What's in your bucket?

Maybe you're wondering what I'm talking about here. Let me explain. In any kind of a tiered pricing model for accepting credit cards, your processor decides which "bucket" or tier they will put transactions. Okay, let's say you are on a Three Tier Pricing model. Your statement would have Qualified, Mid-Qualified and Non-Qualified transactions.

Typically, in this model, when you swipe either a debit or credit card, thru your terminal/software, it will be processed at the Qualified level. Usually, this is also your best rate as well. Now, let's say you hand-key a transaction from a phone order or simply a worn out card that your machine won't read. Most (not all) processors would then treat that as a Mid-Qualified transaction at a higher rate than your Qualified rate. Now, this certainly is justified because the costs to the processor, due to the perceived higher risk, is more so it is passed on to you. Typically, what falls into the Non-Qualified category would mostly be corporate type card transactions. However, some processors, knowing that their merchants don't know much about this industry, will clear even some Rewards cards in this Non-Qualified category. The big question here is, do you ABSOLUTELY KNOW what category ALL or your different transactions are falling into? You should! Ask your current provider to thoroughly explain and if they don't to your satisfaction....find another provider. Now, of course, you could simply go to my website and purchase my ebook on credit card processing. It has received rave reviews in educating merchants around the country.

Maybe, you are on a 4 Tier Pricing model. In this case, the 1st Tier would represent debit cards swiped. The 2nd Tier would be credit cards swiped. The 3rd Tier would be hand-keyed and some Rewards cards. And last, but not least, the 4th Tier would mostly be corporate cards. However, you still have this "bucket" situation going on here. Each processor can put whatever cards they want into any "bucket" they desire. Again, all the more reason for you to really become educated.

Over the past couple years we have seen a surge in Rewards type cards being issued and used. You possibly have one or more in your wallet. When customers go shopping in your establishment and they have a "generic" V/MC in their wallet and a card that pays them some sort of reward for their purchase, which one do you think they will use? Guess what! You pay more to accept them and, indirectly, you are helping the card issuing bank to pay the reward to the customer. It's kind of like paying them to shop with you. Nice huh?

I had a merchant show me a recent statement from their provider. They were informed that as of October 2008, Visa Rewards 2 cards that had previously been cleared as a Mid-Qualified transaction will now be treated as Non-Qualified. Keep in mind now that Visa didn't raise the Interchange Rate on these card types in October. The processor, seeing an increase in these in the marketplace, decided it was a great way to make more off the merchant. Oh, and also, the processor told them, in addition, they would be raising their Non-Qualified rates by .20%. Ouch! The, the DOUBLE WHAMMY!

The bottom line of all this is simply you need to get educated. If I can be of any assistance, there are numerous ways to contact me on this site.

Thanks for coming by

Lower volume than last year but increased costs...why?

What's going on with my processing costs?

I had a merchant call me a couple days ago and asked the above question. Last year, in September, they had a total volume of $28,049. Of that, $12,108 (43% of total volume) fell into their Mid-Qualified category. These types of transactions are typically for card-not-present transactions or, in more cases than not, they are Rewards type cards. In September of this year, his volume had decreased to $26,863 but his Mid-Qualified volume was $17,382 which represented 65% of his total volume. In that same timeframe, there have been a couple Interchange increases which reflected a .23% increase in his Mid-Qualified rates. So, let's take a look at this.

Take a look in your wallet. Do you own any credit cards that pay you some sort of reward? It could be for airline miles or cash back or bonus points towards catalog purchases. If you don't currently own one, it's likely you receive at least one offer weekly to apply for one of these cards. The issuing of credit cards is a very competitive environment and banks are constantly looking for new ways to entice you to make the switch. Now, let's say you were to go into my merchants retail cloting store and spend $100 (which is about his average ticket) and you found something that you liked and stepped up to the cash register. You have a generic Visa or MasterCard in your wallet and you have a Rewards type card....which one will you use? I would say, that in the majority of cases, as is happening nationwide, customers would chose the Rewards card.

So, why is it, besides the increase in my merchants rates in the past year, has he seen his costs increase on less volume? There's no way to know for sure, but, I told him it was likely because he had seen this increase in the types of cards he was gettng. And, every processor pays more (in Interchange fees) to process those types of cards so it gets passed on to the merchant. Ultimately, in a roundabout way, you, the merchant, are helping the card issuing bank to pay some of that reward back to the cardholder. Yep, that's right, you're paying the customer to shop in your store or dine in your restaurant when they pay using a Rewards card. Nice system huh?

Now, the other possibility of his increased costs could be to not batching out in a timely manner. After talking with him this is not the case but for those of you out there that don't know how this could manifest, let me explain. You see, V/MC rules state that you must batch within a timely manner. The general rule of thumb is that you must batch within 24 hours of the authorization or the transaction will be downgraded (in other words, it automatically gets bumped up to the next level). If not batched out within 48 hours, they can get downgraded even further. So, a word to the wise....even if you only have a single transaction in your terminal, BATCH IT OUT.

Leasing VS Purchasing POS equipment

Over the years, I have been amazed at how many merchants were leasing their POS equipment. I know, for a fact, that there are many merchant level salespersons (MLS's) that are making their primary living selling leases for, let's say, only $39.95 (or more...I've seen many at $69.95....what a ripoff!!!) per month for a 36 month lease.

Let's do the math on this one. That would come out to nearly $1500 for the three years. Then, when the lease is up, you could buy it outright but that would typically cost you about 10% of what you paid in total lease payments. Or, in other words, in this example, an additional $150. So, you would have paid about $1650 for a machine that you probably could have purchased outright for $500 or less. Guess what, the rep that leased you that machine, he/she is getting the $1000 or so profit on the lease....up front. Don't need to do too many of those a month to make a nice living. Consequently, they're not really interested in you or in building a mutually rewarding long-term relationship with their merchants. They're in in just for themselves...for the quick buck.

Now, here's where it gets worse, in my mind. At the end of the lease do you think that the leasing company will contact you to let you know that your lease is up????? Not a chance! Read the fine print on your lease. At the end of the initial term, unless you call to cancel and let them know of your intentions regarding the machine, it automatically converts to a monthly rental at the same rate. And, it will go on and on and on..... I've run into merchants that were still paying monthly, two years after their three year lease was up. Simply because they "forgot" about the original term. OUCH!!!

Come on over to one of my websites for some "education". It won't cost you anything and, just maybe, it could end up saving you quite a bit. Here they are:

Credit Card Processing Education

Credit Card Processing Knowledge Ebook

EARLY TERMINATION FEES

Okay, so you've had someone come knocking from a different merchant services provider and it looks like they may have a better deal. Accepting credit cards for payment of goods and services in your business is crucial. But, with everything in life costing more these days, it's important to make certain you're paying fair rates.

So, the new credit card processing company has done their analysis of your current situation. They've given you a proposal and you're ready to sign on the dotted line and make the switch. Hold on their cowboy, you best give this a little more thought.

Typically, most processors contract terms are for three years. If you've been with your current provider for less than three years, you'll likely incur the dreaded, and usually unexpected early termination fee if you make the switch. Get out your original contract and check out the fine print for yourself. You'll find fees of $250 or more. That kind of cost could literally wipe out any potential savings you may receive from making the switch. So, what do you do? Here's some ideas.

First, you could consider contacting your current provider and let them know that you have an offer on the table that beats their rates. Oftentimes, they will match, or even beat, the rate (as long as it is a legitimate one...in writing) to keep you in their portfolio. If you absolutely have problems with the current provider and want to leave anyway, here's another suggestion.

Many times, processors will charge you a Monthly Minimum fee (normally $5-20). Typically, it never comes into play because your processing volume and subsequent fees are more than what the minimum is. So, let's look at some numbers here. Let's say that you've got a good deal on the table and you really want to make the switch. You check your existing contract and discover that you have an Early Termination Fee of $250. And, let's further assume that you have a year to go on your original contract. Make your switch but instead of calling and cancelling your prior contract, just keep paying the Monthly Minimum for the next twelve months. So for example, let's say it's $10 monthly, you end up only paying $120 instead of the $250. The one thing you want to keep in mind is to be sure and contact the previous processor near (not after) your original contract term expiration and cancel then. Otherwise, it will automatically renew for a year and you'll be paying the minimum for the next twelve months.

It's important to stay on top of what's going on with your credit card processing rates. We have seen several increases in interchange this year and some, if not all, have been passed on to you. If you don't fully comprehend your statements and all your rates and fees, get in touch with me and I'll help you to

GET EDUCATED

Paying at the pump with your debit card

I've had people ask me recently why it is that when they're paying for gas with debit cards at AFD's (Automatic Fuel Dispensers), the pump stops at $75 (yah, and that typically is no more than half a tank for many of us). Well, let's see if I can shed some light for you.

As a fuel merchant, you should be thankful this is happening to help is lessening potential fraud resulting in losses to you. As a customer, it can be irritating and, if you really want to fill up, you have to start all over again.

But, there's another thing that's happening with debits at the pump that is bugging consumers. Maybe you've noticed this yourself. You put $50 in the tank on your way home from work. After dinner, you gto your computer to do some on-line banking. Hey, wait a minute, you say, that station ripped me off. They charged me $75 for that $50 worth of fuel (as if $4.00 gas isn't bad enough). Well, that's not exactly what happened so let me explain.

When a debit card is swiped at the AFD, an "authorization" is sent to the bank. That triggers a hold of funds, which then has to be "reconciled" with the final purchase amount. If you go back to your on-line banking in a day or so, you'll see the actual amount you spent deducted from your account. This same scenario, often times happens with debit cards used in restaurants to allow for tip adjustments.

Visa Inc., the largest payment processing network in the country, said recently that it would be making changes in its systems this fall to allow debit card payments from gas purchases to clear much faster, usually within a few hours. However, in the meantime, gas buyers can avoid the debit card holds altogether by simply paying inside at the cashier after filling up. When you use your debit card, simply enter your pin number and the transaction will clear right away for the actual amount you spent.

Paying with a credit card at the pump also can trigger an authorization against your credit line, but, that's different than having a hold put on cash in your checking account. A credit card authorization wouldn't affect cardholders unless they were right up against their credit limits.

Improve your profits without increasing your sales

Credit Card Processing: Legally Beat the System and Reduce your Costs

Are you tired of paying ever-increasing fees for the "privilege" of accepting credit cards in your business? Some merchants have taken the approach of imposing surcharges on credit card transactions. If you are one of these merchants, let me caution you: IT IS ILLEGAL, and will lead to problems for you so don't do it. The secret to beating the credit card processing fees is not charging more for credit card sales, but instead, charging less for cash sales. It may sound like the same thing, but there is a big difference.

The increasing costs associated with accepting credit cards are leaving many merchants searching for ways to pass along at least a portion of processing expenses to their customers. VISA and MasterCard are becoming aware of this new trend and are enforcing strict regulations specifically designed to hinder any such efforts by merchants. With the tightening economy and customers spending less, discount fees, transaction costs, and other expenses associated with the acceptance of credit and debit cards are eating away at businesses net profits.

If you're like most businesses, you have seen an increase in the use of plastic over just a year ago. The reason is simply that there is an increase of "rewards" type cards that are in use today. As a consumer, when you're out shopping and you have the option of paying with cash or check because you have the money available today, or using a "reward" card, which would you chose? Most often, the shopper would likely chose the latter for the benefit it provides. As a result, you see reduced profits and, in fact, pay more for accepting this "reward" card than you would for a generic credit or debit card. So, what can you do?

One thing you can, and should do, is get a thorough understanding of your credit card processing rates and terms. Have an independent rep give you a total consultative analysis of your curreent processing program (check out this site). You should absolutely be well educated in this ever increasing cost center of your business. The next thing you could do is consider a pricing structure for your goods that would offer a "discount for cash". This alternative, of course, is much preferred over imposing surcharges for credit transactions since it is ILLEGAL.

Keep in mind, it's not likely that the V/MC "police" would walk thru your door and penalize you for "surcharging". However, the risks to your business in doing so, is huge. If discovered, your merchant account could, and likely would, be terminated. And, your name and business name could be put on the MATCH OR TMF (Terminated Merchant File) making it nearly impossible to acquire another merchant account in the future.

The largest card originator (VISA) has even published information stating that, "You may, however, offer a discount for cash transactions, provided that the offer is clearly disclosed to customers and the cash price is presented as a discount from the standard price charged for all other forms of payment". While you can’t charge extra for credit card sales, you can charge less for cash as long as all prices are clearly stated to customers, and the cash price is reflected as a discount from the original purchase price. For example: if the price tag on an item states that the item costs $10, the cash price must be represented as a discount from that price. The price tag for this particular item should look something like this:

Price: $10.00

5% discount for cash payment

5% Discount for Check Payment

By utilizing a tiered pricing model, merchants can alleviate the cost of accepting credit cards, while still providing their customers with the freedom to choose their preferred method of payment.

I hope this information has proved beneficial to you and the future continued success and profitability of your business. Please tell your friends about this blog and my website .

Published by VISA in the Card Acceptance and Chargeback Management Guide for VISA Merchants, ©2004

What's in your "Bucket" ??

How do you truly know what you're paying?

If you've read this blog, or visited my website, you know that I am a strong proponent of total and full disclosure when it comes to merchant services. Unfortunately, in our industry, this stance is rarely taken by providers and reps in the field.

As you may already know, there are several different pricing methods in which you may be set up for accepting credit cards in your business. There is Three Tier, Four Tier and Cost-Plus pricing. Of these three, Cost-Plus is the most transparent to the merchant and can be, the least expensive. But, you have to have someone willing to educate you regarding how it works so that you can totally grasp the concept. If you, or anyone you know, owns a business that accepts credit and debit cards for payment, you owe it to yourself to get on over to my website for your education. I promise you will not be SOLICITED by me for your credit card processing business, however, all my contact information is there for you, if you desire my assistance.

When you are priced in a Three Tier format, (like the majority of merchants still are), you will have Qualified, Mid-Qualified and Non-Qualified rates. Qualified will be absolutely your best rate and will be for swiped transactions. But, here's where it gets tricky. For your Mid and Non-Qualified rates, each processor can add any surcharge they want on top of your Qualified Rates. And, they can throw whatever card or transaction types they want into whichever category they want, and....change it whenever they want.

For example, one processor may treat Rewards cards as Mid-Qualified with, let's say a .75% surcharge to the Qualified Rate. Other processors may treat those same Rewards cards as Non-Qualified with a 1.25%, or higher, surcharge. How does your current provider treat these types of transactions that are seen with ever increasing frequency these days? And furthermore, how much of a surcharge are you paying and is it fully disclosed on your statement? Do you know how to figure it out? You need to know the answers to these questions in order to minimize your total costs of accepting all kinds of cards.

In a Four Tier pricing format here is how the categories typically run:

Tier 1 for swiped debit cards

Tier 2 for swiped credit cards

Tier 3 for hand-keyed, maybe Rewards cards (or whatever the provider wants in there)

Tier 4 for corporate, world, Rewards cards (or whatever they want....YIKES!!!)

The bottom line is that you absolutely NEED TO KNOW what you're paying for what....don't you agree?

With the most recent Interchange adjustments (April 2008), it wasn't that there were many rate increases as much as there were more categories added. However, many merchant service providers utilized this as an opportunity to raise your rates. Others that I have seen, notified merchants (via a statement message that few merchants ever read) that several transaction types were going to be moved into higher costing tiers or "buckets". Check your March credit card processing statement to see what happened to your account.

As I've mentioned many times here, it's important to GET EDUCATED. My website is designed specifically to do that for your benefit. It is NOT A SOLICITATION for your credit card processing business, however, all my contact info is there if you desire my assistance.

Well, that's it for now. If you know others that own any kind of business that accepts credit cards for payment of goods and services, please send them to my website . In today's economy, we all need to do all that we can to improve our bottom line. Thanks for visiting!

Be Blessed and Be a Blessing

April 2008 Interchange Rates

Happy Spring! There are a couple things in life we can always depend on. One is that April 15th is always the latest tax filing date (unless of course, you get an extension. And, twice a year, in October and April, Visa and MasterCard review their Interchange Rates. And, this spring, they reduced rates.....NOT!!!! As you might imagine, that's not typically the way it goes. More often than not, we see increases of some sort but this time around we see something a bit different happening.

It's not so much that Interchange Rates increased this time around, as much as many more new "categories" were added. MasterCard, for example, has added Merit I Insurance and Real Estate Interchange categories. Visa, on the other hand, has added numerous new categories, primarily for Internationally Issued Card Transactions.

So, where do you stand in all this stuff? Do you even understand what "Interchange" is and how it affects the rates that you pay to accept credit and debit cards in your business? If you don't then it's about time that you found out. You'll find different sites referred to on this blog that will go a long way in EDUCATING you in the world of credit card processing. Go to these sites and learn all that you can.....it will be worth thousands of dollars in your pocket over the life of your business.

As I've reviewed this current Interchange situation I have discovered that merchants are being hit in a variety of ways. You may received a notice (typically via a "statement message" on your monthly statement) that came through in February or March. The problem with this, as I so often discover, is that many merchants never read or try to decipher their credit card processing statements. Consequently, the "notification of increase" may have just slipped by you.

I've seen some statements that simply state that "your rates will be increased by .XX% beginning April 2008". Others state that some categories, like "Qualified or Tier 1 and Tier 2 rates will not be affected, however some other types of transactions will now be Mid-Qual, Non-Qual or Tier 3 or Tier 4". What the heck does all that mean? Do you understand it? I DO! It means the processor is simply making adjustments in their favor. Now granted, they are all in business to make a profit, and rightfully so.....you are too. But, unless you are thoroughly educated on how this business works and know the questions to ask, you may be getting "hosed". Sorry to be so blunt, but that's reality.

Let's face it! If you're in business selling any kind of goods or services, you need to accept credit and debit cards. Rates continue to increase and the economy continues to slow down so making a buck is becoming more and more difficult. How would you like to improve your bottom line without even increasing your sales? It's simple, reduce your costs! And, one way to do that is by knowing how the credit card processing industry truly works and putting yourself in a better position to be able to negotiate the absolute best program available for your business.

Take a CLICK on over to my website where you'll find out more than you ever knew about credit card processing. I promise you.....I WILL NOT TRY TO SOLICIT YOUR BUSINESS! If you want to get more personalized help from me, my contact information is available.

Well, that wraps it up for now.....thanks for stopping by and please, be sure to tell all your business associates about my blog and websites.

BE BLESSED AND BE A BLESSING

Court Ruling on legality of Interchange

14 March 2008 - 10:37
MasterCard claims court ruling 'reaffirms legality of interchange'

MasterCard has praised the decision of a US appeals court to dismiss an interchange fee lawsuit brought by a group of merchants, saying the ruling reaffirms the "legality" of the current fee structure. The Court of Appeals for the Ninth Circuit upheld a lower court ruling that dismissed a suit brought by a group of merchants claiming that MasterCard, Visa USA and a group of US banks, had conspired to set the interchange fees charged to retailers every time a payment card is used.

The merchant group - which is led by hair salon operator Sheri Kendall - had claimed that the current interchange fee structure in the US violated antitrust laws. In July 2005, the federal court of the Northern District of California dismissed the lawsuit. The decision was appealed to the US Court of Appeals, which upheld the dismissal.

MasterCard general counsel and chief franchise officer Noah Hanft welcomed the decision and says the case was dismissed on grounds that the "merchants had failed to present facts that established a conspiracy". Hanft says the the court rejected claims the interchange fee effectively "sets a floor" for each bank's merchant discount fee. The court concluded that a decision by banks to recoup their costs "suggests a rational business decision, not a conspiracy".
"No US court has found interchange to be illegal," says Hanft. The merchant group is one of a number of trade groups that have been angered by interchange fees charged on card transactions and have filed dozens of lawsuits against MasterCard, Visa and many card issuing banks over the levy.

Last year The Merchants Payments Coalition (MPS) accused the credit companies of using a portion of the interchange fee - which is meant to cover processing costs - for marketing campaigns instead. The coalition said in July that a study had shown that card companies and banks spend only about 13% of the interchange fee on actual processing. The rest goes on marketing, profit and other services like rewards programmes. However merchants are set to get a greater say in the setting of interchange fees with the introduction of new legislation in the US that will allow them to negotiate interchange charges imposed on card transactions.

The Credit Card Fair Fee Act is the first attempt by US Congress to address credit card interchange fees and is the outcome of a hearing held last year by the House's anti-trust workforce. The US move follows action by the European Commission against MasterCard over interchange fees charged on cross-border card transactions.

The EC said in December that the multilateral interchange fees (MIF) charged for cross-border transactions made with MasterCard and Maestro debit and credit cards violated EC Treaty regulations and gave MasterCard six months to scrap the fee structure or incur daily penalty payments. However MasterCard has applied to the European Court of First Instance to annul the EC's decision. The Commission is also reported to be investigating the fees charged by Visa Europe following the expiry of an antitrust agreement between the card company and the EU's Competition Commission.

In 2002 Visa agreed to reduce levels of interchange fees for processing card transactions in return for immunity from legal action. However the exemption ended at the end of December and Brussels is said to be re-investigating the fee structure.

So What's It Really Costing You?

Have you ever tried to figure out exactly what you're paying for the "privilege" of accepting credit cards in your business? You're not still stuck on the rate you think you're paying, are you? Most merchants, when asked what their current rate is quote their lowest rate they see on their statements. However, in reality, the real, Net Effective Rate is always much higher.

Obviously, when you get set up for merchant services, the reps typically only quote you the lowest rate you will receive. This will be for a plain ole generic Visa/MC debit or credit card swiped thru your terminal. If they were to quote you up front what your REAL rate was going to be, you'd probably opt out of accepting them all together. It's hard enough making a living these days without having to give up a chunk of your profits for "convenience" sake.

Keep in mind there are a multitude of categories your customers transactions could fall into. They will be categorized into varying "buckets" and subsequently, a variety of rates and fees will apply. So, how do you know what you're really paying? Let me explain a simple way to decipher it all.

For Existing Merchants: Here's what you want to do. Take a look at your most recent statement. Find your total fees paid for the month. This will be towards the end of your statement. You want to be careful here to make sure you're getting the real "total". For some merchants, they are on what is referred to as "daily discounting". This is where you are paying some of your fees out of each daily batch (great for the processor....an accounting nightmare for the merchant). You'll know this is happening if the total deposit you receive is less than the total sales each day. If that's the case, you'll have to account for these daily fees and add them to the month end fees. You'll want to add any and all miscellaneous fees like batch fees, supplies, statements, equipment rental, monthly or annual fees (these may be only charged once or twice a year but still, you need to account for them to get an accurate figure). Now, take that total and divide it by the total Visa and MasterCard volume. This will give you the true Net Effective Rate that you are paying.

I recently took a look at a merchants statement and went thru this exercise with them. They had never considered this nor had they been shown this process in the past. When I asked them what their rate was, I was told it was 1.49% + $.25. Now, this is a restaurant and this is an excellent rate for them. After examining their numbers, we found that they had total fees of $2,164.24 for the month on $78,132.50 in V/MC volume. Doing the math, we come up with an actual real total rate, considering all their downgrades and transactions types of, 2.77% (the Net Effective Rate). I was then able to do a line by line analysis for them on their actual types of transactions, and show them how to effectively lower their overall rate, quite nicely. Not just their "quoted" rate but their "real" rate. As you might imagine, they were quite pleased with the education and the resulting savings. They have a much better handle on how the whole industry works now, as well. Try doing this with your own statement or even send me a copy for help, if you like.

For New Merchants: For new merchants just getting set up, you won't be able to really determine a Net Effective Rate. What you will need to do, however, is to make sure you ask as many pertinent questions as possible. First, you'll want to know the rate you are being quoted or "teased" with. Ask the rep the following questions:

• What types of transactions will this rate apply to (i.e. debit,credit swiped or whatever)


• What if any transaction or per item fees there will be


• What will hand-keyed or card-not-present rates be


• How much will you pay for Rewards Cards


• What will the rates on corporate or World cards come out to


• Are there any batch fees and if so, how much


• Monthly statement or monthly minimum fees


• Any application or programming fees


• How about annual fees (this is one they don't often tell you about)


• Supplies or any other miscellaneous fees....find out upfront before signing any paperwork)

Out of all the fees described above, I'd have to say that the Rewards Cards are probably the biggest thing to find out about. Each processor can place these types of transactions into any category they choose (primarily when you are on a 3 Tier or 4 Tier Pricing Model). No matter what your type of business, these cards are beginning to show up with greater frequency. For the merchant that I described above, last year they were seeing about 19% of their volume was falling into this category. Currently, they are seeing about 30% and it's beginning to hurt.

Okay, there's your education for today. As always, I welcome your comments and look forward to being of any service to you that I might be.

Why are my fees increasing?

I have been receiving calls from merchants recently wondering why their fees have been increasing. In many cases, it's not because their rates have changed so much as it is the types of cards that they are accepting. Let's talk more about that.

First, let's consider what seems to be going on. Take a look in your mailbox each week. Are you getting an increasing number of credit card offers? I know that I am, and, in fact have taken advantage of a couple. Most of these offers are for cards that pay me some sort of reward on all of my transactions. Now, when I go shopping or out to dinner, I have a choice of which card in my wallet I'm going to pay with. If your bill comes to, let's say $50, and you have a choice of which card in your wallet you will use, which will you chose? Will it be the plain old generic one or the one that pays you some sort of perk or reward? Of course, in the majority, if not all of the cases, you'll use the reward card.

Now, from a merchants standpoint, they are paying more to accept these types of cards (because the interchange rates are higher) and, indirectly, are helping to fund the reward back to the cardholder. I know, I know....it seems like a crock doesn't it? You, the merchant, are, in a way, paying customers to patronize your establishment. Now, in most cases, this is why merchants are seeing higher total fees on their statements. It's because of the types of cards that are being used more and more in their establishments.

Let me give you an example of one of my merchants that I just recently did an analysis for regarding their "increasing fees". They are on a 3 Tier Pricing model with what I consider to be excellent rates. Here's what I uncovered for them. I took a look at their most current statement to see what percentage of their total volume was represented in each of their three tiers. I then compared it to their numbers from a year ago. Here's how it broke down:

Current Month
Qualified 47%
Mid-Qualified 22%
Non-Qualified 30%

One Year Ago
Qualified 57%
Mid-Qualified 24%
Non-Qualified 19%

As you can see from these numbers, they are seeing fewer Qualified transactions (translated to be generic type debit and credit cards) from a year ago and quite an increase in Non-Qualified (translated to be some rewards type and corporate cards).

Obviously all processors are in business to make a profit, as all businesses are, so they need to cover themselves from this changing environment. Since both Three Tier and Four Tier pricing lumps many card and transaction types into one of their buckets (and each processor can freely decide which bucket they want the transaction in and change it whenever they want), what's a merchant to do? Keep in mind that when Interchange Rates change (typically in April and October of each year), the processor has to make some decisions. Do they absorb the increase, pass all or some of it along or pass all of it plus some, to their merchants? It's by no means an exact science.

In the scenario described above with my merchant, we made a decision to change the type of pricing model they are utilizing to Cost Plus. It wasn't up until maybe a year or two ago that local type merchants would even qualify for this type pricing. It was primarily reserved for the large national chains. Now, many merchants can meet the requirements and play on the same field as the big boys. Now, my merchant will be paying exactly what the Interchange Rate is for each card type, plus a small per item fee. The bottom line will be, because of this shift in the types of cards they are getting, they will see a more detailed statement and lower overall fees. They are very pleased and as a result of my continued concern and interest in their business, I have received more referrals. It's a win/win situation which is what I'm always interested in.

Are you experiencing some of the same situations that we have discussed here? If you have any specific questions, please post them here or contact me directly. Thanks for coming by!

Accurately Decipher Your Credit Card Processing Statement

INC. MAGAZINE PUBLISHES STEPS MERCHANTS CAN TAKE TO MORE ACCURATELY DECIPHER THEIR MONTHLY PROCESSING STATEMENTS

Inc. Magazine, a publication targeted for entrepreneurs and small business professionals, recently published an article entitled Cracking the Code, which provides merchants with some pointers on how they can more effectively decipher their monthly processing statements. An excerpt of the article follows below.

Credit card processing bills are a jumble. Here's how to read yours. No one likes a bill, especially one filled with cryptic codes and indecipherable jargon. That's a pretty good description of a statement from a credit card processor. Such firms authorize credit and move funds through the banking system so that you get paid. For these services, you pay the processor a fee, known as the discount rate. Many processors tout low discount rates to lure new customers. Problem is, your bill can be so complicated that it's nearly impossible to figure out if you're paying that low rate--or a lot more, thanks to a host of surcharges and fees. You need to take the time to get educated.

While bills differ from processor to processor, here are some common fees you might see on yours.

1. That low rate? It is really low? Many monthly statements show your daily tally of credit card sales and the fees charged to process them. By way of example, this line might show that you paid your processor $6.86 to process $385.42 worth of MasterCard. That's 1.78% which is the discount rate you likely "think"you are paying. The processor uses those funds to pay the interchange rate, a fee that goes directly to the card issuing bank, and keeps the difference for themselves. But not all credit card transactions are created equal; rewards cards and online transactions, for example, often come with higher interchange fees--and higher processing fees. There's a good chance your processor hasn't told you this.

2. Beware of "billback" fees or "surcharges" noted elsewhere on your statement. Look under the "Financial Detail" or "Financial Advice" headings on your statement or possibly "miscellaneous fees". You may see an item labled as "BB159" for example. To cover higher interchange rates, some credit card processors use billbacks (in other words, the additional fees are "billed back" to you in the form of a surcharge). They'll charge a low discount rate on all of your transactions in a given month--in this case, 1.78 percent--then bill back surcharges on certain transactions. Cards such as Rewards cards cost more to process (and carry a higher interchange fee). The processor is passing on the additional cost of handling those transactions, and in many cases tacks on something additional for themselves. Unfortunately, you can't see the actual rate you're paying because many processors don't provide the total dollar amount of these transactions, thus making it impossible for you to do the math. Do you ever wonder why they do that??? Hmmm!!

3. Be sure to calculate the markup. It's not hard to estimate your actual rate. Take your average sales value (sometimes called "average ticket" on your statement) and multiply it by the number of transactions for a given billback. Divide the surcharge by that amount and you'll find out how much (or at least close to) what you are actually paying on those transactions. As was mentioned earlier, processors can freely add on any "additional fees" they think appropriate over and above the actual interchange rate. Again, one of the reasons so many statements are "encrypted" in this fashion is it gives enhanced ability to "hide" actual fees. There's nothing wrong with making a profit, of course as long as it's reasonable for the risk and services provided. But you have a right to know the rate you're being charged, nonetheless.

Take the time to sit down with your statement and examine it closely. If there are things that simply aren't outright clear and understandable, get some answers. Contact your processor's customer service department and dig into all your charges. You should be able to negotiate a better deal for yourself. Or, you could entertain accepting competitive bids from other providers. But, before doing either of the above, you need to become more thoroughly educated in this area of your business so you know the right questions to ask.

What does it all mean? Because Visa's and MasterCard's interchange fees are so complex, processors sometimes categorize transactions as qualified, mid-qualified, and nonqualified. One rate covers all the transactions that fall into a category. Suppose we're looking at the statement of a restaurant. When a customer pays with a generic Visa card, Visa charges an interchange fee of about 1.63 percent. The processor considers that a qualified transaction and charges a discount rate of 1.74 percent. If someone uses a Visa rewards card, however, the interchange jumps to nearly 2 percent (if it's a Rewards 2 or 1.64% if it's a Rewards 1) . The processor labels it as mid-qualified and charges 2.85 percent. Every processor sets its own tiered pricing, so one type of credit card transaction may be considered mid-qualified by one and qualified by another. It's up to you to find out how your processor defines things.

5. Interchange fees on Visa and MasterCard debit transactions are lower than they are for credit cards. The processors, though, aren't required to pass these savings on to you. The restaurateur in the above example, is paying at least 1.74 percent on each transaction, including debit cards. But Visa and MasterCard charge about 1.30 percent on typical restaurant debit purchases. Make sure your processor gives you a break on debit possibly by using a 4 Tier Pricing system.

6. Watch out for "skimming". Some processors take a percentage of their fees when they reconcile your account at the end of each business day (this is called "daily discounting"). As a result the figure called "total card fees" on your monthly statement is not a total at all (just another way of misleading merchants and disguising true fees). To estimate your true costs, look for a line on your bill that reads "less discount paid." It may be buried near the bottom and not be as obvious. That's how much your processor skimmed off your sales throughout the month. Add it to your "total card fees" to determine how high your fees actually are.

7. Hidden fee No. 1 - AVS AVS stands for address verification service. When you take a credit card order over the phone or online, that transaction qualifies for a better interchange rate if you key in your customer's address. That's because Visa and MasterCard consider AVS a way to combat fraud. Your processor may--or may not--pass these savings on to you. In fact, it might tack on an additional AVS fee to process these transactions. Not all processors do, so be sure to ask.

8. Hidden fee No. 2 - Per-transaction fees. Many processor charge some "per item" fee for every sale, refund and authorization. Per-transaction fees typically range from 10 to 15 cents but can go higher. For companies with only a few, high-value transactions a month, this fee doesn't matter much. But if you have lots of smaller purchases, it can add up.

9. Find your "real net effective rate". The easiest way to determine what you're actually paying your processor is to divide your total fees by your total montly credit card sales.

If you still find that you are having difficulty with all this, please post your comments here or visit our website at: CCPK 101.

Visa Announces No Signature Required Program

VISA SPRING RELEASE: NEW VISA MCC CODES ELIGIBLE FOR NO SIGNATURE REQUIRED PROGRAM

Visa has just announced that they are adding eight existing Merchant Classification Codes (MCCs) to be eligible for the No Signature Required (NSR) program. Additionally, Visa will allow two CPS programs to be eligible for the program. These changes are effective this April and the following eight additional MCCs will be added to the No Signature Required program:

5251 = Hardware stores
5331 = Variety stores
5411 = Grocery stores and supermarkets
5441 = Candy, nut and confection stores
5451 = Dairy products stores
5462 = Bakeries
5942 = Book stores
5947 = Gift, card, novelty and souvenir shops

In addition, the following Custom Payment Systems (CPS) Retail fee programs will be added to the list of CPS fee programs that support the NSR program:

CPS/Supermarket Debit
CPS/Supermarket Credit

This No Signature Required program is meant for transactions under $25. The primary purpose is to help speed up the check-out time and still provide total protection for the merchant.

To further enhance your knowledge of the credit card processing industry, click on over to our website at:

www.creditcardprocessingknowledge.com

MasterCard announces new standards for POS receipts

MASTERCARD ANNOUNCES REVISED STANDARDS FOR POS TERMINAL/ATM RECEIPT REQUIREMENTS

MasterCard has announced that the standards for POS terminal and ATM terminal receipts will become effective on October 1, 2008. Following are the revised requirements:

Cardholder receipts generated by an electronic point-of-sale (POS) terminal (attended or unattended) or by an ATM must:

Include only the last four digits of the primary account number (PAN), replacing all preceding digits with fill characters that are neither blank spaces nor numeric characters, such as “x”, or “*”, or “#”, and exclude the card expiration date.

Check the receipts that you are currently printing out. What kind of numbers do you see? If it appears as though that both the customer and your copy, are not compliant with the mandate coming in October, you need to get it fixed. In most cases, all that will need to be done is to have your current terminal reprogrammed. Contact your processor's help desk for assistance.

Merchant receipts must exclude the card expiration date. Additionally, MasterCard strongly recommends that merchant receipts reflect only the last four digits of the PAN.

Credit card fraud and mishandling of card-holder information is increasingly becoming a major problem. You, as a merchant, want to take all the steps you possibly can to protect both you and your customers.

If, in the event, you need to recall a specific transaction, to issue a refund, let's say, you will be able to retrieve the necessary information from your processor's customer service desk. Simply provide them with the transaction number from the receipt.

Continue to increase your understanding of how the credit card processing industry works and begin saving more money on these necessary services. Visit us at:

www.creditcardprocessingknowledge.com

On-Line and Off-Line Debit Suggestions

As I'm sure you're aware, there are two ways to process debit transactions (on-line and off-line). Each would come with it's own specific rate structure. Here is an explanation of the differences and a suggestion on how you may capture more at the best rates possible.

Online/PINed Debit
PINed Debit transactions, facilitated primarily by ATM cards, require the use of a personal identification number (PIN). Once the card has been swiped through the POS terminal, the cardholder will be prompted to enter their PIN prior to completing the transaction. The transaction is then routed through the appropriate regional or national EFT network for validation, including availability of funds, and processing of the payment and the appropriate transaction fee for that network is charged to the merchant. No signature is required from the merchant and the funds are deducted from the cardholder’s account immediately. PINed Debit transactions are considered more secure and a lower risk for the merchant because they require PIN entry for authorization.

Offline/Signature Debit
Signature Debit transactions require that the cardholder sign a receipt. Signature Debit transactions are processed using the Visa or MasterCard networks and are subject to the interchange fees associated with these networks. Availability of funds is not verified for offline debit transactions. The purchase amount is deducted from the cardholder’s checking account and is reflected on the cardholder’s account statement from their Financial Institution.

Now, let's take a look at some average pricing differences between how they could be routed. We'll use a $50 transaction since at this level, and below, there is a high incidence of debit cards being used at POS nationwide.

Offline Swiped on 4 Tier Pricing at 1.49% + $.25 = $1.00
Offline Swiped on 3 Tier Pricing at 1.79% + $.25 = $1.15

Online Swiped utilizing PIN thru NYCE network
Current Rates are $0.1375 + 0.65% = $.17 + (processor fee of approx $.15) = $.61
NYCE has a CAP Maximum of $.6875

Online Swiped utilizing PIN thru STAR network
Current Rates are $0.1925 + 0.75% = $.23 + (processor fee of approx #.15) = $.72
STAR has a CAP Maximum of $.6925
NOTE: Keep in mind the above maximums relate only to the Network fees and do not
include the processor fee. So, in the example for the STAR network, on this $50 sale, their fees would be $50.00 x 0.75% + $.1925 = $.5675 or $.57

So, you can see from the above example, it would be a cost savings to capture as many Online Pinned debits as possible. Here's the error I see most merchants and their employees make. If they ask the customer at all, it tends to go like this...."credit or debit?". You're giving the customer the option but hey, whose paying the fees anyway, you or them? When a customer hands you their debit card, they know full well there is enough money in their account to accomodate the sale. Just because most all debit cards have a Visa or MC logo on them does not, and never will, mean that it is a credit card. IT IS A DEBIT CARD! The only questions that remains is if the customer actually knows their pin number, and most do.

Many banks that have issued branded (Visa/MC) debit cards have encouraged their cardholders to "just use them like a credit card". In other words, they are telling them that they don't need to use their pin number. Why do you suppose they are doing that? More fees for them, of course. You see, when the customer doesn't use their pin number, the bank (as the issuer) earns interchange (currently Visa @ 1.03% + $.15 or $.67 and MC @ 1.05% + $.15 or $.68). So, if you capture the pin number, you save on fees and the banks earn ZERO. Don't you feel bad for them now? When the pin number is used, the appropriate EFT Network (STAR, NYCE, Pulse, etc) earn the fees.

Here's a suggestion for you to possibly enable you to capture more pinned based debits and save on fees. Every debit card will say on it "debit", "check card", "money card" or something similar. When you, or your employee, takes a card from the customer, simply look at the face of card. If it has any of the words indicated previously, simply say, "I'm going to need you to enter your pin number in a second". Then pause a second and if they don't object or say they don't know their pin number (which is rare), select "Debit" on your terminal, and the PinPad will beep at them and prompt them to enter their number (of course you need a PinPad or a terminal with built in PinPad to accomodate this transaction).

Typically, customers don't know that there is a cost difference to you, the merchant, in how you process their cards. In fact, many customers don't know it cost you anything at all for accepting their credit or debit cards. Because of the continuing increase in processing fees, some of my merchants have put up signs such as: "for your protection and for reduced processing fees to us, when using your debit card, we appreciate the input of your pin number", or something of that nature.

Hopefully, this has been helpful in furthering your understanding of debit card processing and the associated fees. To further your education in the credit card and debit card processing world, please visit my website at: http://www.creditcardprocessingknowledge.com/

Important Questions to ask about your Credit Card Processing Service

If you're in business, you know that you must accept credit and debit cards for payment. The numbers by industry sources for 2007 have indicated that "payment for goods and services utilizing credit/debit cards, has exceeded that of cash and checks". Like most merchants, you are most likely solicited by phone, fax, email or in person, several times a month. So how do you make a wise choice regarding which provider to go with. The best advice I can give you is to ask lots of questions. Get a feel for the person presenting to you with their knowledge and willingness to openly discuss everything with you. Don't be focused only on the quoted rate that the provider seems to be focusing on. It's not a simple task to weed thru all the hype and nuances of this service but, with proper education, you'll be successful in making a wise choice.

First, let's talk about rate a little bit. Here's the things to know up front and these are the kinds of things the provider should be asking you:

1. What is your average monthly volume

The larger the volume, the better the rate should be

2. What is your average transaction size

This helps to determine if you should have bundled or unbundled rates

Also, if you have a lower average ticket (say under $50), you should be considering 4 Tier pricing in order to take advantage of lower signature debit card rates.

In addition to lower signature debit card rates, consider a pin-pad for pinned based debit transactions that could cost you even less. Many debit networks have CAP maximums.

3. How do you transact business (card present or card not present). Merchants that process 80% of their transactions card present will get most favorable processing rates.

Here's some crucial questions you need answered. Ask the rep what your rate will be for:
* Card-not-present or hand-keyed transactions
* Rewards Cards (there are Visa Rewards 1 and Visa Rewards 2....ask for both)
* Commercial Cards or Business T & E cards
* World cards (especially important if you're in a tourist type area

This is an area that is crucial for you to understand because these cards are charged
a higher interchange rate and if you don't ask the questions up-front, the provider won't
likely volunteer the information because this is where they can really get in your pocket.

4. Retail businesses are pretty straight forward when it comes to rates. However, certain industries can be provided with preferred pricing. Some of these would be, restaurants, grocery stores, petroleum dealers, service industries, utilities, etc. Ask if there are any special concessions for your type business.

5. A good way to get a handle on your current "real" rates is to determine what your
Net Effective Rate. Do this by taking your total fees for the month and divide it by the
total monthly (Visa/MC, do not include Discover and AMEX) volume you processed.
Don't forget to add in any annual fees that you may pay. For example, if you pay $120 in annual fees, add in $10 to your monthly total in order to get an accurate NER.

6. If you're allowing a new provider to quote you numbers based on your current statement,
make certain they are doing a line-by-line comparison. This way you can properly compare
your current NER with what they say their's will be.

Okay, now that you've been able to zero in on rates more effectively, it's time to ask some other questions that often get overlooked by merchants.
* Are there any monthly minimums and if, so, how much are they?
* Are there any annual fees?
* How about any set-up, application or programming fees?
* How long is the contract term (typical is 3 years)
* If I decide to terminate early, what is the early termination fee?
* Are there any batch total fees? If so, how much are they?
* Is there a statement fee?
* How much for the occasional Address Verification Fee?
* What do they charge for Chargeback Handling should they arise?
* How about Voice Authorization and referral fees?
* If you're utilizing Pin-based debit, is there a monthly debit network access fee?
* Are supplies FREE or available for a nominal charge?
* What about terminal replacement? Do they have a plan for that?

There may be other questions that I haven't addressed here. Consider your own experience
with merchant providers. Were there any charges or fees in the past that caught you off guard? Ask about them as well.

The bottom line is simply this...you need to accept debit and credit card transactions in your business. You want to do it as smoothly and efficiently as possible and do so with the most reasonable rates you can negotiate. All providers operate from the exact same cost basis which is referred to as Interchange. So, what dictates rates is simply, how much they feel they need to make off of you or how much they can take advantage of you.

I hope this article has been helpful. However, to further expand your knowledge and total understanding of this industry, check out my informative website. I promise, I'm not just another provider trying to solicit your business. Thanks for reading. Here's my site.

www.creditcardprocessingknowledge.com

3 Tier Pricing for Credit Card Processing

It wasn't that long ago (3-4 years or so) that when you set up a merchant account for credit card processing, you would get 3 Tier Pricing. In fact, many of you that accept credit cards in your business may still be set up this way. So what is it and how does it work? Let's take a look.

Typically, with 3 Tier pricing, you will have three different categories of card transaction types. Let's take a look at how they work.

First will be "Qualified". This will be for either a credit or debit card that is swiped thru your credit card terminal or POS system or for what is more commonly called a "card present" transaction. This will always be your best rate on 3 Tier Pricing. The rate could be either bundled (quoted simply as a rate like 2.52%) or unbundled which is a rate plus a transaction fee(quoted like 1.79% + $.25). Depending on your type of business and the averags size transaction that you process, will dictate whether bundled or unbundled is best for you.

Your second tier would be classified as "Mid-Qualified". Now, each processor can determine, on their own, which types of transactions fall into this category (or "bucket" as some refer to it). This could be for "card not present" (or hand-keyed), Rewards, business, Travel & Entertainment cards, etc. These transactions will show up on your statement as a "surcharge" or "interchange fees" in addition to the Qualified Rate you already paid on these sales. The tricky part is that most processors statements will only list the fees you paid without telling what the additional percentage was. Have any ideas why they do it that way? The bottom line is that these types of transactions do cost more to process but, quite honestly, this is where many processors, because of the vaguery that exists, are able to make the bulk of their fees off of you. All processors will add some uptick in the base Qualified Rate on these transactions of say .75% but many I've seen will add over 2.00% and most merchant won't ever catch it. Consequently, you could be paying in the 3-4% range on those line items.

The third category in described as "Unqualified". Simply this is just another category that different card or transaction types are lumped into. Most often, these will be corporate type cards but many processors could also throw in some of the Rewards Cards in this category (which by the way, we are seeing tons more of those in the marketplace these days, for obvious reasons). Again, these transactions will fall under "surcharges" or "interchange" on your statement and will be another area where you could potentially be overcharged based on what costs really are.

All this may sound confusing to you, the merchant, but it doesn't have to be. As with anything in life, if you simply take the time to become educated in the particular field of interest, you will position yourself to make more informed decisions.

You will find a very helpful tool at my website that will give you a more thorough education, in about an hour or so, than the majority of reps trying to sell to you have. You owe it to yourself and your bottom-line to check it out. Here it is:

www.creditcardprocessingknowledge.com

Who is making all the money on credit card processing fees?

There seems to be a great misconception regarding who is making all the money off of merchants that accept credit cards for payment. The last numbers I recall seeing were from 2006 (2007 numbers aren't quite available yet). During 2006, there were over 7 million merchants in the U.S. alone accepting credit cards. Collectively, they paid over $30 billion in fees for this "privilege".Well, here's how it works, in a nutshell. First, it's important to understand that it's not the credit card processors that are making the lions share. The card issuing banks (in other words, the bank that you received your credit card from, i.e. Chase, B of A etc) earn 80% or more of the fees that merchants are being charged.Banks co-issue debit and credit cards with Visa or MasterCard brands on them. This is what makes the cards acceptable anyplace you see a Visa or MasterCard logo. Visa and MasterCard are essentially membership associations owned by the issuing banks, and collectively own about 70% of the market (the balance woud be Discover and Amex as an example). Every time a customeer makes a purchase in your business using a Visa or MasterCard, you get charged a "Discount Rate" and many times a "per item" fee. For example, let’s assume that a business is paying an net effective rate (you need to know what yours is) of 3.0% to accept credit cards. Roughly 80% of that 3.0% is going to the issuing bank. The rest of the 20% is divided among Visa or MasterCard, the credit card processor, and if there is one, the Independent Sales Organization (ISO). As you can see, the "processor" is making very small amounts typically but is doing so on millions of transactions annually.You may ask, "aren't the issuing banks making enough off of card users with the ridiculously high interest rates they charge for cards"? Well, in a word, NO, at least not in their minds anyway. If you're like the majority of the population in the US, your credit card usage has likely grown over the years for a number of reasons. Maybe it's because you get 15 to 45 days to pay for your purchases (sorta like a short-term interest free loan and you get instant gratification). Maybe it's because you get some sort of reward or other perks, or the fraud protection that you receive. Or possibly it's just because you get a monthly accounting of all purchases. Or like many I speak with it's simply because plastic is more convenient than cash or check.All of these that you have justified in your mind, cost banks money. They have costs associated with fraud, bad debt, customer support, rewards and other perks, and float (they pay for your purchases before you pay them). So, they justify the charges (referred to as interchange, to help offset their costs and risks.Now let's take a look at some numbers to give you a better handle on this. Let's say you're a retailer and your average ticket is $50. I come in to your business, make my selection of goods and come to the register. I whip out my Visa card (at this point you don't know if it is a plain vanilla type Visa or one with some sort of perk attached to it). Anyway, you swipe the card thru your POS terminal and the transaction is processed. Your "Qualified Rate" is 1.79% + $.25 so your cost on that transaction is $1.15 in fees (interchange, that goes to the issuing bank is 1.54% + $.10 or $.87 and the Visa "assessment" that goes directly to Visa is .0925% or $.046...let's call it five cents). So, as you can see in this example, the processing company only made $.23 (which by the way, this number is very high).What if that card I gave you was actually my Visa branded debit card instead of a credit card? Well, again, in the above example, if your "Qualified Rate" is 1.79% + $.25, you paid $1.15 in fees. Currently, Visa Interchange on a swiped debit card is 1.03% + $.15 + .0925% assessment. So, the actual "cost" is $.71 and now the processor is making $.44 off of you. Has any of this ever been thoroughly explained to you? Not likely!Let's take it another step further now. Let's assume for a minute that the card I gave you is my brand new Visa Rewards card. To you, at the point of sale, you won't likely know the difference and it doesn't matter anyway. Since you have the Visa logo in the window, you have to accept ALL Visa cards. Now when you swipe it, your terminal automatically reads the magstripe on the back and identifies it as a Rewards Card and routes it accordingly. You won't be getting that "Qualified" rate on that transaction though since the interchange rate is higher on those types of cards. It will show up on your statement under "miscellaneous fees" or something vaguely described. You know, that section of your statement that you can never really seem to get a handle on. Don't you just hate trying to decipher it all?The particular rate that is charged on any given transaction depends on a number of variables, including: 1) the type of card being used, i.e. debit, credit, rewards, business, international, etc. 2) the type of establishment where the card is used, i.e. restaurant, retail, gas station, B2B, internet, etc. 3) How the card is used, i.e. swiped thru a terminal or POS system, over the phone or on a website 4) Also, what kind of information did you capture like name, address, tax ID, item description etc.5) Did you settle the transactions within the prescribed time frame from when it was authorized? If not, the transactions will be downgraded (in other words, you will be charged more).Unfortunately, the credit card processing or merchant services business is plagued with many unscrupulous players. Vaguery and misrepresentations seem to be way to get business. Many merchants are misled into believing they're paying the "low rate" they were originally sold on. Digging deeper into actual statements and transactions most often reveals a much different picture. But hey, most of the guys on the street, know that merchants don't really understand this stuff so it's how they make the most money off of them by not telling them everything.Let's face it, when was the last time you sat down with one of your monthly processing statements and was totally able to decipher it and understand all of your charges? Has your rep or provider been helpful and willing to explain it all to you? They use these unreadable and difficult to understand formats by design. It's what enables them to make the most money off of you constantly eating into your hard earned profits.Over the past several years, Visa and MasterCard have increased "interchange fees" over 117%. And, it doesn't show any signs of slowing down any time soon due to dramatically increasing credit card fraud. So what's a businessperson to do? If you sell any kind of goods or services, you pretty much have to accept plastic or you're losing business.The only thing you can do is to arm yourself with proper knowledge to at least put yourself in a better position. That is precisely what is offered to you at my website. You see, I'm a very well seasoned professional in the merchant services business. I am semi-retired with quite a comfortable ongoing residual income because of my constantly growing client-base. I don't "need" your business (although I wouldn't turn down the opportunity to educate you) so this blog is not about soliciting you. I would highly recommend you go to my website shown here and check out what I can offer you. I promise you, it will be time well spent. Thanks for coming by.

www.creditcardprocessingknowledge.com

Who is making all the money on credit card processing fees?

There seems to be a great misconception regarding who is making all the money off of merchants that accept credit cards for payment. The last numbers I recall seeing were from 2006 (2007 numbers aren't quite available yet). During 2006, there were over 7 million merchants in the U.S. alone accepting credit cards. Collectively, they paid over $30 billion in fees for this "privilege".

Well, here's how it works, in a nutshell. First, it's important to understand that it's not the credit card processors that are making the lions share. The card issuing banks (in other words, the bank that you received your credit card from, i.e. Chase, B of A etc) earn 80% or more of the fees that merchants are being charged.
Banks co-issue debit and credit cards with Visa or MasterCard brands on them. This is what makes the cards acceptable anyplace you see a Visa or MasterCard logo. Visa and MasterCard are essentially membership associations owned by the issuing banks, and collectively own about 70% of the market (the balance woud be Discover and Amex as an example). Every time a customeer makes a purchase in your business using a Visa or MasterCard, you get charged a "Discount Rate" and many times a "per item" fee. For example, let’s assume that a business is paying an net effective rate (you need to know what yours is) of 3.0% to accept credit cards. Roughly 80% of that 3.0% is going to the issuing bank. The rest of the 20% is divided among Visa or MasterCard, the credit card processor, and if there is one, the Independent Sales Organization (ISO). As you can see, the "processor" is making very small amounts typically but is doing so on millions of transactions annually.
You may ask, "aren't the issuing banks making enough off of card users with the ridiculously high interest rates they charge for cards"? Well, in a word, NO, at least not in their minds anyway. If you're like the majority of the population in the US, your credit card usage has likely grown over the years for a number of reasons. Maybe it's because you get 15 to 45 days to pay for your purchases (sorta like a short-term interest free loan and you get instant gratification). Maybe it's because you get some sort of reward or other perks, or the fraud protection that you receive. Or possibly it's just because you get a monthly accounting of all purchases. Or like many I speak with it's simply because plastic is more convenient than cash or check.
All of these that you have justified in your mind, cost banks money. They have costs associated with fraud, bad debt, customer support, rewards and other perks, and float (they pay for your purchases before you pay them). So, they justify the charges (referred to as interchange, to help offset their costs and risks.

Now let's take a look at some numbers to give you a better handle on this. Let's say you're a retailer and your average ticket is $50. I come in to your business, make my selection of goods and come to the register. I whip out my Visa card (at this point you don't know if it is a plain vanilla type Visa or one with some sort of perk attached to it). Anyway, you swipe the card thru your POS terminal and the transaction is processed. Your "Qualified Rate" is 1.79% + $.25 so your cost on that transaction is $1.15 in fees (interchange, that goes to the issuing bank is 1.54% + $.10 or $.87 and the Visa "assessment" that goes directly to Visa is .0925% or $.046...let's call it five cents). So, as you can see in this example, the processing company only made $.23 (which by the way, this number is very high).

What if that card I gave you was actually my Visa branded debit card instead of a credit card? Well, again, in the above example, if your "Qualified Rate" is 1.79% + $.25, you paid $1.15 in fees. Currently, Visa Interchange on a swiped debit card is 1.03% + $.15 + .0925% assessment. So, the actual "cost" is $.71 and now the processor is making $.44 off of you. Has any of this ever been thoroughly explained to you? Not likely!

Let's take it another step further now. Let's assume for a minute that the card I gave you is my brand new Visa Rewards card. To you, at the point of sale, you won't likely know the difference and it doesn't matter anyway. Since you have the Visa logo in the window, you have to accept ALL Visa cards. Now when you swipe it, your terminal automatically reads the magstripe on the back and identifies it as a Rewards Card and routes it accordingly. You won't be getting that "Qualified" rate on that transaction though since the interchange rate is higher on those types of cards. It will show up on your statement under "miscellaneous fees" or something vaguely described. You know, that section of your statement that you can never really seem to get a handle on. Don't you just hate trying to decipher it all?

The particular rate that is charged on any given transaction depends on a number of variables, including: 1) the type of card being used, i.e. debit, credit, rewards, business, international, etc. 2) the type of establishment where the card is used, i.e. restaurant, retail, gas station, B2B, internet, etc. 3) How the card is used, i.e. swiped thru a terminal or POS system, over the phone or on a website 4) Also, what kind of information did you capture like name, address, tax ID, item description etc.5) Did you settle the transactions within the prescribed time frame from when it was authorized? If not, the transactions will be downgraded (in other words, you will be charged more).
Unfortunately, the credit card processing or merchant services business is plagued with many unscrupulous players. Vaguery and misrepresentations seem to be way to get business. Many merchants are misled into believing they're paying the "low rate" they were originally sold on. Digging deeper into actual statements and transactions most often reveals a much different picture. But hey, most of the guys on the street, know that merchants don't really understand this stuff so it's how they make the most money off of them by not telling them everything.

Let's face it, when was the last time you sat down with one of your monthly processing statements and was totally able to decipher it and understand all of your charges? Has your rep or provider been helpful and willing to explain it all to you? They use these unreadable and difficult to understand formats by design. It's what enables them to make the most money off of you constantly eating into your hard earned profits.

Over the past several years, Visa and MasterCard have increased "interchange fees" over 117%. And, it doesn't show any signs of slowing down any time soon due to dramatically increasing credit card fraud. So what's a businessperson to do? If you sell any kind of goods or services, you pretty much have to accept plastic or you're losing business.

The only thing you can do is to arm yourself with proper knowledge to at least put yourself in a better position. That is precisely what is offered to you at my website. You see, I'm a very well seasoned professional in the merchant services business. I am semi-retired with quite a comfortable ongoing residual income because of my constantly growing client-base. I don't "need" your business (although I wouldn't turn down the opportunity to educate you) so this blog is not about soliciting you. I would highly recommend you go to my website shown here and check out what I can offer you. I promise you, it will be time well spent. Thanks for coming by.

http://www.creditcardprocessingknowledge.com/