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.
Friday, April 30, 2010
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!
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