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.”

###

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.

**************************************************************************
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

Hidden Fees for High volume Merchants

High-volume merchants have a great advantage towards startups and businesses that rarely process credit cards: merchant providers love them. In fact, as a high volume merchant you’re likely to get a 50% – 60% discount in your rates compared to a startup. Unfortunately that’s not because your purchasing power allows you to make a bunch of savings but much rather because most merchant providers overcharge startups and small businesses with super-high monthly fees.

Since your processing volume is high, per transaction fees are more important to you than monthly charges. That’s why you should be on the look-out for the two biggest profit-melting hidden fees out there:

Hidden Fee #3: Downgrades

Fact is, downgrades are impossible to be avoided if you want to accept credit cards. But it is within your influence to reduce them significantly. Michael, who commented on part 1 of this series, pointed out an important fact: there’s a lot of stuff involved with downgrades. Starting with your POS (the terminal you use daily to run credit card transactions if you’re in retail) over incorrect batch times to keying in a transaction vs. swiping the card; literally dozens of factors influence your downgrade activity. As a rule of thumb, if more than 20% of your charges are downgraded, you should get an expert to check into it.

A professional analysis should typically not cost you anything as a merchant, you can get one here; make sure that your merchant provider shares any and all findings with you regardless if you consider switching the provider or not. Working with a completely transparent provider is a very strong indicator for its excellence.

Hidden Fee #4: Interchange

The interchange is the single highest fee that any and all merchants are forced to pay to the credit card networks of Visa, Mastercard, American Express and the like. The interchange fees are non-negotiable and all merchants have to pay them. This fee, sometimes reaching even 3% of the sale, is a huge cost factor for any size of business. While there is no immediate remedy, organizations are fighting the banking lobbyist in Washington to get interchange fees lowered. To show your support, visit http://www.thecreditcardcon.com for more information.

Contact us know. We are looking forward to answer your questions: (888) 255-4162

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

Merchant Guide authorization, chargeback, chargebacks, corporate, credit card, credit card processing, credit card processor, debit card, downgrades, hidden fees, high volume merchant, interchange, merchant account, merchant provider, mid-size merchant, refunds, voids

Nobody likes hidden fees, though usually such fees rarely exceed a few dollars any given month and aren’t a major cost factor for midsize and large merchants. But there’s also the other type of hidden fees that may cost your business hundreds or even thousands of dollars and you don’t even know that they exist, because they are – in the truest sense of the words – hidden, so well hidden that you won’t find them on your merchant statement at all.

What’s a high volume Merchant

A merchant is typically considered high volume if the monthly processing volume exceeds $100,000. Some steps listed in this article may only make sense once a certain processing volume is reached and there are some other factors that need to be considered besides volume as well.

A good merchant provider will name you these cost drivers and a great credit card processor will work on eliminating these costs with you.

Hidden Fee #1: Refunds & Chargebacks

Refunds requests are part of daily business and are sometimes the only way to avoid a chargeback. However, refunds are costly to you and that in more than one way. Credit card processors often charge you transaction fees above and beyond the chargeback and refund amount, making you pay twice. Ask your provider to conduct a thorough processing analysis and share the results with you.

Hidden Fee #2: Authorization-Voids

An Auth-Void transaction is an attempt to charge a credit or debit card which gets voided before the transaction goes through. Imagine you’re a pizza store owner and you’re about to charge a customer $10 for a pizza. After authorizing the transaction the customer asks fora bottle of coke to be added, so you go ahead and void the original $10 transaction and charge him $12 instead.

The $10 transaction never reached the customer s credit card. In fact, the transaction never happened since it got voided in time. Yet you’ve most likely paid for it. Doesn’t sound too fair to be charged for something that has never happened to begin with, does it?

A great merchant account provider and processor will not charge you an authorization but a capture fee – so that you only pay when you make an actual sale; after all, a great process will align ist success with your success to eliminate conflicts of interest.

Hidden Fee #3: Downgrades

Downgrades are the end-all-be-all of hidden costs. Nothing eats away your profits faster and is more complicated to get fixed. Stay tuned and subscribe to the RSS feed or email newsletter to bet he first to know how you can eliminate downgrades in our upcoming issue.

Contact us know. We are looking forward to answer your questions: (888) 255-4162

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

Merchant Guide authorization, chargeback, chargebacks, credit card, credit card processing, credit card processor, debit card, downgrades, hidden fees, high volume merchant, merchant account, merchant provider, mid-size merchant, refunds, voids

Merchant accounts can become tricky and choosing a new merchant account provider without some background information can get quite pricy to your business. This blog features articles to help you learn more about this industry. Submit your email address on the sidebar and you´ll get our posts per email or add our feed to Google Reader or another Feed Reader.

1. LinkedIn as information provider

Another way to learn and inform yourself is to create an account on LinkedIn and join groups of interest. You can find groups by searching the with the search box. Get started by joining these groups:

• Social Business Bank LinkedIn Group
• Merchant Level Sales
• Merchant Partnerships, Credit Card Processing

2. Collect Blogs and Magazines

The next step is to read blogs like this one. Blogs are a great tool to learn and discuss. There are also some amazing onlines business magazines like inc.com or entrepreneur.com out there, where you will find useful articles about credit card processing. Most of the magazines have a feed for every category, so you can focus on what is most important to you. A feed reader like Google Reader helps you organize and collect all feed subscriptions; take your time to read them carefully, they may help you to establish new ideas and partnerships.

3. Talk, Talk, Talk

The very best you can do is talking to people. The web offers an answer for almost everything, but isn´t it easier to send a direct message,  email,  contact a blog author or call the company you´re interested in? People typically aren’t very secretive about their success. Far from it! They can give the answers you are looking for and help you reach out to new potential clients and partners.

Contact us know. We are looking forward to answer you questions: (888) 255-4162

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

Entrepreneurs, Merchant Guide Blog, credit card processing, education, linkedin, merchant account, talking

1. Use your existing Reporting and Bookkeeping

Credit card processing is a sophisticated industry and like every other industry there’s many ways how to tweak the system to make it more efficient and cost effective. Your businesses processing costs depend on many factors such as the relation between card-present and card-not-present transaction and so forth.

Solution: Regularly check your reporting and bookkeeping and find out the relation between keyed and swiped transactions, online vs. in-store transactions, etc. and forward your reports to your merchant processor to get your processing settings up to date and configured based on your latest transaction data.

2. Reduce your Risk

In the processing industry it is all about risk. Merchant account acquirers and credit card service providers assess the risk of every merchant signing up and quote processing rates based on the perceived risks. You can be sure that your merchant provider will notice if circumstances change for the worse, often however, they “forget” to notice improvements.

Regularly check in with your merchant provider and update him on recent developments in your business. Forward the latest financials and create a personal connection to build up trust. The lower the perceived risk of a business default is, the lower you rates will be.

Merchant Guide analytics, Corporate credit card processing, cost savings, credit card processing, how-to, merchant account, merchant reports, profit margin increase, revenue increase, software, step-by-step guide

Last issue we talked about rates, rates and you’ve guessed it: billbacks. This 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.

1. Rates are not Everything

Especially in today’s economy businesses are eager to cut costs and to swap your merchant service provider may seem like a great opportunity to slash your credit card processing rates. A solid and – this one’s important – regular review of your merchant service provider is crucial to gain the lowest rates possible, but it’s not everything.

In the first part we already untapped some of the factors that influence your bottom line credit card processing costs. Often times the rates quoted by the merchant acquirers are not the bottom line rates you end up paying. Watch out the fine print and any fees above and beyond processing rates such as termination fees, minimum length contracts or bucket rates and credit card transaction qualification levels.

Solution: Read the fine prints and prioritize. Are you looking for the cheapest offer or the best value for the price? What’s important to your business? Is it solely cost driven or would a great technological integration with your ERP system and online shopping cart given you a competitive edge? The merchant acquirer provides an integral part of payment services and can help to get it all integrated to fit your specific needs and business opportunities.

2. Bucket Rates and Qualifications

Because Visa’s and MasterCard’s interchange fees are so complex, processors sometimes categorize transactions as qualified, mid-qualified, and nonqualified. One rate covers all the transactions that fall into a category. Suppose this statement is that of a restaurant. When a customer pays with a generic Visa card, Visa charges an interchange fee of about 1.63 percent. The processor considers that a qualified transaction and charges a discount rate of 1.74 percent. If someone uses a Visa rewards card, however, the interchange jumps to nearly 2 percent. The processor labels it as mid-qualified and charges 2.85 percent. Every processor sets its own tiered pricing, so one type of credit card transaction may be considered mid-qualified by one and qualified by another. It’s up to you to find out how your processor defines things. Large organizations generally use a system called “cost plus”. In a cost plus system the interchange charged by Visa and Mastercard is forwarded to the merchant at cost, plus an additional fee to cover for the merchant acquirers services. Corporations prefer cost plus due to its full transparency, which makes it much easier to understand the credit card processing bill.

Solution: Ask your merchant provider if they offer a cost plus system as well. It depends on your businesses’ particular needs; however, a serious merchant account provider will at least offer you the opportunity to transfer your account to a more transparent cost plus system.

3. Hidden Costs (that’s a biggie)

Especially for medium and large businesses processing $10 million annually and upwards, rates are much less an issue than other factors such as the technological integration of their payment acceptance points (PAP) with the credit card network back-end. Often a perfectly valid credit card transaction gets flagged by the credit card network as possibly fraudulent transaction which increases the risk to the merchant acquirer, thus charging much higher rates for the transaction.

The credit card network is a complex system linking many financial institutions and parties together. If the system is not perfectly optimized for the individual business, chances are that many transactions are captured at a rate which can be up to 350% higher than a regular transaction.

Solution: If you’re running a medium or large business ask your merchant provider to provide a cost-savings analysis based on better technological integration. Your provider should be able to tell you what you can do to lower unnecessary mark-ups on your transaction and provide assistance during the implementation.

Read Part 1 of this post here.

If you want to know more about Social Business Bank, visit socialbusinessbank.com.

Merchant Guide bucket rates, cost plus, credit card processing, credit card rates, credit card transactions, hidden costs in processing, interchange, merchant account, merchant reports, merchant service, mid-qualified rates, non-qualified rates, online credit card acceptance, online integration, PAP, payment acceptance points, qualified rates, technical integration