STOP OVERPAYING FOR CREDIT CARD PROCESSING

Transcription

1 STOP OVERPAYING FOR CREDIT CARD PROCESSING (Four easy steps to lower your processing costs)

2 Table of Contents Page 1 Table of Contents Page 2 Purpose of This Handout Introduction to 4-steps to lowering your processing costs Page 2 Part One - Beware of companies claiming they fight for the merchant If they are paid by providers or salespeople be careful Page 3 Part Two - Some things to know Visa and MasterCard have little to do with day-to-day processing Who is really getting the money you spend on processing Who is getting too much of your money Page 5 Part Three - The two basic pricing plans Interchange Plus Tiered Page 5 Part Four How to choose a merchant account provider Page 5 Step 1 - Preparations Page 6 Step 2 - The bid process Page 7 Step 3 - The sales presentation Page 8 Step 4 - The Decision Page 8 Part Five - Never do & Always do when selecting a provider Page 9 MerchantFeeSavers is always here to help the merchant

3 THE PURPOSE OF THIS HANDOUT The purpose of this handout is simple: To give you, the hard-working merchant, a quick 4-step procedure so you can get the lowest possible credit and debit card processing rates and the best possible terms and conditions. This handout is concise and gives merchants the 4-steps needed to lower their processing costs. If you need to know the details behind these 4-steps plus other important information, go to and order the MerchantFeeSavers Guide to Slashing Your Credit Card Processing Costs NOTE: I want to make one thing very clear: It s not my intention in this handout to accuse any specific card industry players of bad practices, whether they are salespeople, merchant account providers, equipment providers, issuing banks, credit card associations, credit card companies or anyone else. All the companies in the processing industry want to make acceptable profits, just as you do for your business. I will leave the consequences of good and bad business practices to the free market, and to the government regulatory agencies that monitor this industry. My intention in writing this handout is simply to give you the information you need to obtain the best card processing value. PART ONE: BEWARE OF COMPANIES CLAIMING TO BE FIGHTING FOR THE MERCHANT This advice may come as a shock to you, because MerchantFeeSavers is a company that educates and fights for the merchant to get the lowest possible processing costs and the best possible Terms & Conditions. However, please be aware that there are companies that claim to be fighting for the merchant when in fact they have behind-the-scenes agreements with merchant account providers or their salespeople. Some even sell card processing services. If a company is getting paid behind-the-scenes by a provider or salesperson, are they really working to find the best processing deal for you or the one that is best for them? Before you work with any company that claims to be on your side, ask them where every penny they make comes from and if they have any agreements or ties with providers or processing salespeople. There are good companies fighting for merchants and there are companies with fancy names claiming to be totally on the merchant s side. Be very cautious of any company that claims to be fighting for you while being paid by the same providers or salespeople bidding for your processing. Important Point MerchantFeeSavers is 100% on the merchant s side. MerchantFeeSavers is not affiliated with any merchant account providers or their salespeople nor does MerchantFeeSavers receive any financial compensation or any favors from any of them.

4 PART TWO: SOME THINGS TO KNOW Visa and MasterCard have little to do with day-to-day processing. Surprised? Think of them as you would Ford or GM. Ford and GM build and market their cars. However, you have to go to an auto dealership if you want to buy a car. Some auto dealerships are more honest than others. However, none of them are on the Pope s list of future saints. If you want to obtain card processing you have to contact a merchant account provider (not Visa or MasterCard). As in the auto industry, some merchant account providers are more honest than others, but none are on the Pope s list of future saints. The money merchants pay for card processing generally goes to three players: Issuing banks The bank that issued the card used by your customer should receive 70% - 90% of what you pay. This is called Interchange. It is important to note that there are hundreds of interchange rates. The lowest interchange rate is for regulated debit cards with a maximum interchange of 0.05% + $0.22. Commercial cards and transactions that were not conducted properly have the highest interchange rates. These rates are generally in the 2.2% - 3% + $0.10 range. Card association/company (Visa/MasterCard/Discover) They should receive about 5% of what you pay. These are called Dues and Assessments and Access Fees. Combined they are called pass-through fees. Merchant Account Provider The company selling the processing services. They should only receive 5% - 20% of what you pay for processing. This is the merchant account provider s Mark-up. The actual amount you pay depends on your size, industry, and risk. In addition to the Mark-up o Merchant account providers can charge annual, monthly, and pertransaction fees. o Some merchants (all internet merchants and some merchants with POS Systems) also need a gateway and may pay a per-transaction fee for it. Important Point Every Merchant Account Provider pays the same Interchange fees, Dues and Assessments, and Access Fees. The only negotiable fees are the Merchant Account Provider s Mark-up, the annual/monthly/per-transaction fees, and the gateway fees (if a gateway is required). As stated above, the provider s mark-up should only be 5% - 20% of what you pay for card processing. However, many merchants pay their provider far more and some pay the provider more than the issuing banks receive. This handout is about making sure you do not overpay the provider for their services.

5 PART THREE: THERE ARE TWO BASIC PRICING PLANS Interchange Plus - This is the only pricing plan a merchant should be on. All of the major retailers are on Interchange Plus pricing because it s the most transparent pricing plan and merchants have the potential for being priced fairly on this plan. Interchange Plus means you will pay a consistent mark-up no matter what card type is used. For example, you may pay 0.20% + $0.10 over the interchange, Dues & Assessments, and Access fees. Tiered Pricing Tiered pricing exists to make more money for the merchant account provider. It does not exist to help the merchant. Tiered pricing as the name suggests has different pricing levels depending on the type of card used. The most common form of Tiered pricing is 3-Tiered - Qualified, Mid-Qualified, and Non-Qualified. If you see those words you know it s a Tiered pricing plan. However, there are many other forms of tiered pricing and not all use this verbiage. Important Point If a salesperson every tries to put your company on a Tiered pricing plan, stop the presentation and walk him to door, period. This is not a salesperson with whom you want to work. PART FOUR: HOW TO CHOOSE A MERCHANT ACCOUNT PROVIDER Step 1: Preparation First of all, you need to be prepared before you talk to the provider or salesperson. You better believe they will be prepared to sell you their processing service. In order to be prepared, you need to gather the following information about your current service: Termination date Termination policy Penalty for terminating your current agreement early Before you talk to the salesperson you need to know how much it will cost you to get out of your current contract before it expires. Depending on the provider, it can cost anywhere from $0 to $1000 s. Now, before detailed discussions with any salesperson, take the time to write down the things you do not like about your current processor. Then keep this list to yourself. Don t vent your frustrations to the bidding salesperson during your discussions. Just make sure the salesperson covers these items clearly. Also, make a list of the things you like about your current processor. You don t want to lose these features if you switch Merchant Account Providers.

6 Step 2: The Bid Process Make sure the salesperson uses a RapidCompare Independent Statement Analysis! A RapidCompare statement analysis is a must because it ensures you are getting an unbiased analysis. The salesperson, not the merchant, pays for this service. MLS Advocate, LLC is a sister company to MerchantFeeSavers. Whereas MerchantFeeSavers fights for the merchant to get the lowest possible costs and best possible Terms & Conditions, MLS Advocate simply provides an unbiased statement analysis for merchants who want to try to negotiate their own processing costs and Terms and Conditions. The unbiased statement analysis ensures the merchant is not being tricked by any misleading analysis manufactured by the provider or salesperson. Can you be tricked? Let s test your cost savings analysis skills (You don t need a calculator). Below is part of an actual cost savings analysis presented by a salesperson. You ll understand why a RapidCompare analysis is a must after reviewing the salesperson s analysis. (The actual figures are below the insert for clarity). Keep in mind that the merchant is already on Interchange Plus pricing. Also, so you understand what is being presented - The merchant s monthly volume is $99,993.71, approximately 44% ($44,084.70) is credit card and 56% ($55,909.01) is debit card. The salesperson is telling the merchant that all credit cards will be charged 1.49% + $0.15, all debit cards will be charged 0.05% + $0.28, and all credit cards that downgrade to the Mid/Non Qual level ($25,415.90) will be charged an extra 1.49%. Before reading my comments below, look at the analysis, note the immediate concern the merchant should have had, and identify the misleading tactics used. Focus on the New Proposed Pricing. Don t worry about the Current Provider information. Current Provider New Proposed Pricing $99, % $44, % $ $ % $55, % $ % 1272 $0.15 $ $2, % 1619 $0.28 $ % $25, % $378.70

7 Concerns and Misleading Tactics 1) The salesperson is trying to move the merchant off Interchange Plus pricing to a Tiered pricing plan. The salesperson should have been walked to the door without any further review of the proposal. 2) The salesperson is telling the merchant that 100% of the debit cards will process under the regulated (Durbin Amendment) interchange rates. This is blatantly misleading. The provider knows that the Durbin Amendment only affects debit cards issued by financial institutions greater than $10B in size. Therefore, somewhere closer to 60% of the debit cards will process at 0.05% + $0.28. The other 40% will process at the providers much higher rates as high as 2.98% + $0.15, plus it would not be a surprise if additional transaction fees were added. 3) The Mid/Non Qual volume is extremely low. A more realistic number would be $38,000 in credit cards and $20,000 in debit cards (depending on actual debit downgrade pricing). Important Point Merchants who want to try to negotiate their own costs and T&C s should always their current statement to [email protected] for an unbiased statement analysis. Do not have the salesperson it. This ensures you receive an authentic RapidCompare analysis. Note: The salesperson (not the merchant) pays MLS Advocate, LLC a one-time fee for the analysis. MLS Advocate is not affiliated with any providers or salespeople nor does it receive any additional compensation or favors should the merchant choose the provider nor does it refund the salesperson should the merchant not choose the provider. All of MLS Advocate, LLC profits go to the National Breast Cancer Foundation. Go to for more detail. Step 3: The Sales Presentation After reviewing the bids, schedule meetings with the salesperson(s) who submitted the best proposal. The presentations don t need to be face-to-face; they can be over the phone or via the internet. During the presentation, be sure to go through the terms and conditions point-by-point. Remember: the terms and conditions are just as important as the processing rates and fees. Be sure to monitor your emotions during the presentation. Does the salesperson make you feel anxious? Worried? Rushed? Manipulated? Or do you feel interested? Reassured? Confident?

8 Step 4: The Decision Here is some vital advice to help you make a good decision. Never sign an agreement after the first presentation. Give yourself a day or two to think about the information, discuss it with pertinent people in your business, e.g., partner, manager, bookkeeper or CPA, and prepare to bring up any questions or concerns in a second meeting with the salesperson. Don t base your decision on price alone! Yes, processing cost is very important but so are the terms and conditions, service, support and the integrity of the provider and the salesperson. PART FIVE: NEVER DO AND ALWAYS DO Never lease a terminal. If the salesperson tries to lease you a terminal, show him to the door. He is not a salesperson with whom you want to work. Never overpay for a terminal. A new dial-up terminal costs the provider less than $200. A new IP terminal costs the provider no more than $350. Never inflate the figures. Use conservative but accurate processing volume and average ticket size on the merchant agreement. Never sign an incomplete merchant agreement. Always remember. A merchant agreement is a legal document and you may have to sign a personal guarantee. Always insist upon a RapidCompare statement analysis Always review all the costs. Don t just look at the provider s rate. Understand all the fees including per-item, annual, quarterly, and monthly fees. Never trust a recommendation or endorsement of a provider at face value. In this industry, many of those who recommend or endorse are actually getting paid behind the scenes for their support. Always choose Interchange Plus pricing Never choose Tiered pricing Always analyze the merchant statement. After signing with a provider, always analyze the first two statements you receive for pricing correctness. Always follow MerchantFeeSavers on Facebook and Twitter.

9 MerchantFeeSavers is always here to help! MerchantFeeSavers is an educational resource that merchants can trust. We are always keeping our clients informed on interchange rate changes, laws, and technology that you need to know. Also, many merchants who read this handout may not feel comfortable trying to negotiate better pricing and terms and conditions with providers in such a perplexing and convoluted industry. Others simply don t have the time. Sound familiar? Then let MerchantFeeSavers do the negotiating for you. MerchantFeeSavers will work with your existing provider or go out with a blind bid to get the lowest possible costs and best terms and conditions. All the data will be placed in an easy-to-understand format and presented directly to you, so that you remain in control, and choose the provider that best serves your business needs. MerchantFeeSavers truly fights for the merchant. MerchantFeeSavers is not affiliated with any provider or salespeople. There is no on-going contract. There are no on-going fees. You choose the provider that best serves your needs. Your time is valuable! MerchantFeeSavers can do all of this research for you at a lower cost than you can do it for yourself, and with better results. Let us help you substantially reduce your processing costs, and keep your business safe from punitive contracts. Simply call us at (800) or go to and press Contact Us. The site also contains a wealth of information on subjects ranging from PCI cardholder security compliance to articles that educate merchants on how to avoid the pitfalls and misleading tactics used in this industry. And finally, Connect with MerchantFeeSavers! Follow MerchantFeeSavers on Facebook to receive critical industry, security and costsaving information. We re at facebook.com/merchantfeesavers on Twitter to learn when new industry rates or other critical changes are posted to the MerchantFeeSavers website.