Merchant Guide

Consumer rights coalition hopeful that mark-up will fix critical oversight

INDIANAPOLIS, IN – Robert Johnson, President of Consumers for Competitive Choice (C4CC), released the following statement regarding the Senate Banking Committee’s mark-up of the Restoring Financial Stability Act of 2010, Chairman Dodd’s revised version of financial regulatory reform legislation, scheduled to begin today:

I am hopeful that the members of the Senate Banking Committee will make a critical fix to Chairman Dodd’s financial regulatory reform bill during the mark-up that begins today, and include a provision that addresses credit card swipe fees – specifically, that establishes debit-at-par. As the Chairman himself has noted, these increasing and excessive fees are outrageous and something needs to be done. The Chairman’s own financial reform bill provides the perfect vehicle to implement commonsense reform now.

“Small business owners across the country are preparing for additional increases to the already hefty debit card swipe fees next month, increases that are not justified in any way. It already costs merchants as much as 43 times as much to process debit cards as it does to process paper checks, even though they work the same way. As long as big banks and credit card companies have access to this unregulated revenue stream, increases like these will continue and more hard-earned American dollars will go to line the pockets of Wall Street executives.

“As the mark-up begins, I hope that the Senate Banking Committee sides with Main Street America. Commonsense reform that includes debit-at-par is a fix that will benefit small business owners and consumers alike.”

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About The Credit Card Con
The Credit Card Con is a project by the Consumers for Competitive Choice.
For more information, visit The Credit Card Con website at www.thecreditcardcon.com.

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FOR IMMEDIATE RELEASE
March 18 , 2010

This was a guest post from The Credit Card Con.

If you want to know more about Social Business Bank visit http://www.socialbusinessbank.com or follow us on Twitter!

PRESS credit card fees, merchant account, Small Business

No one likes bills, especially those types of bills that are filled with cryptic codes and dozens of line items. That’s a pretty good description of a statement from a credit card processor or – if you already have one – your merchant account provider.

In order to accept credit cards like Visa, Mastercard, American Express (AMEX) or Discover, you’ll want to partner with a merchant account provider. For these services you pay the provider a monthly fee plus a percentage of your processing volume.

Many merchant account providers advertize low rates to lure new customers. Problem is, your bill can be so complicated that it is almost impossible for you to figure out how much you are actually paying. We analyze the statements of clients who have been processing with other firms before switching to SBB and identified common fees you should be looking out for:

1. Quoted Rates and Actual Rates

Often you’ll be quoted rates of 1.80% or even lower, but if you compare the quoted rate with your statement you find a huge discrepancy. In one client’s case, she was quoted 1.95% initially from her former merchant account provider. Over a period of 3 months, her small business was processing $24,720 and was paying $791.04 in processing fees. That’s an effective rate of 3.20%, almost double her quoted rate.

Solution: Regularly review your statements and compare your quoted rates with the actual total amount charged. Demand a detailed explanation of your merchant account provider why the amounts differ and what can be done to eliminate the discrepancy.

2. Not all credit card charges are created equal

A monthly credit card processing statement shows your daily tally of credit card sales and fees charged to process them. As an example, you paid $5.40 for a transaction worth $299.95 or in other words 1.80%.Visa and Mastercard have very strict regulations that determine the risk associated with every transaction. If certain conditions are not met a transaction will be “downgraded” and surcharges applied.

Some downgrades are unavoidable, like if your customer is using a rewards or corporate card. Most downgrades however can be avoided by providing a strong and tight integration of your payment system (terminal, online shopping cart, etc.) with your merchant account provider’s payment portal and the associated banks and networks that run in the background.

Solution: Take a look at your statement. If you have downgrades at 20% of your total transactions or more, consult with your merchant account provider. Ask him to analyze your statement and find ways to lower the downgrades. Beware that a higher bill to you generally means a higher profit to the merchant provider. Ask him to switch to an interchange plus payment model to avoid incentivizing your merchant provider to fix such issues pro-actively.

3. Beware billbacks

Billbacks are a particularly tricky tool to make your processing statement confusing to you. To cover high interchange rates and downgrades, you’ll be charged a low discount rate in a given month and then billed any and all surcharges in the following month. Such billbacks are marked as “BB” on your statement.

Solution: While billbacks do not increase your costs in any way, they make it difficult to determine your real processing costs. Your merchant provider should be able to provide you with a detailed description of all billbacks and analyze these carefully to minimize them. Billbacks on 20% or more of your total transactions typically indicate room for improvement.

Next issue, we’ll provide you with more tips & tricks how you can crack the code on your credit card processing statement, such as why rates are not everything, why you can’t find the single largest hidden cost on your statement and why you should avoid bucket rates in most cases.

Read Part 2 of this post here.

Kind Regards,

Social Business Bank

Merchant Guide billbacks, bucket rates, cost plus, credit card fees, credit card rates, interchange