EARLY TERMINATION FEES

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

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

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

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

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

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

GET EDUCATED

Paying at the pump with your debit card

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

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

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

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

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

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

Improve your profits without increasing your sales

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

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

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

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

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

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

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

Price: $10.00

5% discount for cash payment

5% Discount for Check Payment

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

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

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