Posted by Jeff Shavitz on Mon, Dec 21, 2009 @ 03:19 PM
Paying close attention to your credit card processing expenses is a must, but sometimes even the most conscientious merchants miss some not-so-obvious costs. Below are three common processing expenses that you may be paying without even realizing it.
Processing fees aren't returned when you refund a credit card purchase.
When you charge a customer's credit card, you pay a discount rate and transaction fee to your merchant account provider to process the transaction. When you refund a credit card purchase, your provider does not return those fees. Depending on the type of business that you have, lost merchant account fees from credit card refunds can be substantial and you may not have considered it.
Let's use a hypothetical retail store as an example. If our make-believe store has card-present merchant account rates of 1.7%, a transaction fee of $0.25, an average ticket of $50 and an average of ten credit card refunds per month - they'll lose $11 every month in processing fees dues to refunds. That's also assuming that all of those transactions ran at a qualified rate. Common mid and non-qualified surcharges would make the loss even greater.
If you haven't considered how losses due to credit card refunds are affecting your business, sit down and crunch the numbers as soon as possible. You may be surprised at the results.
You're paying mid and non-qualified surcharges.
When credit card transactions downgrade a mid or non-qualified surcharge is added to the regular qualified discount rate. Many processors express surcharges as a separate fee on their merchant account statements and they charge them at different times of the month. Qualified charges are commonly deducted from credit card transactions throughout the month and surcharges are assessed in a lump sum at the end of the month.
The lump sum amount that's deducted for surcharges is expressed as a single large fee on the merchant processing statement. This leaves many merchants thinking that their total processing charges are represented by the surcharge amount that they see on their statement when in fact this is only a portion of total charges.
In order to realize you're total credit card processing expenses, you have to add the fee charged at the end of the month for downgrades and surcharges to the qualified discount charges that are deducted throughout the month.
It's tough to generically explain how to read merchant account statements because each processor and provider has a different layout and charge structure. If you're having trouble reading your merchant processing statement, it's best to call your merchant account provider for assistance.
You're being surcharged for a monthly minimum.
Merchant accounts often have a confusing charge called a merchant account monthly minimum fee. The monthly minimum dictates the amount of fees that a processor must collect from a merchant in a monthly period. For example, if a merchant account has a monthly minimum of $25 and the merchant's processing fees for a given month are only $15, a surcharge of $10 will be assessed to bring total charges up to the $25 monthly minimum amount.
If your business has a slow or seasonal downtime, you may be paying a monthly minimum surcharge without realizing it. Check your merchant processing statement and the schedule of fees for a monthly minimum fee. If you do have a minimum that's affecting your charges, call your provider to see if the fee can be lowered or even waived.
Article courtesy of: MerchantCouncil (www.merchantcouncil.org)
For more information on Credit Card Processing expenses or to find out if you are paying the lowest rates on your merchant account, contact CCS for a no-cost, no-obligation rate analysis.
Posted by Jeff Shavitz on Fri, Nov 13, 2009 @ 11:15 AM
Charging a Minimum on Credit Card Purchases
One of the most contested issues in credit card processing is whether a merchant should have the ability to impose a minimum purchase amount on credit card transactions. At one point or another we've all walked into a store to make a quick purchase and after seeing a sign that read "minimum credit card purchase $10," realized we didn't have any cash.
Merchants set a minimum on credit card purchases to avoid losing money on smaller transactions where processing fees are larger than the profit made on the sale. While it makes business sense to do this, three of the four major card brands specifically forbid doing so and violating these terms can be detrimental to their merchant account.
Visa says "Always honor valid cards in your acceptance category, regardless of the dollar amount of the purchase. Imposing maximum or minimum dollar amounts in order to accept a Visa card transaction is a violation of the Visa rules."1
MasterCard says "A Merchant must not require, or indicate that it requires, a minimum or maximum Transaction amount to accept a valid and properly presented Card."2
Discover says "You may not require that any Cardholder make a minimum dollar purchase in order to use a Card and you may not limit the maximum amount that a Cardholder may spend when using a Card except when the Issuer has not provided a positive Authorization Response for a Card Transaction."3
American Express doesn't specifically mention guidelines regarding minimum purchase amounts but they do publically discourage any practice that would hinder card acceptance. American Express has also gone on the record saying that they don't condone the practice.
Credit card companies discourage minimum purchase amounts because they don't want to lose money when consumers are excluded from using their card. Similarly, merchants don't want to lose money on merchant account fees when customers use their card to make a small purchase. Who's right or wrong is a debate that can go on forever. What matters is who has the power and in this case it's the credit card originators like Visa and MasterCard.
Some merchants will continue to dictate a minimum on credit card purchases regardless of whether the practice is allowed.
courtesy of: merchantcouncil.org
For more information or to find out if you are paying the lowest possible processing fees on your merchant account, contact CCS for a FREE RATE ANALYSIS.
Posted by Jeff Shavitz on Fri, Nov 06, 2009 @ 12:57 PM
The subject of credit card processing is confusing. Information about credit card processing can vary from one source to the next and even from one provider to the next. It's tough to know who to listen to and what can and can't be taken for granted.
To set the record straight, the list below addresses five costly myths and misconceptions about credit card processing that every business person should know and understand.
Merchant service agreements with a contract terms guarantee rates and fees for the length of the term.
Wrong. A contract term is not a guarantee that merchant account fees and rates will not change within the contract period. In fact, processing agreements with terms of a year or more provide the same protection against rate and fee changes as a month-to-month processing agreement. Merchant service agreements have multiple clauses that enable the issuer of the account to change rates and fees under certain, broadly interpreted conditions.
Agreements with a contract term will automatically switch to month-to-month when the initial term expires.
Wrong. Some merchant service agreements have clauses that automatically renew the contract period when the previous period expires. In order to terminate an agreement that automatically renews, a merchant must cancel a merchant account within a short window of time that is usually 30 days or less. If an agreement is not cancelled within the specified window, the agreement is renewed for another full term.
Credit and debit cards swipe at the same low discount rate.
Wrong. Swiped debit transactions carry significantly lower processing fees than swiped credit card transactions. To appear more competitive, some merchant service providers will advertise their swiped debit rate without including the higher rate for swiped credit cards. When researching merchant service providers make sure to get both sets of fees.
Merchant accounts have hidden rates and fees.
Not really, by law merchant service agreements must disclose all processing fees but there's nothing that says they have to be easy to see. Merchant accounts don't have hidden rates and fees, just fees that merchants overlook in the merchant service agreement. When opening a merchant account it's crucial to read every single word in the agreement and ask about anything that you don't understand. This can time consuming because some agreements can be 20 pages or more, but it's worth every second.
Monthly minimum fees are based on gross processing volume.
Wrong again. Merchant account monthly minimum fees refer to the fees paid by the merchant to the provider. They don't refer to gross processing volume. For example, if a merchant has an account with a monthly minimum fee of $25, the merchant must accrue at least $25 per month or they will be charged the difference between their actual fees and the $25 minimum.
Courtesy of: MerchantCouncil
For more information or to find out if your current rates for credit card processing are as low as they could be, get a free rate analysis today.
Posted by Jeff Shavitz on Tue, Sep 01, 2009 @ 08:36 AM
When shopping for a merchant account, the most diligent business people will do their homework. They'll get multiple processing quotes from different providers and negotiate the lowest rates to get what seems to be the least expensive processing solution. Here's the kicker - merchant accounts with very low discount rates are not always less expensive than accounts with higher rates. In fact, more often than not, they're substantially more expensive. Here's why:
The merchant discount rate that businesses pay to process credit cards is based on VISA and MasterCard's interchange fees. Basically, interchange rates are the wholesale processing rates paid to the issuing bank of a customer's credit card. If your merchant account is set-up in a tiered rate structure (the most common type of set-up for a merchant account), your merchant account provider will take the hundreds of VISA and MasterCard interchange fees and group them into three categories. The first rate category is called the qualified rate, and the second and third categories (called the mid-qualified and non-qualified rates) represent surcharges that are applied to the qualified rate. For example, a typical three-tiered merchant account pricing schedule mak look like this:
Qualified rate: 1.79%
Mid-Qualified Surcharge: 0.25%
Non-Qualified Surcharge: 0.60%
Simply put, merchant account providers have the ability to control which fee category interchange rates will be charged to - meaning they can conceivably offer a merchant account quote with a qualified discount rate of 1.50% and still make a profit by routing the majority of the charges to the mid and non-qualified rate categories. Rates as low as this are very appealing at first, but once it becomes apparerent how interchange fees are being routed, they're essentially worthless because they are virtually unattainable. This practice allows shifty merchant account providers to win business over honest providers that are actually offering a better merchant account.
In order to find the best merchant account rate, ask your provider how they will be routing interchange fees, as this can be more important than the rates and fees that you're quoted - again, a low rate is worthless if very few of your transactions will every qualify for it.
If you're already processing credit cards, now is a good time to call your provider and ask them to explain how they are routing interchange fees on your account - you may be surprised by the answer.
If you're in the market for a new merchant account, make sure to ask each provider how they'll be qualifying the different interchange fees. Don't get caught up in selecting the quote with the lowest rate, make sure to pick the quote with the lowest rate that will apply to the majority of your transactions.
Courtesy of: MerchantCouncil.org
Posted by Jeff Shavitz on Mon, Aug 24, 2009 @ 02:43 PM
Merchant account chargebacks are an increasingly expensive problem not only because of the fees charged by the processor, but also because of the time and energy that a merchant must invest to try to win a dispute. A thorough chargeback prevention plan can help limit the number of chargebacks that your business receives. Below are some tips and best practices for preventing 3 common types of chargebacks:
Preventing customer-related chargeback issues:
Use a recognizable DBA name - if the DBA is not easily recognizable to a cardholder on their statement, they may not recognize the charge and may issue a chargeback.
Include a phone number on cardholder statements - this ensures that cardholders can easily contact you with any questions regarding a charge.
Clearly post policies - make sure that policies such as returns and damaged merchandise are clearly visible and easy to understand.
Work with customers to resolve issues - it sounds simple but if you don't communicate with customers to resolve issues, you're forcing them to resort to a chargeback to solve their problem.
Proactively communicate with customers - keep customers informed on the status of their orders. Many customers won't bother to contact you if an order doesn't arrive on time, instead they may issue a chargeback.
Preventing chargebacks from processing errors:
Use address verification service (AVS) for not-present transactions - never process a card-not present transaction without an AVS match.
Swipe all card-present transactions or get a fully legible manual imprint.
Don't re-run a decline transaction - if a credit card is declined, don't run it again. Instead, ask the customer for another card or form of payment.
Never split transactions - always authorize a credit card once for the total amount of the transaction. If you accidentally undercharge, cancel the transaction and run another transaction for the entire payment.
Clear credit card batches daily - posting transactions to your customers' accounts quickly while the purchase is still fresh in memory lowers the chance that they won't recognize the charge and issue a chargeback.
Preventing fraudulent chargebacks (for card-present transactions):
Obtain and compare signatures - if a customer's signature on the receipt is significantly different than the one on the back of the card (or if the card is not signed at all) the transaction may be fraudulent.
Verify the number on the credit card machine matches the card - after obtaining an authorization, make sure that the number displayed on the machine matches the number on the card.
For more information on how to prevent chargebacks, you can also check with your processor, review the VISA and MasterCard websites and also look at resource sites like CardFellow for more great information.
Courtesy of MerchantCouncil.Org
To learn more about chargebacks or to find out if you're getting the best rate on your merchant account, click here for a free rate analysis.
Posted by Jeff Cohen on Thu, Aug 20, 2009 @ 11:39 AM
Below are a few of the key reasons why merchants overpay for credit card processing, and what business owners can do to address these problems:
1. Confusion about how fees are charged, resulting in costly downgrades
Problem - Credit card processing fees are confusing - transactions can fall into qualified, mid-qualified or non-qualified categories, and many businesses end up paying mid and non-qualified surcharges when they don't have to.
Solution - Contact your credit card processing representative to find out why your transactions are downgrading and what can be done to remedy the causes. If downgrades can't be lessened, consider switching to a new merchant account provider where transactions won't be downgraded as often.
2. Failure to read credit card processing statements
Problem - some businesses just don't read their merchant account statements, which is the main communications tool that many credit card processors use to inform merchants about rate increases and other vital information.
Solution - read your credit card processing statements every month, and pay special attention to the area where important updates (like rate increases) are listed.
3. Difficulty understanding credit card processing statements
Problem - processing statements are notoriously confusing, and to make matters worse, each processor has their own way of structuring their statements, which makes general tutorials on the subject impossible.
Solution - call your credit card processing rep and have them teach you how to read your statements - the time it takes to do this could save you a substantial amount of money.
4. Failure to regularly compare rates
Problem - Credit card processing rates can fluctuate over time. Changes can come directly from Visa and MasterCard or from individual processors, so failing to compare rates on a regular basis could leave you at an expensive competitive disadvantage.
Solution - Periodically test the market and get multiple merchant account quotes. If you're current rates don't compare favorably, it may be time for a money-saving switch.
5. Downgrades to due 'user-error'
Problem - credit card transactions downgrade because of things a person does or doesn't do when charging the card. Certain requirements must be met in order for a credit card transaction to fall into the lowest merchant account rate category, and failing to meet these qualifications may cause a higher rate to be charged.
Solution - learn about the different qualifying requirements for your credit card processor and your specific type of merchant account. The easiest way to do this is to call your credit card processing rep and have them walk you through it.
Courtesy of: MerchantCouncil.org
Posted by Jeff Shavitz on Wed, Aug 19, 2009 @ 08:42 AM
In order to figure out which type of merchant account is best for your business, and which rates and fees will matter the most you, you must create a quick profile for your business. Answering these 6 simple questions can point you in the right direction:
1. How will I be processing credit card transactions? Envision how you see a transaction taking place - will you be accepting credit cards via your website and/or in a retail store? Perhaps you will require some degree of portability in order to process credit card transactions - in which case you may need a wireless merchant account.
2. Does my business have seasonal swings? If your business is dormant for certain months, you should try to have monthly fees such as the merchant account statement fee and monthly minimum fee lowered. You may need to give a little in other areas (like discount rate and transaction fee) but it will save you money in the long run.
3. What is my average dollar volume (or ticket size) of each sale? If you have a high dollar volume per sale, you should try to find the lowest discount rate possible, even if you have a higher transaction fee. If you have a smaller average ticket size, then the opposite is true - you are better off with a lower transaction fee and higher discount rate. To get a better understanding of these terms, click here.
4. What will my processing volume be? How many Visa and MasterCard transactions do you expect to process in a monthly period? If the transaction volume is higher, then monthly fees are less important to your business and you should focus on trying to get lower transaction and discount fees.
5. Does my business require multiple merchant accounts? If your business will be processing credit card transactions in different ways (i.e., retail businesses that also have an online presence), you may be better off having separate merchant accounts - often times you can work with your provider to have monthly fees lowered or even waived on one of the accounts.
6. Will my business benefit from the ability to accept credit cards? This is probably the most important - and overlooked - business profile question. Make sure to compare the cost of credit card processing to the expected increase in sales it will generate, and also look what your competitors are doing. Retail stores and e-commerce websites may not have much of a choice, but smaller businesses and niche business types need to give this question some serious thought.
Posted by Jeff Cohen on Fri, Aug 14, 2009 @ 04:41 PM
Merchant account fees are a substantial portion of monthly expenses for many businesses. Keeping processing expenses low is a very worthwile priority - here are 5 tips you can use to make sure your saving money on credit card processing for your business:
Periodically test the marketing to ensure you have competitive rates and fees. Merchant account providers can raise rates and fees over time. If you don't test the market, you will fall out of touch with what competitive rates and fees are. To kep your rates and fees as low as possible, periodically get processing quotes from other service providers.
Stop leasing processing equipment. Credit card processing equipment is not nearly as expensive as it was even a few years ago. Leasing made sense when processing equipment was cost-prohibitive to own. These days equimpment can be purchased for a few hundred dollars, and some providers even offer a free machine with a new merchant account. If you're currently locked into a leasing contract, research how much it will cost to end the agreement. If you have to buy out the remainder of the lease, it may not be worth it to cancel. However, if your lease has a cancellation fee it may be less expensive to cancel the lease and purchase a terminal.
Negotiate your monthly minimum fee. A monthly minimum fee is the minimum amount of processing charges that a merchant must pay their provider in a monthly period. In any month where processing fees don't equal the minimum, the merchant will have to pay the difference out of pocket. Businesses that have a substantial and consistent monthly processing volume won't be affected by a monthly minimum as much as businesses that process seasonally or that don't process a high volume. If you're paying monthly minimums on a fairly regular basis, call your provider and ask to have the fees reduced or waived. If they decline to work with you, find another provider that doesn't charge a minimum.
Get two merchant accounts if you process card-present and card-not-present transactions. Card-present businesses that process even a small amount of not-present transactions can reduce processing fees by getting another merchant account. When you're trying to save money, the suggestion to open another account may sound counterproductive - but the devil is in the details. When a not-present transaction is processed through a card-present merchant account, the transaction downgrades to a higher processing rate. By opening a separate card-not-present merchant account to process not-present transactions, you'll avoid excessive downgrades and save on fees. Also, providers are usually willing to waive or lower merchant account statement and minimum fees on a second processing account.
Figure out why transactions are downgrading and take action. A credit card transaction downgrades when it is assessed a surcharge called a mid or non-qualified fee. Knowing how many of your transactions downgrade is vital to saving money on credit card processing. Study your monthly processing statements each month to figure out how many of your transactions are downgrading. If you're unable to read your statement, call your provider and ask that they go through and explain the charges. Once you assess how many of your transactions are downgrading, call your provider and ask them to explain the reason for the downgrades. Depending on the reason, it may be possible for your provider to make changes to your account to limit downgrading. Changing your processing habits may also help minimize downgrades. When you're processing credit cards, make sure to follow Visa and MasterCard guidelines for qualifying transactions. For example, always obtain a signature for card present transactions and take care to obtain an AVS match for card-not-present transactions. When you contact your provider to ask why transactions are downgrading, they should be able to diagnose bad processing habits by looking at downgrades on your statement. Be sure to ask for their suggestion on how you can change your procedures to minimize downgrades.
Article Source: MerchantCouncil.org
To find out if you're getting the best rate on your merchant account, click here for a free rate analysis.
Posted by Jeff Cohen on Wed, Aug 12, 2009 @ 04:31 PM
There are seemingly endless things to consider when deciding which merchant account is right for your business. You must compare features, discount rates, monthly fees, processing limits, customer service and a whole host of additional account features. Herein lies the mistake that most people make when comparing merchant accounts. The trick to effectively comparing merchant accounts is to keep your evaluations 'general'.
We receive calls all the time from business owners who are comparing merchant accounts and don't want to talk, all they want to know are the rates and fees we have to offer and nothing else. As soon as we tell them our pricing schedule they hang up and call the next provider - these people eventually end up signing a contract with the provider who offers them the lowest merchant acount rates and fees, only to have those rates raised shortly thereafter. The most important thing to do when comparing merchant accounts is to look past the rates and fees. Look for these qualities first when comparing merchant account providers:
Positive, legitimate customer testimonials - look for a provider that is able to provide proof of long-standing satisfied customers. Many providers look to sign up as many merchants as possible while neglecting their current customers. Avoid asking providers for references when comparing merchant accounts, due to privacy issues references often cannot be provided.
A knowledgeable representative with a consultative approach to selling - look for a representative that takes the time to learn about your business before he or she starts quoting rates and fees. look for someone with whom you feel that you can establish a relationship. Remember, this person will be responsible for one of the most costly expenses that your business may have.
A proven track record of support and customer service - look for a provider that clearly defines their times and methods of offering you customer service and support. You want to make sure that help is available if and when you need it.
Only after you've decided on a provider that you feel is right for your business should you look at costs associated with the account. Chances are good that this provider won't have the lowest rates and fees, but they will be willing to work with you to earn your business.
The next step is to contact the provider that best matches the above criteria, and cite specific examples of areas where other providers offered lower rates and fees and ask if they can be matched or beaten. Ultimately, you will end up with the most service-oriented provider and the most competitive rates.
Lastly, when comparing merchant accounts you want to use the ultra-competitive nature of the credit card processing industry to your advantage. Don't feel overwhelmed - feel empowered! Find the best provider based on service and reputation, and then work with them to lower rates and fees to equal or lower than other providers that you've compared.
Courtesy of: MerchantCouncil.org
Posted by Jeff Cohen on Mon, Aug 10, 2009 @ 01:00 PM
Having worked with many hospitals around the county, we have found that the healthcare industry faces the same survival issues as a retailer or restaurant. After all, a business is a business.
Our research shows that hospitals are engulfed in daily survival issues and, consequently, the attention to credit card transactions and the corresponding costs are not being adequately and properly addressed.
In today's environment, shrinking margins are compounded by the cash flow crunch of payments not made within 60 or 90 days and the expense to "chase" money or hire a collections firm. What is the expense of accepting checks? It seems so simple, yet think about the time it takes to fill out a deposit slip, go to the bank to make a deposit and wait for the funds to clear. Each one of these issues adversely effects cash flow and bottom line profitability.
The acceptance of credit cards helps in many ways: however, it is important to avoid the pitfalls associated with taking a credit card for payment. Just like we need to maintain our health by exercising regularly, hospital administrators must exercise their financial acumen when analyzing whether they have the best "credit card program" for their practice.
Yes, the word "program" is critical as there are different programs and solutions depending upon the needs of your hospital. What is your rate is the most common question we hear when speaking with a medical office. Yet the base rate is only part of the equation. The credit card industry has numerous "hidden costs" which can, and will, inflate credit card costs. Unfortunately, most hospital CFOs are unaware of the potential pitfalls and how the additional fees are adversely affecting the bottom line.
Did you know that there are different rate structures based upon how the hospital account is set-up? Different rate structures exist depending upon how a transaction will be conducted. For instance, are the majority of your transactionsswiped (card and cardholder present) or manually entered (card and cardholder not present)? There are numerous accounts that can be set up for a hospital ranging from each medical speciality, philanthropy, cafeteria, parking garage, and many others. It is critical to understand that, depending on the business profile of each of your divisions, that there are ways to set up your merchant account to ensure the most competitive pricing.
Visa and MasterCard maintain different rate structures for different types of cards and based upon how a transaction is processed. Credit card companies present these rates in different forms i.e. qualified, mid-qualified, non-qualified. Credit card companies also have other fees such as batch fees, debit fees, annual fees, voice verification fees, address confirmation fees, etc. I think you can understand the point.
In addition to discount rates there are transaction fees. Not having a transaction fee does not necessarily ensure the best rate structure. Some credit card processors will "bundle" their rate, combining the discount rate and the transaction fee to give hospitals the appearance of a better rate structure. However, in situations such as this the discount rate will be much higher, which could adversely affect the bottom line. Don't get caught up in the game of not having a transaction fee, it may not make sense for your hospital.
Many credit card companies will offer a low introductory rate, which to a layperson will seem unbelievable. However, what will be unbelievable will be the "downgrades" or penalties that a hospital will be paying, without even realizing it, because there are so many additional issues that have to be addressed besides a low base rate. In order to run your hospital in a financially astute manner, you must know your "effective rate" (takes into consideration all charges) vs. your "base rate", which is the initial rate discussed with your credit card company.
Other issues that are rarely raised is how long until your money is deposited into your bank account - 12, 48 or 72 hours? Why should you have to wait three days to get your money, doesn't 12 hours sound better? When is your discount fee taken, daily or monthly? Think about the savings on interest, the float of your money plus increased cash flow if your fees were removed at the end of the month? It certainly adds up and these issues will help greatly with your cash management.
Finally, it is important to note that switching processors is not a difficult task. In most cases there is no fee to switch and it typically involves filling out a 2-page application. Why not start saving money today for your hospital? It is a much better investment than wasting money on the high and hidden costs of your credit card processing fees.