higher risk.
If the card gets declined, you then need to call the event planner (hopefully the answer!) to get their credit card information and try again. Not only does this process waste time, but you're losing valuable time that you could instead be following up with leads and generating more revenue.
Poor Guest Experience
It's the 21st century and consumers are used to doing everything online. By asking guests to print and scan a document, guests feel like they are taking a step back in time. Many Millennials and Gen Z don't even own printers to be able to complete a CC Auth Form even if they wanted to.
Additionally, it's not uncommon for guests to push back at filling out a CC Auth Form because they know that the process is insecure and increases the chances that their credit card information gets lost or stolen.
The added friction of asking guests to do something that requires a lot of steps can also hurt the bottom line. Guests may simply decide to go with a venue that makes the process easy.
PCI Non-Compliance Fines
Credit card companies and payment processors formed an organization called the "Payment Card Industry Security Standards Council" (PCI) which publishes rules for how to properly handle credit card information. For example, ensuring that credit card information is always encrypted and that employees are properly trained on how to handle credit card information.
Higher fees aren't the only cost that can come with CC Auth Forms. Although CC Auth Forms are common in the hospitality industry, they are not technically PCI compliant because they are storing a customers full credit card information on a document that is not secured.
Fines can be as high as $500,000 per incident for security breaches when merchants are not PCI compliant.
In addition, it is required that all individuals whose information is believed to have been compromised must be notified in writing to be on alert for fraudulent charges. As such, the potential cost of a security breach can far exceed $500,000 when the cost of customer notification and recovery is calculated.
Potential cost of a security breach
- Fines of $500,000 per incident for being PCI non-compliant
- Increased audit requirements
- Potential for campus wide shut down of credit card activity by our merchant bank
- Cost of printing and postage for customer notification mailing
- Cost of staff time (payroll) during security recovery
- Cost of lost business during register or store closures and processing time
- Decreased sales due to marred public image and loss of customer confidence
What is the solution?
Up until recently, there really wasn't a great solution to this problem of collecting payment information for deposits. A CC Auth Form was really the only way to do it, so it should come as no surprise that this is still commonplace in the industry.
Fortunately, now there are systems like Perfect Venue that make collecting deposits easy, affordable, and secure. With Perfect Venue’s event management software, you can easily send a guest a link to their portal, where they can easily and securely pay their deposit online.
With rates as low as 2.9% for all cards, including Amex, you are likely paying significantly less than keying in the card through your POS in addition to no longer having to worry about PCI Non-Compliance Fines.