I've been in the merchant services business for many years and rarely, if ever, have I come across a merchant that feels that their fees for processing credit cards are FAIR. I think part of that comes as a result of a lack of transparency that is provided to them. There are numerous types of pricing models that can be implemented and, as you might imagine, most of them are more in favor of the processor, not the merchant. While in the field, I have always utilized the consultative approach with my merchants and taking care of their credit card processing needs. I ask numerous questions regarding their business and how they typically transact business. I'm always looking to determine what the absolute best, least expensive, pricing model will be for them. In addition, I search for other tools that may help them increase business with things like gift cards or check services. I never recommend equipment or services that won't be beneficial to their bottom line. Unfortunately, I'm sad to say, many in our business don't come close to taking that same approach.
American business owners, like yourself, are fed up with the unfair, hidden, and excess fees imposed by the banks and processors (you do know that those fees make up the majority of your Discount Rate, don't you?). In October, Visa and MasterCard posted their new Interchange Rates. Typically, adjustments are made twice a year (April and October). This time around, there were NO INCREASES that I was able to see but yet, I know of many merchant services providers, that imposed increases to their merchants (primarily those that are on a Tiered pricing model). Does this seem fair to you? I'm guessing the answer is a resounding NO. This, once again, is why, as I've written about many times in the past, is all the more reason for being priced in a more transparent form utilizing a Cost-Plus Pricing model. This way, no increases that aren't actually imposed on the provider, can be passed on or "hidden" from you.
Studies have shown that Americans pay the highest swipe fee rates in the industrialized world. Forty-four countries around the world have enacted some form of swipe fee reform that has brought rates down. In my opinion this industry has been broken and unregulated for far too long. Back in the early 1980's, big banks, Visa and MasterCard demanded that credit card swipe fees (a huge source of income for them) be shielded from free market forces. Well, guess what....they won that fight and the result has been an unfair, uncompetitive system of escalating swipe fee charges to you during a time that, do to advanced technology, their actual cost has gone down.
Senate Bill 1212 has been proposed to STOP THE BLEEDING . This bill is a great starting point to the interchange fee situation prevalent in the US. The bill simply stands for the proposition that powerful credit card companies should have to play fair and disclose prices and terms. I encourage you to stand up, join business owners like yourself, take action and be heard and add your name to the petition by going to THIS SITE .
With all that being said, you know how quickly things move through the legislative process so what can you do for yourself in the meantime? You got it....you need to be more proactive and get a better, more thorough understanding of how this industry works. More importantly to you, is the need to get a better grasp on how pricing works and absolutely make certain that you know EXACTLY what you're paying in fees for every card and transaction type in your business. What are you waiting for? Pick up your phone, right now, and get your rep or your processors Customer Care on the phone and ask the questions. If you don't feel like you're getting the straight story or an outright runaround, start looking elsewhere. Thanks for reading!
Tuesday, November 30, 2010
Friday, October 22, 2010
October 2010 Visa and MC Interchange Rate Changes
Well, it's that time of year again when Visa and MasterCard make adjustments to their Interchange Rates. Typically, these adjustments take place in the spring and the fall, usually in April and October. If you're unfamiliar with what Interchange Rates are, let me present what Visa identifies them as on their website:
"Visa uses interchange reimbursement fees as transfer fees between financial institutions to balance and grow the payment system for the benefit of all participants. Merchants do not pay interchange reimbursement fees; merchants pay "merchant discount" to their financial institution. This is an important distinction, because merchants buy a variety of processing services from financial institutions; all of these services may be included in their merchant discount rate, which is typically a percentage rate per transaction."
Now, as you can see, they also call them "interchange reimbursement fees". Let me break it down for you a bit more clearly. You, as the merchant, pay your credit card processing provider, the acquirer, a Discount rate. This Discount rate is what you see quoted on your statements in various ways which, in many cases leads to your ultimate confusion....by design. This rate was either negotiated by you with your provider or was more than likely provided as a comparison to what you may have had with a previous provider. The Discount rate that you pay represents a markup above what the Interchange Rate is which is where your processor (the acquirer) make their profit for providing the service to you. In turn, the acquirer pays the interchange reimbursement fees to the card issuing entity and those fees are utilized for the "benefit of all participants" as indicated above.
So, these fees are for numerous things like the cost to issuing banks of issuing cards, maintaining accounts, sending statements, monitoring transactions for authorization, collecting payments from card holders, etc, etc. These fees are also used for paying rewards to those card holders that have such cards. You, in turn, pay higher rates for accepting these cards and therefore, in a way, are paying your customers for shopping with you. With the huge and ever increasing numbers of these types of cards ("What's in your wallet? ") in existence these days, you better know what you're paying for the privilege of accepting them.
As of this writing, we know there will be adjustments and, in fact, your provider may have already notified you on your September statement of just how much they will be increasing your rates, effective with your October processing month. Neither Visa or MasterCard has posted the October rates yet, however. So, what I would recommend that you do, RIGHT NOW is to go the VISA SITE and the MASTERCARD SITE find, and download the April Interchange Rates. Then, in a couple weeks, go back to these sites or even sign up for their RSS feed so you will be notified, and get the October rates when they become available. Do the comparisons to see where the actual increases were, compare them to what you're paying and see where you stand. I'd say, you should then probably get with your rep (if you can locate them) or Customer Care and get a total rate review of your account.
If you've read any of my articles in the past, you know that I am a strong advocate of becoming more thoroughly educated on credit card processing. It is an ever-increasing cost center in your business and it's crucial that you are fully aware of what your costs are and if there is anything that can be done to reduce them.
Thanks for reading and if you have found this article to be helpful, please pass it along to others that you know could benefit from it. I wish you continued, prosperous endeavors in your business.
"Visa uses interchange reimbursement fees as transfer fees between financial institutions to balance and grow the payment system for the benefit of all participants. Merchants do not pay interchange reimbursement fees; merchants pay "merchant discount" to their financial institution. This is an important distinction, because merchants buy a variety of processing services from financial institutions; all of these services may be included in their merchant discount rate, which is typically a percentage rate per transaction."
Now, as you can see, they also call them "interchange reimbursement fees". Let me break it down for you a bit more clearly. You, as the merchant, pay your credit card processing provider, the acquirer, a Discount rate. This Discount rate is what you see quoted on your statements in various ways which, in many cases leads to your ultimate confusion....by design. This rate was either negotiated by you with your provider or was more than likely provided as a comparison to what you may have had with a previous provider. The Discount rate that you pay represents a markup above what the Interchange Rate is which is where your processor (the acquirer) make their profit for providing the service to you. In turn, the acquirer pays the interchange reimbursement fees to the card issuing entity and those fees are utilized for the "benefit of all participants" as indicated above.
So, these fees are for numerous things like the cost to issuing banks of issuing cards, maintaining accounts, sending statements, monitoring transactions for authorization, collecting payments from card holders, etc, etc. These fees are also used for paying rewards to those card holders that have such cards. You, in turn, pay higher rates for accepting these cards and therefore, in a way, are paying your customers for shopping with you. With the huge and ever increasing numbers of these types of cards ("What's in your wallet? ") in existence these days, you better know what you're paying for the privilege of accepting them.
As of this writing, we know there will be adjustments and, in fact, your provider may have already notified you on your September statement of just how much they will be increasing your rates, effective with your October processing month. Neither Visa or MasterCard has posted the October rates yet, however. So, what I would recommend that you do, RIGHT NOW is to go the VISA SITE and the MASTERCARD SITE find, and download the April Interchange Rates. Then, in a couple weeks, go back to these sites or even sign up for their RSS feed so you will be notified, and get the October rates when they become available. Do the comparisons to see where the actual increases were, compare them to what you're paying and see where you stand. I'd say, you should then probably get with your rep (if you can locate them) or Customer Care and get a total rate review of your account.
If you've read any of my articles in the past, you know that I am a strong advocate of becoming more thoroughly educated on credit card processing. It is an ever-increasing cost center in your business and it's crucial that you are fully aware of what your costs are and if there is anything that can be done to reduce them.
Thanks for reading and if you have found this article to be helpful, please pass it along to others that you know could benefit from it. I wish you continued, prosperous endeavors in your business.
Wednesday, October 13, 2010
Net Effective Rate for Credit Card Processing Fees
When you look at your monthly credit card processing statement, (and I'm sure you do in great detail every month... don't you?), have you ever calculated the Net Effective Rate? Really, this is simply a tool to determine exactly what you are paying, in total, for ALL of your fees. This would include all of the following:
This comes in real handy when you are getting rate comparisons from different companies. Of course, when someone is trying to lure you away from your current provider, they'll present you with their "best rate" which would typically be for a swiped debit card. Let's just say they tell you that is 1.15% + $.25. At a glance, that may sound pretty good compared to what you think you are currently paying.
So, here's what you absolutely must do. Have the merchant rep from the processing company that is trying to attract your business, give you a complete and thorough comparison of ALL fees as compared to one of your current processing statements. Then, do the math and come up with the Net Effective Rate to see how it stacks up with what you are currently paying. Unfortunately, in this industry, reps are very skilled at telling you just enough to make their proposal "look" like it is better than what it ultimately might really be. After all, the bottom line in all of this stuff is... YOUR BOTTOM LINE! Do the math so you don't take a bath.
- Discount Rates
- Monthly Service Fees
- Statement Fees
- Batch Total Fees
- PCI/DSS Fees (Data Security)
- Debit Access Fees
- Amex Per Item Fees
- Administrative Fees
- Any other miscellaneous Fees
This comes in real handy when you are getting rate comparisons from different companies. Of course, when someone is trying to lure you away from your current provider, they'll present you with their "best rate" which would typically be for a swiped debit card. Let's just say they tell you that is 1.15% + $.25. At a glance, that may sound pretty good compared to what you think you are currently paying.
So, here's what you absolutely must do. Have the merchant rep from the processing company that is trying to attract your business, give you a complete and thorough comparison of ALL fees as compared to one of your current processing statements. Then, do the math and come up with the Net Effective Rate to see how it stacks up with what you are currently paying. Unfortunately, in this industry, reps are very skilled at telling you just enough to make their proposal "look" like it is better than what it ultimately might really be. After all, the bottom line in all of this stuff is... YOUR BOTTOM LINE! Do the math so you don't take a bath.
Combat Skimming of Credit Cars at Your Business
The fraudsters are getting even more active these days than before. They're out to steal credit card numbers in any way they can and they're not just after the processors and major retailers any longer. The term often referred to is "skimming" which is defined as the "unauthorized capture and transfer of payment data to another source for fraudulent purchases". According to ADT Security Services Inc., skimming nets fraudsters approximately $350,000 daily in the United States. And payment consultancy Celent LLC estimates skimming drains the global economy of $1.2 billion annually. So, you can see why the bad guys are actively searching for any opportunity or target that they can.
Skimming can be accomplished by stealing the data directly off of payment cards or by infiltrating payment networks via POS terminals, terminal locations, wires, communication channels, switches and so forth. One of the most common types of attack occur directly at the Point of Sale terminal and usually takes place with the merchants own personnel. Staff and outside contractors are "targets" of fraudsters, either through "bribery or coercion," The people that fall for this "temptation" are people who have both criminal intent and they have direct access to the customers credit card and aren't really observed or monitored much at the time of payment.
One specific industry is particularly prone to this situation and that would be in restaurants. Typically, the wait staff disappears with the diners' credit cards and can skim the card numbers in private or simply write down the appropriate information for later sale to the bad guys. If you happen to be in the restaurant business, you may want to seriously consider obtaining a few wireless terminals that can be taken directly to the customers table. Not only will this protect you but your customers will feel more at ease as well. And, a side benefit to this would be that now you will be able to capture pinned debit transactions and the resulting savings that go along with it.
You may have read in the news not long ago about huge data breaches at a couple major retailers as well as some of the largest payment processors in the business. Even they weren't immune to these sophisticated crooks. However, security measures have stepped up dramatically in those places so the cons are looking for easier targets. Smaller merchants are particularly vulnerable to skimming attacks. Mom-and-pop operations are busy with the day to day running of their businesses and might overlook signs that their terminals, or elsewhere in their business, have been compromised.
The security standards council has prepared a FREE 25 page supplement for merchants that provides photographs of how merchants can detect evidence of tampering. The report also recommends that merchants routinely inspect their businesses from the POS to the point where the cables leave the building. There are also pictures available to show merchants what actual tampering devices look like. For example, a key logger attached to an electronic cash register, for example can be smaller than a quarter and can easily be mistaken as part of the register.
Another suggestion is for merchants to limit the access to payment locations that customers and vendors have. These tampering devices can be quickly placed virtually anywhere in the system path. Installing surveillance cameras would also be a good idea and worthwhile investment. Times are tough these days and the fraudsters, either through bribery or coercion target staff and outside contractors to assist them in their endeavors.
The FREE report has helpful tips to help merchants quantify their risk levels. There are more than two dozen questions posed to merchants that are designed to evaluate whether they could be classified as low, medium or high risk to skimming attacks.
The second appendix is basically a checklist that allows merchants to document the details of their POS terminals and systems. "Take a picture of your device," Russo said. "What's the serial number? Where's it located? Where is the label? Is the label on the right side or the left side? So that when periodically somebody goes around and looks at these things to check them, they check them against this list to see if there's anything that looks different from what they had before."
Skimming can be accomplished by stealing the data directly off of payment cards or by infiltrating payment networks via POS terminals, terminal locations, wires, communication channels, switches and so forth. One of the most common types of attack occur directly at the Point of Sale terminal and usually takes place with the merchants own personnel. Staff and outside contractors are "targets" of fraudsters, either through "bribery or coercion," The people that fall for this "temptation" are people who have both criminal intent and they have direct access to the customers credit card and aren't really observed or monitored much at the time of payment.
One specific industry is particularly prone to this situation and that would be in restaurants. Typically, the wait staff disappears with the diners' credit cards and can skim the card numbers in private or simply write down the appropriate information for later sale to the bad guys. If you happen to be in the restaurant business, you may want to seriously consider obtaining a few wireless terminals that can be taken directly to the customers table. Not only will this protect you but your customers will feel more at ease as well. And, a side benefit to this would be that now you will be able to capture pinned debit transactions and the resulting savings that go along with it.
You may have read in the news not long ago about huge data breaches at a couple major retailers as well as some of the largest payment processors in the business. Even they weren't immune to these sophisticated crooks. However, security measures have stepped up dramatically in those places so the cons are looking for easier targets. Smaller merchants are particularly vulnerable to skimming attacks. Mom-and-pop operations are busy with the day to day running of their businesses and might overlook signs that their terminals, or elsewhere in their business, have been compromised.
The security standards council has prepared a FREE 25 page supplement for merchants that provides photographs of how merchants can detect evidence of tampering. The report also recommends that merchants routinely inspect their businesses from the POS to the point where the cables leave the building. There are also pictures available to show merchants what actual tampering devices look like. For example, a key logger attached to an electronic cash register, for example can be smaller than a quarter and can easily be mistaken as part of the register.
Another suggestion is for merchants to limit the access to payment locations that customers and vendors have. These tampering devices can be quickly placed virtually anywhere in the system path. Installing surveillance cameras would also be a good idea and worthwhile investment. Times are tough these days and the fraudsters, either through bribery or coercion target staff and outside contractors to assist them in their endeavors.
The FREE report has helpful tips to help merchants quantify their risk levels. There are more than two dozen questions posed to merchants that are designed to evaluate whether they could be classified as low, medium or high risk to skimming attacks.
The second appendix is basically a checklist that allows merchants to document the details of their POS terminals and systems. "Take a picture of your device," Russo said. "What's the serial number? Where's it located? Where is the label? Is the label on the right side or the left side? So that when periodically somebody goes around and looks at these things to check them, they check them against this list to see if there's anything that looks different from what they had before."
Merchant Services and Early Termination Fees
Every merchant services or credit card processing agreement that I have ever seen, has a contract term. Typically you will find that they are three years in length. If you terminate early, for pretty much any reason, you will be assessed an "early termination fee". And, usually, this fee will be automatically deducted from the bank account that is on record with the with the credit card service provider.
Whenever you consider starting a relationship with a new credit card processing company, you will always want to make certain that you actually read the fine print of the agreement. The primary part of any new agreement that merchants agree to that they actually look at, tends to be the "Schedule of Fees". Even those aren't necessarily clear in all instances but should be thoroughly understood before signing on the dotted line. Most merchants rarely look at all the Terms and Conditions. Now, that said, most contracts have the same verbiage but the "Term and Termination" portion can be quite different from one processor to another.
Get out your current copy of your merchant account agreement. Take a look at the back and look for the before mentioned section. Most often, here is what you will see or something very close to this:
"This Agreement shall remain in full force and effect for an initial term of three (3) years. This Agreement shall be automatically extended for successive one (1) year periods (underlined to draw your attention to this part) on the same terms and conditions expressed herein, or as may be amended, unless Merchant gives written notice of termination as to the entire Agreement or a portion thereof at least 60 days prior to the expiration of the initial term (underlined once again for emphasis) or any extension or renewals thereof, in which case this Agreement will terminate at the end of the then current term. Notwithstanding anything to the contrary set forth herein, in the event Merchant terminates this Agreement in breach of this Section 13, the lesser of the following amount(s) shall be immediately due and payable to the services provider--(a) the maximum amount permitted by applicable state law, or (b) $295, if such termination occurs within the first twelve (12) months period of the initial term of this Agreement, or $195, if such termination occurs after the first twelve (12) month period of the initial term of this Agreement..."
You see, whether you realize it or not, service providers have expenses in setting up and maintaining your merchant account so, therefore, they feel if you bail early, they're entitled to some compensation. Simply put, you absolutely need to know what the terms are before you make any commitments.
So, let's just say that some new merchant account rep (or as they're called in the industry MLS or Merchant Level Salesperson), performs a statement analysis for you. When they're all done, they show you the results and, of course, tell you they can save you a "ton of money". Your first inclination is to want to make the change because, of course, you want the projected savings in your pocket. But, wait a minute, where are you in your existing contract? Well, you know that if you outright cancel to make the move to the new provider, you WILL PAY AN EARLY TERMINATION FEE. So, what are your alternatives? Well, it's really all about math so get out your calculator and look at the numbers.
Okay, so the new guy/gal has shown you a $20 a month savings....not bad but how's that all shake out? Assuming your early termination fee is $195, it would take you about ten months before you would actually start realizing those savings (after paying the early term fee) if you decide to make the change. Here's another option that you may consider. Does your existing contract have a "Monthly Minimum" fee. Quite often you will have a $10-$25 Monthly Minimum in your Schedule of Fees. This means that even if you don't process a dimes worth of credit cards in any given month, the processor is still getting something. Let's suppose that you have say eight months to go before your existing contract expires and you have a $20 Monthly Minimum. You could make the switch, not call in to "officially" cancel, take advantage of the savings and just pay the $20 minimum fee to the previous guys (in this example, it would be $160 for the eight months so it's less than the $195). The risk you take here is that the provider just happens to notice that you aren't running any transactions thru them any longer and they automatically assess the early term fee per the agreement. Oftentimes, however, they really don't notice. But, the other thing that you need to be alert of is you will still need to contact them and " give written notice of termination as to the entire Agreement or a portion thereof at least 60 days prior to the expiration of the initial term" or it will renew for one more year and they will likely, sooner or later, catch up with you and collect the fee. These fees can easily eat away at any "projected" savings by the new provider and cause great frustration on your part.
As I've written many times before, it is crucial that you have any proposal made to you, explained in detail so that you fully understand all that is being promised. Sometimes, when someone has given you one of those "huge savings" proposals and you are still in the midst of a contract, you can use that with your current provider to negotiate a better rate with them. Simply call Customer Service and tell them you've received a quote for better rates and ask them what they can do for you to encourage you to stay. Don't tell them the numbers that you've gotten but just tell them that you have been offered what appears to be a "much better deal" and you wanted to give them the opportunity to sharpen their pencils or you may entertain going elsewhere. It's just a thought to consider especially if the service you're currently receiving, is up to your requirements.
One last thing while we're on the topic of Early Termination Fees. There are still some contracts out there that I have experienced that say something to the effect of "Early termination fees can be $295 or projected loss of revenue, for the balance of the contract, whichever is greater" So, let's just say that the credit card processor has calculated that they were going to be making $50 a month on your account and you had eighteen months to go....do that math. Now, that one could really sting so, once again, make sure you know what you're getting into. And, definitely get out your existing agreement, read the fine print and get fully acquainted with what your currently obligated to.
Whenever you consider starting a relationship with a new credit card processing company, you will always want to make certain that you actually read the fine print of the agreement. The primary part of any new agreement that merchants agree to that they actually look at, tends to be the "Schedule of Fees". Even those aren't necessarily clear in all instances but should be thoroughly understood before signing on the dotted line. Most merchants rarely look at all the Terms and Conditions. Now, that said, most contracts have the same verbiage but the "Term and Termination" portion can be quite different from one processor to another.
Get out your current copy of your merchant account agreement. Take a look at the back and look for the before mentioned section. Most often, here is what you will see or something very close to this:
"This Agreement shall remain in full force and effect for an initial term of three (3) years. This Agreement shall be automatically extended for successive one (1) year periods (underlined to draw your attention to this part) on the same terms and conditions expressed herein, or as may be amended, unless Merchant gives written notice of termination as to the entire Agreement or a portion thereof at least 60 days prior to the expiration of the initial term (underlined once again for emphasis) or any extension or renewals thereof, in which case this Agreement will terminate at the end of the then current term. Notwithstanding anything to the contrary set forth herein, in the event Merchant terminates this Agreement in breach of this Section 13, the lesser of the following amount(s) shall be immediately due and payable to the services provider--(a) the maximum amount permitted by applicable state law, or (b) $295, if such termination occurs within the first twelve (12) months period of the initial term of this Agreement, or $195, if such termination occurs after the first twelve (12) month period of the initial term of this Agreement..."
You see, whether you realize it or not, service providers have expenses in setting up and maintaining your merchant account so, therefore, they feel if you bail early, they're entitled to some compensation. Simply put, you absolutely need to know what the terms are before you make any commitments.
So, let's just say that some new merchant account rep (or as they're called in the industry MLS or Merchant Level Salesperson), performs a statement analysis for you. When they're all done, they show you the results and, of course, tell you they can save you a "ton of money". Your first inclination is to want to make the change because, of course, you want the projected savings in your pocket. But, wait a minute, where are you in your existing contract? Well, you know that if you outright cancel to make the move to the new provider, you WILL PAY AN EARLY TERMINATION FEE. So, what are your alternatives? Well, it's really all about math so get out your calculator and look at the numbers.
Okay, so the new guy/gal has shown you a $20 a month savings....not bad but how's that all shake out? Assuming your early termination fee is $195, it would take you about ten months before you would actually start realizing those savings (after paying the early term fee) if you decide to make the change. Here's another option that you may consider. Does your existing contract have a "Monthly Minimum" fee. Quite often you will have a $10-$25 Monthly Minimum in your Schedule of Fees. This means that even if you don't process a dimes worth of credit cards in any given month, the processor is still getting something. Let's suppose that you have say eight months to go before your existing contract expires and you have a $20 Monthly Minimum. You could make the switch, not call in to "officially" cancel, take advantage of the savings and just pay the $20 minimum fee to the previous guys (in this example, it would be $160 for the eight months so it's less than the $195). The risk you take here is that the provider just happens to notice that you aren't running any transactions thru them any longer and they automatically assess the early term fee per the agreement. Oftentimes, however, they really don't notice. But, the other thing that you need to be alert of is you will still need to contact them and " give written notice of termination as to the entire Agreement or a portion thereof at least 60 days prior to the expiration of the initial term" or it will renew for one more year and they will likely, sooner or later, catch up with you and collect the fee. These fees can easily eat away at any "projected" savings by the new provider and cause great frustration on your part.
As I've written many times before, it is crucial that you have any proposal made to you, explained in detail so that you fully understand all that is being promised. Sometimes, when someone has given you one of those "huge savings" proposals and you are still in the midst of a contract, you can use that with your current provider to negotiate a better rate with them. Simply call Customer Service and tell them you've received a quote for better rates and ask them what they can do for you to encourage you to stay. Don't tell them the numbers that you've gotten but just tell them that you have been offered what appears to be a "much better deal" and you wanted to give them the opportunity to sharpen their pencils or you may entertain going elsewhere. It's just a thought to consider especially if the service you're currently receiving, is up to your requirements.
One last thing while we're on the topic of Early Termination Fees. There are still some contracts out there that I have experienced that say something to the effect of "Early termination fees can be $295 or projected loss of revenue, for the balance of the contract, whichever is greater" So, let's just say that the credit card processor has calculated that they were going to be making $50 a month on your account and you had eighteen months to go....do that math. Now, that one could really sting so, once again, make sure you know what you're getting into. And, definitely get out your existing agreement, read the fine print and get fully acquainted with what your currently obligated to.
The Most Important Things to Consider about Your Credit Card Processing Agreement
In my years in the field, consulting with merchants regarding their credit card processing, it never ceases to amaze me how little they actually know about the process or the agreement. But hey, it's not your fault because most often you don't know all the questions to ask and the reps typically don't just volunteer all the details....for obvious reasons. So, what I hope to do here, with this article, is to give you some insight and, more specifically, the questions you need to ask, whether you're an existing merchant or a new one in search of merchant services. So, here's some ideas for you to strongly consider because it's imperative that you become informed:
- What is the term of my agreement? Typically, you will find them to be for three years with an "early termination fee" for pulling out early. You absolutely need to know what penalties there may be for your future reference. The reason is that you will always be prospected by reps in the industry, all the time, And, they have a way of making things "look" better than what they are actually are in reality. So, armed with the information that you have here, and possibly elsewhere, you'll be better able to apply the math to see if the "new deal" will ultimately be a cost savings. For example, let's say that your new proposal shows an anticipated savings of $25 a month based on your average volume and average ticket. Well, that would be a $300 savings over a twelve month period. So, with that in mind, and if let's say you would have a $195 early termination fee to leave your current provider, it would take you just under eight months to start getting into the green with the new guys. If, on the other hand, your early term fee is $295, it would take almost a year to get there. Simply, know your costs versus potential rewards, do the math and make an informed decision.
- What rate am I paying for pinned debit transactions? Now, if you're using a PinPad, and your average transactions are under $50, you could potentially rack up some savings here by capturing more pinned debit sales. As you may, or may not know, pinned debits will cost you less than swiping them as a credit card. For example, let's say you make a $50 sale and your customer hands you a debit card that goes thru the NYCE network. Effective with the April 2010 Debit Network Fee schedule, a pinned debit on that $50 sale would have a "cost basis" of about $.55 (plus whatever transaction fee your processor charges you). That same transactions swiped, as a credit card would have a "cost basis" of about $.68 (and you know your processor is charging something more significant than that. So, here again, ask the question so, based on your pricing structure (whether i be 3 Tier, 4 Tier or Cost-Plus pricing), you absolutely know what you are being charged and you can train your staff accordingly for maximum savings.
- What rate am I paying for swiped, generic credit cards? You see, if you are on a Cost Plus pricing program (which by the way is the most transparent form of pricing) you will absolutely know what you are paying for all different types of transaction and card types simply by know what your "plus" is and have access to the Interchange Rates. The problem comes when you are priced on any form of Tiered pricing because, literally, the processor can make their own decision into which "bucket" they want to put your transactions. And, you can bet, it will typically benefit them....and not you!
- What rate am I paying for Rewards Cards? Now this, especially these days, can be a big one. Again, if you're on Cost-Plus pricing...no big deal once you know what your "plus" figure is. The reason is that you will simply get the exact Interchange Rate for the card or transaction type, plus the "plus", every single time. Once again, the problem comes when you're on a tiered structure. Come right out and ask your rep, and have them show you in writing, what you are paying for these Rewards Cards. Let's face it, more people have, and are using, some form of credit card that pays them some sort of "reward" whenever they use that card. And, guess who pays more to accept that card and indirectly, help pay the reward back to the customer......that's right....you, the merchant. And hey, look at your own spending using plastic these days. If you had the option to use your plain ole generic card, or one that pays you a reward, which one would you use? The problem with a tiered structure is that the processor can place those transactions in any "bucket" (Tier 2, Tier 3, or Tier 4) they wish and, furthermore, can change which buckets they go in at any point in time, as they desire. Here's where the next point comes into play.
- Check your statements monthly, in detail. There are numerous times when I consult with a merchant that they hand me their most recent statements, still sealed in the original envelope. They have given up trying to decipher them because they feel there are more important things to tend to. Let me tell you, that if you simply spend some time with them and have your rep or Customer Service, explain every line item in detail to you, they're not that difficult to understand. And, after all, who has a more motivating reason to comprehend them than you, the owner? In addition to looking at your statements every month, you want to compare them to previous months to look for any changes, either in rates or fees in general. If you find any, make the call and have the changes explained to your full satisfaction. Another thing to look at is the "Statement Message" or something to that effect that is usually found on the first page of your statement. Here is where reputable processors will alert you of changes that are coming up. And, some even give you helpful tips on improving your costs.
- When was the last time you asked for a rate review? Most merchants never even think of doing this. All it takes is a phone call to your rep or Customer Service and say something like this: "I've been with you for a while and am doing consistent business, and I'd like to have my account reviewed for any rate reductions that I may be entitled to". This is an especially good step to take after you have received a competing quote that "looks" better than what you currently have. Don't give your current provider the rates you've been offered but simply tell them that you're entertaining an offer and wanted to give them the opportunity to be "more competitive" in order to keep your business. Hey, it's worth the call, don't you think?
- Here's some other ideas you want to ask about: You will likely find numerous other fees on your statement, some of which are justified and worthwhile and some others that are simply profit generators for the processor. Here again, look for and ask for justification of these kinds of fees: debit access fees, monthly minimum fees, statement or service fees, gateway fees, "merchant advantage" or something similar to this (usually for terminal replacement or paper fees), PCI/DSS fees (if you see these, ask if they are monthly, annually or a combination of both and ask what benefit you get from them), and simply, any other fees that you don't understand what they are for.
Monday, October 4, 2010
Friday, July 23, 2010
What do you get for your PCI fee?
Many merchants have questioned the charges they are receiving for PCI fees. PCI/DSS stands for Payment Card Industry Data Security Standards. Simply, or maybe not so simply, these are standards that are implemented by credit card processors and merchants, to ensure card holder privacy and minimize fraud. Every acquirer has a huge responsibility in this area and they have incurred numerous necessary costs to comply. They all pass some form of fee off to their merchants in either a monthly or annual charge or possibly, both. How much are you being charged and what do you get for it?
As a merchant, this fee doesn't mean that you now get to ignore cardholder security and all the risk falls back on your provider. Do the fees insure the merchant against PCI fines? Do they help pay for the processor to become PCI compliant? Do they pay for the merchant to become PCI compliant. The answer is Yes, No and Maybe. You still, must absolutely do all you can do to protect card holder data within your daily business practices. The fines incurred for non-compliance can be devastating.
The bottom line here is that you, as a merchant need to take a look at your statement, in detail, and understand all the fees you are paying. If you see a line item that says PCI/DSS fee, call your provider and flat out ask them what you're getting for it. Then ask they how you might be able to go about eliminating it. Some providers are simply using this as an additional income generator for themselves.
Take the time to visit THIS WEBSITE to find out more about PCI/DSS than you probably want to know. But, it could be time very wisely spent.
As a merchant, this fee doesn't mean that you now get to ignore cardholder security and all the risk falls back on your provider. Do the fees insure the merchant against PCI fines? Do they help pay for the processor to become PCI compliant? Do they pay for the merchant to become PCI compliant. The answer is Yes, No and Maybe. You still, must absolutely do all you can do to protect card holder data within your daily business practices. The fines incurred for non-compliance can be devastating.
The bottom line here is that you, as a merchant need to take a look at your statement, in detail, and understand all the fees you are paying. If you see a line item that says PCI/DSS fee, call your provider and flat out ask them what you're getting for it. Then ask they how you might be able to go about eliminating it. Some providers are simply using this as an additional income generator for themselves.
Take the time to visit THIS WEBSITE to find out more about PCI/DSS than you probably want to know. But, it could be time very wisely spent.
Wednesday, June 9, 2010
Processing Rates Increasing Because....
Over the past week or so, I've had merchants contacting me saying that their processor has given them various reasons for raising their credit card processing rates. Sometimes rate increases are necessary and warranted. In your business, when your costs increase, don't you also consider raising the price of your goods and services to help offset, at least a little, the increased costs you have incurred? It's no difference in the merchant services industry but when I hear what some of the merchants have been told, my blood starts to boil because they are simply flat out lies.
One processor told their merchants that they were going to have to increase some of their Non-Qualified or Fourth Tier rates, by .30% and $.10 due to "interchange increases". Well, if there was actually increases to that magnitude, I could certainly see the justification. However, the problem is, that in April, Visa/MC had very minimal (and I do mean minimal) increases only on a very few card or transaction types. So, the processors "justification" in passing on this type of increase is ridiculous. It's simply a profit generator for them.
Another processor has told their merchant (a retailer) that increases were coming on many of their transactions because they weren't breaking out the transaction and separating the cost of goods/services and sales tax. So, consequently, they were going to have to charge them more. How ridiculous! I'm sure you're aware that when you run a transaction thru your POS system, it simply asks for a total and not separate amounts for the product and the sales tax. What a crock!
It's precisely these types of things that happen that further encourages me to always recomment Cost Plus pricing to merchants. It is by far the most transparent form of pricing and simply, the processor can't manipulate rates or "hide" fees on you. If you're not currently priced this way...it's time to get on it.
One processor told their merchants that they were going to have to increase some of their Non-Qualified or Fourth Tier rates, by .30% and $.10 due to "interchange increases". Well, if there was actually increases to that magnitude, I could certainly see the justification. However, the problem is, that in April, Visa/MC had very minimal (and I do mean minimal) increases only on a very few card or transaction types. So, the processors "justification" in passing on this type of increase is ridiculous. It's simply a profit generator for them.
Another processor has told their merchant (a retailer) that increases were coming on many of their transactions because they weren't breaking out the transaction and separating the cost of goods/services and sales tax. So, consequently, they were going to have to charge them more. How ridiculous! I'm sure you're aware that when you run a transaction thru your POS system, it simply asks for a total and not separate amounts for the product and the sales tax. What a crock!
It's precisely these types of things that happen that further encourages me to always recomment Cost Plus pricing to merchants. It is by far the most transparent form of pricing and simply, the processor can't manipulate rates or "hide" fees on you. If you're not currently priced this way...it's time to get on it.
Wednesday, May 26, 2010
Interchange Rate Comparisons 2006-2010
Just last week, I was contacted by a merchant that had received notification of substantial increases in their rates. The processor claimed that it was due to “adjustments in interchange rates from Visa and MasterCard”. They were going to see an increase of .30% + $.10 in their Non-Qualified transactions, even though there was nothing like that reflected in the new Interchange levels.
I thought it might make an interesting topic to take a look back at credit card processing Interchange Rates. Since we just had an adjustment to rates in April, I decided to go back to April 2006 for some comparisons. As you might imagine, there are hundreds of different rates based on the card or transaction type. Rather than make this an extremely lengthy, and boring, article, I simply chose to focus on a few of the most common type transactions. So, let’s take a look:
Visa CPS Retail Credit: This is for a plain old generic Visa card (with no perks or Rewards attached) that is swiped thru your credit card terminal. This still represents quite a chunk of credit card sales for most merchants. If you’re on a Three Tier Pricing, this will typically show up in your Qualified rate category. If you’re on Four Tier Pricing, it is Tier 2. If you are on Cost-Plus or Interchange-Plus pricing, it will show up as a separate line item as CPS Retail Credit. In April 2006, the Interchange Rate was 1.54% + $.10 and is still the same as of the new Interchange Rates in April 2010. How have your Qualified, or Tier 2 rates been affected in that time frame?Visa
CPS Rewards 1: Rewards cards pay the card holder some form or reward in the form of cash back or bonus points. You, as the merchant, have the privilege of accepting these cards and paying more for them. In a sense, you are paying the customer, indirectly, to shop with you. As a Three Tier merchant, these will typically be Mid-Qualified and as a Four Tier Merchant as the third tier. And, of course, as a Cost-Plus merchant, they will show up as their own line item. Interchange Rate was 1.65% + $.10 in April 2006 and is the same today. How have your Mid-Qualified or Tier Three rates been affected in that time frame?
Visa CPS 2: Simply, this Visa Rewards card pays a larger reward to the card holder and, you got it, you get to pay more to accept it. Some processors will put this into your Mid-Qualified or third tier category, however, some will slam you by putting it into your Non-Qualified or fourth tier. I know of one processor that “reclassified” Rewards 2 transactions in July 2008 (in between typical Interchange Rate adjustments) and took them from Mid-Qual to Non-Qual and Third Tier to Fourth Tier…EVEN THOUGH THERE WAS NO RATE INCREASE. That represents an immediate increase in their bottom line and a subsequent decrease in yours. Why do you think they did that? You’ve seen the ads all over the place for “enhanced-double rewards” type cards. More and more consumers are getting them, and using them in your business. Interchange was 1.90% + $.10 in April 2006 and went up to 1.95% + $.10 in October 2008 and remains the same today. How have your rates been affected in the past four years in this category?
Visa CPS Key-Entered: Now this doesn’t typically represent a bunch of transactions for most brick and mortar type businesses but still warrants attention. April 2006 showed an Interchange Rate of 1.85% + $.10 but, in April 2009, it was reduced (that’s right, I said reduced) to 1.80% + $.10 and remains the same. These will be classified Mid-Qualified or Tier Three by most processors. How much did your provider reduce your rates on these types trnsactions?
MC Merit III: Here again, this is a generic MC swiped thru your POS system. It was 1.64% + $.10 in April 2006 but, in either April or October of 2007, they came all the way down to 1.58% + $.10 which is where it remains today. These are Qualified or Tier Two transactions. I believe the substantial drop was to come more in line with where the Visa rates were. I'll bet your rates weren't reduced, were they?
MC Key-Entered: April 2006 showed 1.95% + $.10 and also in October 2006, it dropped .06% to 1.89% + $.10 where it remains today. Here again, these will be Mid-Qual or Tier Three, typically. And of course, your processor reduced your rates....didn't they?
I know this may seem to be a lot of rambling but the point I want to make
is this. As you can see from these basic illustrations, there hasn’t been much in the way of overall increases over the past four years. Have your rates remained the same or have you experienced increases (like the merchant that contacted me), or “reclassifications”? Do you even know? Unfortunately, many merchants rarely look at their statements in great detail much less compare them to previous months or years to look for changes. You should definitely look at your statements each month and…COMPARE!
Let me ask you this now. In October 2007 when MasterCard lowered their rates on some of their cards, did your processor lower your rates? Nah, that never (or should I say, rarely) happens. If you’re priced on any kind of tier system, you likely didn’t see any kind of reduction in your rates. However, if you were on Cost-Plus pricing, which is the most transparent form of pricing, the reduction would have automatically been applied.
At MY WEBSITE, you’ll find unbiased SOLUTIONS to all your credit card processing questions and concerns. This blog, also provides timely and relative tips on an on-going basis that you will find helpful. As always, thanks for reading and please pass this article on to other business owners in your circle of influence.
Website tools
I thought it might make an interesting topic to take a look back at credit card processing Interchange Rates. Since we just had an adjustment to rates in April, I decided to go back to April 2006 for some comparisons. As you might imagine, there are hundreds of different rates based on the card or transaction type. Rather than make this an extremely lengthy, and boring, article, I simply chose to focus on a few of the most common type transactions. So, let’s take a look:
Visa CPS Retail Credit: This is for a plain old generic Visa card (with no perks or Rewards attached) that is swiped thru your credit card terminal. This still represents quite a chunk of credit card sales for most merchants. If you’re on a Three Tier Pricing, this will typically show up in your Qualified rate category. If you’re on Four Tier Pricing, it is Tier 2. If you are on Cost-Plus or Interchange-Plus pricing, it will show up as a separate line item as CPS Retail Credit. In April 2006, the Interchange Rate was 1.54% + $.10 and is still the same as of the new Interchange Rates in April 2010. How have your Qualified, or Tier 2 rates been affected in that time frame?Visa
CPS Rewards 1: Rewards cards pay the card holder some form or reward in the form of cash back or bonus points. You, as the merchant, have the privilege of accepting these cards and paying more for them. In a sense, you are paying the customer, indirectly, to shop with you. As a Three Tier merchant, these will typically be Mid-Qualified and as a Four Tier Merchant as the third tier. And, of course, as a Cost-Plus merchant, they will show up as their own line item. Interchange Rate was 1.65% + $.10 in April 2006 and is the same today. How have your Mid-Qualified or Tier Three rates been affected in that time frame?
Visa CPS 2: Simply, this Visa Rewards card pays a larger reward to the card holder and, you got it, you get to pay more to accept it. Some processors will put this into your Mid-Qualified or third tier category, however, some will slam you by putting it into your Non-Qualified or fourth tier. I know of one processor that “reclassified” Rewards 2 transactions in July 2008 (in between typical Interchange Rate adjustments) and took them from Mid-Qual to Non-Qual and Third Tier to Fourth Tier…EVEN THOUGH THERE WAS NO RATE INCREASE. That represents an immediate increase in their bottom line and a subsequent decrease in yours. Why do you think they did that? You’ve seen the ads all over the place for “enhanced-double rewards” type cards. More and more consumers are getting them, and using them in your business. Interchange was 1.90% + $.10 in April 2006 and went up to 1.95% + $.10 in October 2008 and remains the same today. How have your rates been affected in the past four years in this category?
Visa CPS Key-Entered: Now this doesn’t typically represent a bunch of transactions for most brick and mortar type businesses but still warrants attention. April 2006 showed an Interchange Rate of 1.85% + $.10 but, in April 2009, it was reduced (that’s right, I said reduced) to 1.80% + $.10 and remains the same. These will be classified Mid-Qualified or Tier Three by most processors. How much did your provider reduce your rates on these types trnsactions?
MC Merit III: Here again, this is a generic MC swiped thru your POS system. It was 1.64% + $.10 in April 2006 but, in either April or October of 2007, they came all the way down to 1.58% + $.10 which is where it remains today. These are Qualified or Tier Two transactions. I believe the substantial drop was to come more in line with where the Visa rates were. I'll bet your rates weren't reduced, were they?
MC Key-Entered: April 2006 showed 1.95% + $.10 and also in October 2006, it dropped .06% to 1.89% + $.10 where it remains today. Here again, these will be Mid-Qual or Tier Three, typically. And of course, your processor reduced your rates....didn't they?
I know this may seem to be a lot of rambling but the point I want to make
is this. As you can see from these basic illustrations, there hasn’t been much in the way of overall increases over the past four years. Have your rates remained the same or have you experienced increases (like the merchant that contacted me), or “reclassifications”? Do you even know? Unfortunately, many merchants rarely look at their statements in great detail much less compare them to previous months or years to look for changes. You should definitely look at your statements each month and…COMPARE!
Let me ask you this now. In October 2007 when MasterCard lowered their rates on some of their cards, did your processor lower your rates? Nah, that never (or should I say, rarely) happens. If you’re priced on any kind of tier system, you likely didn’t see any kind of reduction in your rates. However, if you were on Cost-Plus pricing, which is the most transparent form of pricing, the reduction would have automatically been applied.
At MY WEBSITE, you’ll find unbiased SOLUTIONS to all your credit card processing questions and concerns. This blog, also provides timely and relative tips on an on-going basis that you will find helpful. As always, thanks for reading and please pass this article on to other business owners in your circle of influence.
Website tools
Wednesday, May 12, 2010
5 Tips for saving on your credit card processing rates
There never seems to be a shortage of merchant services, or credit card processing, reps that are coming thru your door promising to save you some money. It's quite easy for the skilled ( and shall we say, less than ethical) credit card rep to manipulate the numbers and present, what appears to be, a "better deal". So, what can you do to know for sure how to really save money on your fees?
There's a lot that goes into the pricing of a merchant services agreement. Your rates typically depend on the kind of business you have, your average monthly volume, average ticket and how you transact business. What I want to present to you here is 5 Tips that you can do right now, maybe without even considering changing processors, to save on your bottom line. So, without further rambling, here's some ideas for you:
1. GET EDUCATED: Now, I'm not insinuating that you aren't an educated person by any stretch of the imagination. You wouldn't likely have tackled the monumental task of being in business for yourself if you weren't intelligent. But, let's face it, there are so many aspects of running a business, that you can't possibly be an expert in all areas. Credit card processing is one of those cost centers that are necessary if you want to appeal to the masses with your goods and services. In my years of experience in the field, I've seen relatively few merchants that truly understand how this industry works. So, simply, all I'm saying here is you need to dedicate some of your time to find out more so you will become more comfortable with what you are paying and why. The webites for both Visa and MasterCard offer a wealth of knowledge that would be very helpful in your educational process. In addition, you could just head on over to MY WEBSITE and see what you can pick up there. You'll find that it's NOT A SITE SOLICITING YOUR PROCESSING BUSINESS. The knowledge you gain from any of these sites will be time well spent.
2. ASK QUESTIONS: This is one of the simplest things that you can do for yourself. Take a look at your statement, thoroughly. and then, get on the phone with your rep (that is if you're able to even find him/her) and have them explain every single charge. I've seen merchants that are paying monthly for some sort of supplies program that they never use. They've been buying from the local office supplies store and have needlessly been paying these fees. Many processors now charge a monthly fee for sending you a paper statement when you could access them on-line for free. I know you've got a computer because, otherwise, you wouldn't be reading this article. If you're comfortable with downloading, or at least viewing them monthly, on the internet, opt out of the paper fee. You might also check your Discover and AMEX statements too as they both charge for a paper statement and with them too, you can eliminate that fee by getting them on-line.
3. GET A RATE REVIEW: If you were fortunate enough to get in touch with your rep and get their "spin" on all the charges on your statement, you still want to check them out. Keep in mind that most reps are paid monthly residuals based on all the profits generated from your account. If you're paying a statement fee, annual fee, membership fee or any other miscellaneous fees, they may tell you something like "everybody charges those"....don't buy it. They're earning a couple bucks on them monthly and will likely be reluctant to have them removed. So, call the companies Customer Care center and tell them you want a full Rate Review. While you have them on the phone, verify all that the rep told you and make sure you keep good notes for your conversation.
4. SHOP YOUR RATES: Look, there's no shortage of credit card processing reps out there. Heck, you're probably getting several stopping in or calling you weekly. Take one or two of them up on their offer to give you a quote, especially if you've been with the same provider for some time. BUT, only do this after you have taken the time to more thoroughly educate yourself so you will be better able to determine a real offer and a less than realistic offer.
5. CAPTURE MORE PINNED BASED DEBITS: This can add up to immediate savings for you, if you already have a pin pad. Most merchants, and their employees, when presented with plastic to pay for a purchase, ask "credit or debit?". The majority of customers, when given the choice, will simply chose credit because it's less hassle to sign than it is to remember and key in that massive four digit pin number that takes all but a nano second to do. But to you, the merchant, the cost difference can add up quickly. A $50 sale rung up as a credit card will typically cost you, let's say $1.10. That same card, run as a swiped debit card would run about $.67 (that is if you're set up properly to capitalize on this structure). And, last, but not least, that same transaction run as a pinned debit card, could cost you in the neighborhood of $.50 or so. If you have a pin pad, do this: look at the customers card when they hand it to you. If it is a debit card, it will say "debit", "check card" or "money card" on it. Once you are sure that it is a debit card, say to the customer, "I'm going to need you to enter your pin number here in a second", pause briefly (for any objections) and then process accordingly. Many of my merchants have even gone to the extent of telling their customers, when and if they raise objections, of the cost differences and then, the customers are happy to oblige.
Well, that's it for now. I hope that these tips will be of some help to you. As always, I thank you for taking the time to read and wish you great business success in 2010 and beyond.
There's a lot that goes into the pricing of a merchant services agreement. Your rates typically depend on the kind of business you have, your average monthly volume, average ticket and how you transact business. What I want to present to you here is 5 Tips that you can do right now, maybe without even considering changing processors, to save on your bottom line. So, without further rambling, here's some ideas for you:
1. GET EDUCATED: Now, I'm not insinuating that you aren't an educated person by any stretch of the imagination. You wouldn't likely have tackled the monumental task of being in business for yourself if you weren't intelligent. But, let's face it, there are so many aspects of running a business, that you can't possibly be an expert in all areas. Credit card processing is one of those cost centers that are necessary if you want to appeal to the masses with your goods and services. In my years of experience in the field, I've seen relatively few merchants that truly understand how this industry works. So, simply, all I'm saying here is you need to dedicate some of your time to find out more so you will become more comfortable with what you are paying and why. The webites for both Visa and MasterCard offer a wealth of knowledge that would be very helpful in your educational process. In addition, you could just head on over to MY WEBSITE and see what you can pick up there. You'll find that it's NOT A SITE SOLICITING YOUR PROCESSING BUSINESS. The knowledge you gain from any of these sites will be time well spent.
2. ASK QUESTIONS: This is one of the simplest things that you can do for yourself. Take a look at your statement, thoroughly. and then, get on the phone with your rep (that is if you're able to even find him/her) and have them explain every single charge. I've seen merchants that are paying monthly for some sort of supplies program that they never use. They've been buying from the local office supplies store and have needlessly been paying these fees. Many processors now charge a monthly fee for sending you a paper statement when you could access them on-line for free. I know you've got a computer because, otherwise, you wouldn't be reading this article. If you're comfortable with downloading, or at least viewing them monthly, on the internet, opt out of the paper fee. You might also check your Discover and AMEX statements too as they both charge for a paper statement and with them too, you can eliminate that fee by getting them on-line.
3. GET A RATE REVIEW: If you were fortunate enough to get in touch with your rep and get their "spin" on all the charges on your statement, you still want to check them out. Keep in mind that most reps are paid monthly residuals based on all the profits generated from your account. If you're paying a statement fee, annual fee, membership fee or any other miscellaneous fees, they may tell you something like "everybody charges those"....don't buy it. They're earning a couple bucks on them monthly and will likely be reluctant to have them removed. So, call the companies Customer Care center and tell them you want a full Rate Review. While you have them on the phone, verify all that the rep told you and make sure you keep good notes for your conversation.
4. SHOP YOUR RATES: Look, there's no shortage of credit card processing reps out there. Heck, you're probably getting several stopping in or calling you weekly. Take one or two of them up on their offer to give you a quote, especially if you've been with the same provider for some time. BUT, only do this after you have taken the time to more thoroughly educate yourself so you will be better able to determine a real offer and a less than realistic offer.
5. CAPTURE MORE PINNED BASED DEBITS: This can add up to immediate savings for you, if you already have a pin pad. Most merchants, and their employees, when presented with plastic to pay for a purchase, ask "credit or debit?". The majority of customers, when given the choice, will simply chose credit because it's less hassle to sign than it is to remember and key in that massive four digit pin number that takes all but a nano second to do. But to you, the merchant, the cost difference can add up quickly. A $50 sale rung up as a credit card will typically cost you, let's say $1.10. That same card, run as a swiped debit card would run about $.67 (that is if you're set up properly to capitalize on this structure). And, last, but not least, that same transaction run as a pinned debit card, could cost you in the neighborhood of $.50 or so. If you have a pin pad, do this: look at the customers card when they hand it to you. If it is a debit card, it will say "debit", "check card" or "money card" on it. Once you are sure that it is a debit card, say to the customer, "I'm going to need you to enter your pin number here in a second", pause briefly (for any objections) and then process accordingly. Many of my merchants have even gone to the extent of telling their customers, when and if they raise objections, of the cost differences and then, the customers are happy to oblige.
Well, that's it for now. I hope that these tips will be of some help to you. As always, I thank you for taking the time to read and wish you great business success in 2010 and beyond.
Friday, April 30, 2010
Credit Card Processing and spring time
Well, spring has sprung and it's feeling good. My grass is starting to turn green, flowers are popping thru the soil, buds on the trees and an abundance of birds have returned from the south. Everything's coming back to life again and that goes for MLS's as well. What, you say, is a MLS! In the credit card processing industry, it refers to Merchant Level Salesperson. If you're in business, especially in the eastern states or midwest, you experience a bunch of new reps coming thru your door or calling on the phone, every spring.
You see, here in the midwest (I'm in Michigan....could never figure out why this is called the midwest since we're nowhere near the west and not really even close to the middle of the country....oh well, that's a topic for another post) outside salespeople find other things to do than be "outside". But come springtime, everybody wants to get out. And, in the credit card processing biz, a whole new round of new reps are hitting the street.
This industry has the potential for a very lucrative income (I can personally attest to that after over a decade in the industry)so, it attracts a lot of fresh blood, especially every spring. So, typically, what happens is that they get a day or maybe only a half day, of training and they're sent out cold calling seeing dollar signs in their eyes. They have been provided the basics and mostly, just a pitch from their new sales manager, that of course, will sound like a really good deal to many merchants. However, after a couple months of knocking on doors, getting kicked out, ignored or just told to go away, they give up and go in search of their next job....it's just too hard. Unfortunately, for you, the merchant, you get hammered with all the different approaches from numerous new reps and it gets old real fast. This business, while being a great way to make a living for the honest hard working rep, is also a very competitive and hard business to be successful with.
If you've read any of my other articles and posts to my blog, you know that I am, and always have been, a strong advocate of having merchants get thoroughly educated. Let's face it, if you're selling any kind of goods or services, either in brick and mortar establishments or on-line, you need to accept credit cards.
This industry can be quite complex with lot's of ways for the less than scrupulous rep to take advantage of uninformed merchants. Don't let this be you as it can cost you dearly. Take the time to head on over to my website and learn more than what 90% of the reps that are calling on you, know about the credit card processing industry. It will be one of the most profitable things you can do for your business.
Thanks for coming by and I wish you a HAPPY SPRING and a prosperous year.
You see, here in the midwest (I'm in Michigan....could never figure out why this is called the midwest since we're nowhere near the west and not really even close to the middle of the country....oh well, that's a topic for another post) outside salespeople find other things to do than be "outside". But come springtime, everybody wants to get out. And, in the credit card processing biz, a whole new round of new reps are hitting the street.
This industry has the potential for a very lucrative income (I can personally attest to that after over a decade in the industry)so, it attracts a lot of fresh blood, especially every spring. So, typically, what happens is that they get a day or maybe only a half day, of training and they're sent out cold calling seeing dollar signs in their eyes. They have been provided the basics and mostly, just a pitch from their new sales manager, that of course, will sound like a really good deal to many merchants. However, after a couple months of knocking on doors, getting kicked out, ignored or just told to go away, they give up and go in search of their next job....it's just too hard. Unfortunately, for you, the merchant, you get hammered with all the different approaches from numerous new reps and it gets old real fast. This business, while being a great way to make a living for the honest hard working rep, is also a very competitive and hard business to be successful with.
If you've read any of my other articles and posts to my blog, you know that I am, and always have been, a strong advocate of having merchants get thoroughly educated. Let's face it, if you're selling any kind of goods or services, either in brick and mortar establishments or on-line, you need to accept credit cards.
This industry can be quite complex with lot's of ways for the less than scrupulous rep to take advantage of uninformed merchants. Don't let this be you as it can cost you dearly. Take the time to head on over to my website and learn more than what 90% of the reps that are calling on you, know about the credit card processing industry. It will be one of the most profitable things you can do for your business.
Thanks for coming by and I wish you a HAPPY SPRING and a prosperous year.
Monday, April 19, 2010
What's in your contract
Yesterday I received an email from a reader of this blog. It seems that her credit card processor has decided to add a Monthly Minimum to her account. I explained to her that the only time this would come into play, and affect her, is if she didn't do enough volume to generate enough fees to exceed the minimum. It's not in addition to Discount Rates and fees, it would be instead of.
She questioned the rights of the processor to do such a thing since she had already signed an agreement (contract) when she met with the rep and he assured her there was no Monthly Minimum. I suggested that she pull out her contract and look for any part of it that said that they could do just what they had proposed. Here's what she sent me which was an excerpt from her contract with this unnamed processor:
18. PROCESSING FEES.
a. Merchant will pay Processing Fees in the amount specified in the FEE SCHEDULE
attached to the Application or as otherwise provided for in this Agreement or an
Addendum thereto. Merchant will pay monthly fees equal to the greater of (i) actual
fees incurred, or (ii) the minimum amount of fees as specified in the Application.
Merchant will pay a Corporate Fee for each location equal to $90.00, to be collected via
ACH transfer within 150 days after the initial approval of this Agreement, and within
30 days after each anniversary of the effective date of this Agreement. Merchant Bank
may increase the Processing Fees and annual fees and/or impose additional fees by
giving Merchant thirty (30) days advance written notice effective for Charges and Credit
Vouchers submitted on and after the effective date of the change.
Yep, that's right, they are fully within their rights to add, increase or adjust fees to the original agreement simply by giving the merchant 30 days advance written notification. Typically, this notification comes via the "Important Information" section usually found on the monthly merchant statement. Do you ever read those things? It's been my experience that the majority of merchants never look at that section and, in fact, rarely even look at their statement in any great detail....sad, but true.
Now, let me say this about the above referenced processor. They are not unlike any other merchant services provider out there. In the credit card processing business, we are all affected by interchange. Interchange is one of the factors that affects the processor's cost basis. And, like any other business on the planet, when their costs increase, they have the right to pass on those increases to their customers, or absorb it and incur the reduction to their personal bottom line.
So what is your recourse if this same scenario happens to you? Well, you can grumble and complain all you want, honestly but, the fact remains, that you signed a contract and probably didn't read all the fine print. But, how much does it really matter since every credit card processing agreement that I've ever seen, has some form of the same verbiage in it as the above.
My advice is simply this...make certain that you are looking at, reading and understanding your monthly processing statement each and every month. This is a huge and ever-increasing cost center for your business. You absolutely MUST understand what you are paying and why. Don't ever hesitate to contact your rep or the companies Customer Care department and ask the questions. In fact, you should be calling at least on average of twice a year asking for a rate review and reduction. If you don't ask, they certainly won't voluntarily call you and lower your rates. Hey, it's your business and your profits are at stake here so I'm sure you'll see the value in taking a few minutes and making the call
Thanks for coming by and please don't hesitate to comment on this article or contact me with any specific questions.
Ping blog
She questioned the rights of the processor to do such a thing since she had already signed an agreement (contract) when she met with the rep and he assured her there was no Monthly Minimum. I suggested that she pull out her contract and look for any part of it that said that they could do just what they had proposed. Here's what she sent me which was an excerpt from her contract with this unnamed processor:
18. PROCESSING FEES.
a. Merchant will pay Processing Fees in the amount specified in the FEE SCHEDULE
attached to the Application or as otherwise provided for in this Agreement or an
Addendum thereto. Merchant will pay monthly fees equal to the greater of (i) actual
fees incurred, or (ii) the minimum amount of fees as specified in the Application.
Merchant will pay a Corporate Fee for each location equal to $90.00, to be collected via
ACH transfer within 150 days after the initial approval of this Agreement, and within
30 days after each anniversary of the effective date of this Agreement. Merchant Bank
may increase the Processing Fees and annual fees and/or impose additional fees by
giving Merchant thirty (30) days advance written notice effective for Charges and Credit
Vouchers submitted on and after the effective date of the change.
Yep, that's right, they are fully within their rights to add, increase or adjust fees to the original agreement simply by giving the merchant 30 days advance written notification. Typically, this notification comes via the "Important Information" section usually found on the monthly merchant statement. Do you ever read those things? It's been my experience that the majority of merchants never look at that section and, in fact, rarely even look at their statement in any great detail....sad, but true.
Now, let me say this about the above referenced processor. They are not unlike any other merchant services provider out there. In the credit card processing business, we are all affected by interchange. Interchange is one of the factors that affects the processor's cost basis. And, like any other business on the planet, when their costs increase, they have the right to pass on those increases to their customers, or absorb it and incur the reduction to their personal bottom line.
So what is your recourse if this same scenario happens to you? Well, you can grumble and complain all you want, honestly but, the fact remains, that you signed a contract and probably didn't read all the fine print. But, how much does it really matter since every credit card processing agreement that I've ever seen, has some form of the same verbiage in it as the above.
My advice is simply this...make certain that you are looking at, reading and understanding your monthly processing statement each and every month. This is a huge and ever-increasing cost center for your business. You absolutely MUST understand what you are paying and why. Don't ever hesitate to contact your rep or the companies Customer Care department and ask the questions. In fact, you should be calling at least on average of twice a year asking for a rate review and reduction. If you don't ask, they certainly won't voluntarily call you and lower your rates. Hey, it's your business and your profits are at stake here so I'm sure you'll see the value in taking a few minutes and making the call
Thanks for coming by and please don't hesitate to comment on this article or contact me with any specific questions.
Ping blog
Wednesday, April 14, 2010
What happens when a credit card is processed?
Have you ever considered what actually happens when a credit card is presented for payment of goods or services? Merchants pay a credit card processor for this service and are charged a Discount Rate. Here's a look at what the process looks like and costs involved:
• When a credit card is presented for payment of goods or services, the merchant swipes the card thru their credit card terminal.
• The transaction is electronically routed thru to their credit card processor
• The credit card processor electronically routes it thru the network (Visa or MasterCard) and the network earns an Access Fee (Visa @ .0925% and MasterCard @ .110%) on every transaction
• The network then electronically routes it thru the card issuing bank for approval or denial and this issuing bank earns the Interchange Rate (there are well over 200 different rates based on the card or transaction type)
• Then the whole process reverses back from the issuing bank, thru the network, back thru the merchant services provider, and finally, back to the merchant’s terminal with the approval. The processor charges the merchant a Discount Rate for providing the service which shows up on the merchant statement in various formats each month. It is the difference between the Interchange Rates and Assessments and what the merchant is paying that the processor earns for providing the service.
Well, that's how it all works, behind the scenes, and it happens all in a matter of seconds.
• When a credit card is presented for payment of goods or services, the merchant swipes the card thru their credit card terminal.
• The transaction is electronically routed thru to their credit card processor
• The credit card processor electronically routes it thru the network (Visa or MasterCard) and the network earns an Access Fee (Visa @ .0925% and MasterCard @ .110%) on every transaction
• The network then electronically routes it thru the card issuing bank for approval or denial and this issuing bank earns the Interchange Rate (there are well over 200 different rates based on the card or transaction type)
• Then the whole process reverses back from the issuing bank, thru the network, back thru the merchant services provider, and finally, back to the merchant’s terminal with the approval. The processor charges the merchant a Discount Rate for providing the service which shows up on the merchant statement in various formats each month. It is the difference between the Interchange Rates and Assessments and what the merchant is paying that the processor earns for providing the service.
Well, that's how it all works, behind the scenes, and it happens all in a matter of seconds.
Thursday, April 8, 2010
April 2010 Interchange Rate Adjustments
Well, it's that time of year again. Typically in April and October of each year, Visa and MasterCard make adjustments to Interchange Rates. What's that you say, you don't know what Interchange Rates are? Shame on you for not understanding because you're paying it every time you take a credit card. Well, at least this April, there weren't any significant changes in rates, however, MasterCard came out with a whole bunch of new "categories" that could have an affect on you and your bottom line.
You see, as a merchant that accepts credit cards for the payment of goods or services, you are charged a Discount Rate by your service provider. This provider, or merchant services processor, pays card issuing banks an Interchange Rate and pays either Visa or MasterCard, an access and assessment fee. All of these figures represent their cost basis for providing this service to you. On top of all these fees, the processor adds their markup and presents it to you in the form of the Discount Rate.
For sake of discussion here let me give you a quick example. Currently, the Interchange Rate for a Visa Debit Card is .95% + $.20 (last time around, October of 2009 it was 1.03% + $.15). This is one of the few changes for April 2010. So, a $50 debit card transaction would cost about $.67. This fee ultimately gets paid directly to the financial institution that issued the debit card. On top of that is a Visa Assessment fee of .0925% and total Access fees of about $.02. So, to cut to the bottom line here, the total "costs" is 1.0425% + $.22. Take a look at your most current statement and see what you're paying for swiped debit cards without capturing a pin number (that's a whole other ball game). If you're priced on 3 Tier pricing, it will be your Qualified Rate. If you're on a 4 Tier pricing, it's your 1st Tier. And, if you're on Cost Plus Pricing it will be a specific line item showing the total breakdown (or at least it should).
The bottom line here is that you need to become more thoroughly educated regarding this ever-increasing cost center in your business. Listen, your service provider doesn't want to tell you all this stuff. All they want to do is just provide the service and hope that you don't ask too many questions. Trust me, I spent a lot of years in this business and built a tremendous, loyal, customer base. It was accomplished by establishing mutually rewarding long-term relationships. Look, the economy is pretty lousy now and isn't showing signs of getting much better any time soon. You owe it to yourself and your business to learn more about this cost center as it is continually having a growing impact on your bottom line. You can slowly learn more and apply it along the way, by just subscribing to this blog or coming by often. Or, you can head on over to my website right now by CLICKING HERE and get the crash course to increased profits. The choice is yours!
You see, as a merchant that accepts credit cards for the payment of goods or services, you are charged a Discount Rate by your service provider. This provider, or merchant services processor, pays card issuing banks an Interchange Rate and pays either Visa or MasterCard, an access and assessment fee. All of these figures represent their cost basis for providing this service to you. On top of all these fees, the processor adds their markup and presents it to you in the form of the Discount Rate.
For sake of discussion here let me give you a quick example. Currently, the Interchange Rate for a Visa Debit Card is .95% + $.20 (last time around, October of 2009 it was 1.03% + $.15). This is one of the few changes for April 2010. So, a $50 debit card transaction would cost about $.67. This fee ultimately gets paid directly to the financial institution that issued the debit card. On top of that is a Visa Assessment fee of .0925% and total Access fees of about $.02. So, to cut to the bottom line here, the total "costs" is 1.0425% + $.22. Take a look at your most current statement and see what you're paying for swiped debit cards without capturing a pin number (that's a whole other ball game). If you're priced on 3 Tier pricing, it will be your Qualified Rate. If you're on a 4 Tier pricing, it's your 1st Tier. And, if you're on Cost Plus Pricing it will be a specific line item showing the total breakdown (or at least it should).
The bottom line here is that you need to become more thoroughly educated regarding this ever-increasing cost center in your business. Listen, your service provider doesn't want to tell you all this stuff. All they want to do is just provide the service and hope that you don't ask too many questions. Trust me, I spent a lot of years in this business and built a tremendous, loyal, customer base. It was accomplished by establishing mutually rewarding long-term relationships. Look, the economy is pretty lousy now and isn't showing signs of getting much better any time soon. You owe it to yourself and your business to learn more about this cost center as it is continually having a growing impact on your bottom line. You can slowly learn more and apply it along the way, by just subscribing to this blog or coming by often. Or, you can head on over to my website right now by CLICKING HERE and get the crash course to increased profits. The choice is yours!
Monday, March 22, 2010
You should be aware of this
Well, it's been a couple months since I posted last. As you can see from the picture, I've been quite busy. My family and I spent two months in Costa Rica so my mind was elsewhere. However, this business that I'm in (merchant services) is in the blood and I have never really strayed too far away from the pulse of what's going on in this industry.
As one that's always been concerned about long-term relationships with my merchants, I feel compelled to bring up areas of concern that I feel you should be aware of. You're probably aware of the new credit card laws that went into effect in February. Well, along with that, many card issuers have increased interest rates and consequently, many card holders have reduced their spending. So, the card issuers are coming up with some programs to encourage consumer spending, once again.
There are some that believe that the economy is starting to show some signs of recovering from our most recent sluggish past. Many of the credit card issuers are now ramping up their rewards programs. Some are offering double reward points on purchases in general. Still others are offering more frequent flyer miles for each $1 spent. You may also see that some card companies are offering increased points or "rewards" for purchases at "partner" merchants. No matter what their doing, the bottom line is that these new purchases will affect your bottom line.
Here's what to look for on your end. First, if you're priced on a three tier pricing structure, thes "rewards" type cards fall into your Mid-Qualified or Non-Qualified category. There are numerous types of rewards cards offered by Visa and MasterCard so, you need to call your provider and ask them point blank, which level these rewards cards clear in. Honestly, the processor can, at their will, determine which category to put each card type in and if you aren't informed thoroughly, you're needlessly giving up profits. I know of a processor, that not long ago, informed their merchants (you know, in that little paragraph or two on the first page of the monthly statement that nobody seems to read) that they were "reclassifying" Visa Rewards 2 cards and moving them from Mid-Qualified to Non-Qualified (at rates that are, at a minimum, 1% higher). If you're on a four tier pricing model, these reward cards will be in either Tier 3 or Tier 4....make sure you ask where your transactions are priced.
Now, if you're in a Cost-Plus pricing model, you don't need to worry about being priced in a "bucket" where you don't need to be. All of these rewards cards will, by their very nature, simply be routed to the proper category and pricing. The bottom line is that if the credit card issuers ploy to increase rewards to their card holders, encourages them to spend more, then you reap the benefits of increased business. You simply want to make sure you absolutely know what you're paying for these transactions. After all, who is most interested in the profits and viability of your business....you or your merchant account provider?
Being in business these days is tough enough as it is. Anything you can do to cut your costs and, subsequently, increase your profits is a good thing to do. With that in mind, knowledge is king and the kind of knowledge that I offer to you, is typically not offered up by the majority of credit card processing reps. So, if you want to really stack the cards in your favor, GET EDUCATED. I have prepared a 40 page eBook on the topic and will give you the A-Z's of how the credit card processing industry works and how it affects you. Take a spin on over to my website and check it out for yourself. I'm confident that you won't be disappointed.
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