5 STEPS TO LOWER YOUR PAYMENT PROCESSING FEES

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1 5 STEPS TO LOWER YOUR PAYMENT PROCESSING FEES

2 STEP 1: Understand the Basics of a Merchant Account Your best defense against high rates is information. This guide is intended to provide merchants with a better understanding of payment processing terms, fees and best practices as they relate to accepting credit and debit card payments. A Merchant account makes it possible for a business to accept a credit card or debit card as a form of payment. All transactions made with a debit or credit card involve the transfer of funds from the customer s account to a merchant account. Merchant accounts are not the same as the checking or savings account you have with your local bank. A merchant account is more like a contract between a provider (such as Pivotal Payments) and a business owner (Merchant), with rules about how products or services are sold and paid for. To ensure your processor offers you the best rates available for your particular payment acceptance needs, share your recent statements as a comparison. Myth Buster! Many Merchants tend to think it is difficult to get approval for a merchant account, specifically for a newly established business. This is not the case with Pivotal Payments; we have an acceptance rate of 90-95% of applicants. It's also a common belief that having the ability to accept credit card payments is too expensive for the average small/medium business owners but with Pivotal Payments we work with our Merchants to alleviate this myth. 01

3 IF YOU ARE NEW TO PAYMENT PROCESSING Pivotal Payments provides reliable and affordable merchant account solutions across North America. Our goal is to maximize our clients' revenues and performance by empowering them with safer and smarter transactions. How do I get a Merchant Account? A merchant account is like a form of credit and involves a formal application process with an acquiring institution (e.g. Pivotal Payments) or bank. It involves a thorough assessment of your credit and financial standing in order to weigh the risk associated with taking on your business. If your application is approved, you enter into a contract with the bank or acquirer. Under the contract, the acquiring bank exchanges funds with your customers bank (issuing bank) on your behalf, and pays into your merchant account for the daily payment-card activity s minus any applicable fees. 02

4 STEP 2: Understand Processing Rates and Fees Discount Rate: Visa and MasterCard assess a fee on each Visa and MasterCard sale. The fee is a percentage of the sale and is the main component of the discount rate fee. Assessment Fee: A fee charged on every Visa and MasterCard transaction for the use of their brand and network. Authorization Fee: A fee assessed per authorization for the communication to the processor s host each time a terminal initiates a transaction (sale, refund, void or decline). Minimum Discount: If your sales volume does not generate the minimum amount of discount rate fees agreed to in your contract, the difference may be assessed to your account. Batch Fee: A fee assessed each time a batch is closed (settled). Qualified Fee: A rate assessed on all transactions meeting the normal operating guidelines as stipulated by the processor. Non-qualified rate: Non-qualified transaction apply to most cards with Premium Privileges, that are Corporate cards, business cards or that are Keyed, as well as various types of transactions or batch closes that were not made the same day as the transactions. Surcharge: An additional charge that a business owner could apply when clients pay by Interac or on a cash back transaction. Chargeback fee: A fee assessed per occurrence as a result of a disputed payment initiated by the cardholder 03

5 WHAT IS INTERCHANGE? Interchange is a term used in the payment card industry to describe a fee paid between banks for the acceptance of card based transactions. Usually it is a fee that a merchant's bank (the "acquiring bank") pays a customer's bank (the "issuing bank"). When a consumer uses a debit or credit card to make a purchase, the merchant does not receive the full purchase amount, because a portion of the sale is deducted to compensate other parties to the transaction. In particular, the merchant s processor (the acquirer ), the bank that issued the card (the issuer ), and the card network that processes the transaction (the network ) all receive a portion of the transaction, with the largest portion paid to the card-issuing bank as an interchange fee. 04

6 STEP 3: Understand the Settlement Process Accepting credit and debit card payments is just the beginning. As a business owner, you will need to also understand how to tally your transactions for the day and communicate this information to your payment processor so you can get the funds deposited into your account. Batching and Funding A batch is all of the credit and debit transactions you have processed since you ended the same process the previous day. You should ideally batch out at least once a day and have your transactions settled as quickly as possible. Daily batching ensures that your transactions are processed as quickly as possible and that you are not charged higher processing fees. Monthly Statement and Fees The monthly merchant account statement includes information on all batched transactions and deposits (see a sample statement), and an itemization of fees incurred. The fee types and amounts may vary, depending on the sales contract associated with your merchant account. It s best to review these statements to get a better handle on what card types and transactions resulted in higher fees. Reconciliation Reconciliation describes the process of accounting for transactions processed and money deposited in your bank account. Depending on your sales volume and business needs, you may want to consider how frequently you would like to reconcile: daily, weekly, or monthly. It is recommended that you reconcile your account at least once a month. 05

7 STEP 4: Follow These Industry Best Practices Below are some tips to help merchants protect their business against disputes, fraudulent transactions and chargebacks. Provide accurate information during initial set up to ensure correct merchant account type and if separate Merchant IDs are required. Publish your refund policy conspicuously on your cash registers and on your website to make sure your customers know that they can return merchandise and what the policies and procedures are. When issuing a credit, make sure it s issued to the same card that made the original purchase. Merchants cannot give cash back or check refunds for a credit card purchase. Ensure the receipt only prints the last 4 or 5 digits of the payment card number. Notify your provider of promotions or sales that may increase your normal monthly sales volume in order not to raise flags. 06

8 STEP 5: Ask Your Payment Processor These Critical Questions Before Signing an Account MERCHANT ACCOUNT CHECKLIST Does the processor provide... Y/N 1 Flexible Payment Options for Terminals Are you locked into long-term rental contracts? Or does the processor provide you with options to buy or lease-to-own terminals? 2 Future-Proof Terminals Are the terminals designed to upgrade to future payment technology? Or will you be forced to upgrade when new payment types are introduced such as mobile wallets? 3 Quick Access to Cash Does the processor provide flexible financing to help grow your business? Are there restrictions or interest charges placed on loans, or can you get a loan that is free from fixed payments, timeframes and interest? 4 Ease of Integration Do you need to change your existing setup? Does the processor integrate with your existing system or customized setup? Can you easily import/export your existing customer database files? 5 Online Reporting Can you follow your business performance anytime, from anywhere? Can you export business reports in your preferred file formats (XML, Excel, PDF, etc.)? 6 Security and PCI Compliance Does the processor use sophisticated fraud and security tools to protect your business and your clients? Do they meet all PCI standards, allowing your business to benefit from additional reliability? 7 Gateway with Recurring Billing, Re-billing and Customizable User Access Levels Can you manage recurring payments to avoid potential errors? Can you immediately process transactions from repeat customers, without re-entering customer information? 8 Dedicated Merchant Support Can the processor help you deal with any issue, including chargeback resolution, risk monitoring, etc.? Are they available 365 days/year? 9 Fully Redundant System Does the processor have backup servers, to avoid downtime and keep your business up and running 24/7? 08

9 USEFUL LINKS Small and medium-sized business resources: Canada One - Business Guides Business resources including a wide range of information on government services, programs and regulations: Canada Business Network Government of Canada services for entrepreneurs: Business Start-up Assistant Find out how to write a business plan and access templates, sample business plans, market research information and statistics: Canadian Business Planning Information on starting a business in Canada: Service Canada - Starting a Business Other useful information: Visa Interchange Information MasterCard Interchange Information Canadian Code of Conduct 07

10 About Pivotal Payments Pivotal Payments is a leading provider of technology-driven global payment processing solutions to the point of sale, B2B and ecommerce industries. Our proprietary solutions include card not present, integrated POS and mobile payments that deliver efficiency and profitability to businesses across all sales channels and platforms. With a focus on security and fueled by continuous investment in research, product development and innovation, we are shaping the future of payments. Our goal is to maximize our clients' revenues and performance by empowering them with safer and smarter transactions. Learn more at: Need help with your merchant account needs? Contact us toll-free at Network with us: Copyright 2015 Pivotal Payments Direct Corp. All Rights Reserved Pivotal Payments Direct Corp. is a registered ISO/MSP of Peoples Trust, Vancouver Canada.MasterCard is registered trade mark of MasterCard International Incorporated. Trade-mark of Interac Inc.