COMMERCE PAYMENT SYSTEMS Authored by Michael Mendlowitz CommercePaymentSystems 1465 Broadway Hewlett NY 11557 USA www.commercepaymentsystems.com 1.866.999.4622
Introduction I am sure that when you spent all that time researching the right Merchant Account for your business, you did the best you could to compare all costs and options. Unfortunately that is only half the story. Your Merchant Account can be thought of as being a part of your cash register and is critical that you understand just what is going in to it and coming out of it. You could spend hours sorting out the details of your Merchant Account Statements this is no accident. Hard to understand Merchant Account Statements are designed so that most merchants just throw their hands up and hope that they are paying the rate they spent so much time searching for. This problem is so rampant that I can be very certain that your business is probably paying Hundreds maybe Thousands of dollars in fees that may not be easily understood by a fast reading of just about any Merchant Account Statement. I have had over 20+ years in the Merchant Account Industry and have sat on the other side of the table as a Merchant also. I hope this report will help you understand your Merchant Account Statement and allow you to evaluate your current Merchant Account Provider and the actual costs you are paying. I will try to cover the most popular points, but a proper evaluation requires hands on research by a Merchant Account expert with direct experience in proper Merchant Account Statement evaluations. At the end of this report, I will give you my contact information if you want a complete report and evaluation on your current Merchant Account Provider. Overview There are literally 1000s of versions of Merchant Account Statements, however there are some common entries that can be found on every statement (see simple example attached to this report). 1) Processing summary an overview of your monthly credit card volume and charges 2) Total gross amount processed actual total amount processed through your Merchant Account 3) Total Merchant Account fees the total fees charged to you for this month s transactions 4) Total number of transactions the total number of credit card transactions With these points alone you can run a very simple and quick calculation to see what your Effective Discount Rate is. Effective Discount Rate is the actual average Merchant Account Cost per each transaction and is the most realistic way to evaluate your true costs. Effective Discount Rate Formula Total Merchant Account fees / Total gross amount processed = Effective Discount Rate (in decimal form) Example $1,006.34 / $39,596.71 = 0.0255 or 2.55% It is really that simple. Of course, your Merchant Account Statement will have many other fees and costs. But this is a good starting point. I am sure that you will be surprised when you first perform this calculation., it will likely be much higher then you assumed you were paying. ADVICE: If you do just one thing, do this calculation. 1
Common fees As I mentioned, there are 1000s of versions of Merchant Account Statements, so being able to cover all the variations in a simple report will be impossible. However there are a few more common fees that appear on just about all statements. 1) Transaction fees also known as communication fees or capture fees 3) Batch fees these are usually charged once per day per batch closed 4) Qualified fees usually the basic rate when a card is swiped 5) Mid Qualified fees usually the rate added to Qualified rate when cards are keyed in and other reasons 6) Non Qualified fees usually the rated added to the Qualified rate when some Reward cards are processed and other reasons All of the fees listed above usually are arbitrarily set by the Merchant Account Provider and is always the best place to start to discover hidden rate increases. This allows the Merchant Account Provider a way to gain your business by quoting a Qualified rate below wholesale, only to make it up by assessing excessive Mid or Non Qualified surcharges, or downgrades. It is one of the major reasons your Effective Discount Rate is so much higher then you may have thought. I have seen far too many merchants that are being charged Non Qualified rates on 100% for no logical reason. ADVICE: have professional research done on your Merchant Account Statement to see if the fees you are paying is warranted. Fixed Fees All Merchant Account Statements include fixed fees. These fees can be quite excessive and may be very hard to detect. Making things worse is the fact that some fixed fees show up on random basis. Most common: 1) Statement fee cost to produce the Merchant Account Statement 2) Monthly Minimum a fee that assures that you will pay at least this fee to the Merchant Account Provider 3) Customer Service fee for customer service charges 4) Membership fee also known as Supply fee, charged for many reasons 5) Annual fee or Quarterly fee 6) Security PCI fee many variations to this fee These fixed fees can add to your Effective Discount Rate in a big way. Many merchants forget to factor this in when evaluating their current Merchant Account Statement. Most of theses fees are not fully disclosed when a Merchant first signs the contract and can be tagged on to a Merchant Account Statement at any time. ADVICE: find out what each fixed fee is and why you are paying it. More Fees So far we have just touched just the tip of the Iceberg of fees that can appear on a Merchant Account Statement. At the time of this writing there are over 275 different Interchange categories set by Visa and Mastercard, and the trend is for more in the future. Some statements will do away with the Qualified/mid/non price structure (the best overall system) and offer Interchange Plus prices showing all 275 categories and what appear to be raw wholesale costs with a profit added. This type of Merchant Account Statement is many times more confusing and costly. Some of these 275 categories also show up on a standard Merchant Account Statement and are usually surcharged to base rates. It is very likely you were not informed of these fees and may be very surprised by how much they add to your 2
monthly costs. ADVICE: determine what type of additional fees you are paying and get a complete explanation for why each one appears on your Merchant Account Statement. Conclusions I can not stress enough just how important it is to fully understand your charges. In a recent study of randomly selected merchants, we have found: 81% were being over charged or charged incorrectly 94% misunderstood their Merchant Account Statements 97% would not have selected their current provider after evaluating their Merchant Account Statements Odds are likely that you are paying more then you thought or were not fully informed of your true costs during the application process. As I mentioned earlier, I have been a merchant also for many years and far too often took it for granted that my rates were correct. I finally learned much later that I had been over charged for years. This motivated me to understand Merchant Accounts more deeply and resulted in me starting a company in this industry. I suggest that it is in your best interest to look into your Merchant Account Statement much more closely or to have an expert evaluate and research it for you. If you discover that you are paying more then what you where lead to believe during your application process, I would advise that you seek a new Merchant Account Provider. I can tell you that from years of Merchant Account Statement evaluations that negotiating with a provider under these circumstances just invites this practice from happening over and over again. It is best to just move to new relationship, even if you must pay a cancellation fee, in almost all cases paying this fee will save you money. Be sure that any new Merchant Account Provider you select does not have a long term contract or any form of a cancellation fee. I would like to offer the experience I have garnered over the last 20 years and perform a complete analyses of your Merchant Account Statements so that you can be full informed of just how much money is really being spent to accept Credit Cards. There will be absolutely no obligation and the service will be performed very discreetly. I would also like to show you how I can guarantee that you will have long term savings with out any obligation of a long term contract with any cancellation fees. In either case I hope this report serves you very well and allows you to have an even more profitable business.. Email: sales@commercepaymentsystems.com Web: http://www.commercepaymentsystems.com/ Phone: 866.999.4622 Fax: 877.352.9119 1465 Broadway Hewlett NY 11557 3
While some statements may state a rate, it is always best to check the math on your merchant statement to find out what the real bottom line costs are for your business. The statement rate quoted above is for qualified only. Since $39,596.71 x 1.65% = $653.35, not $1,006.34, you can guess this merchant had many NonQualified Transactions. The real rate for these Visa transactions is 2.5%. Take $1,006.34 (fee) and divide by $39,596.71 (amount). Here, additional fees are charged per transaction. Per transaction fees are normal, but should be reviewed often to look for changes. Visa and MasterCard are.25 cents per transaction for this merchant. Finally, the merchant is charged $10.00 Statement/ACH and an additional.25 cents for each batch (capture fee). This merchant may look at his statement and think he is paying 1.65% for all his transactions. However, it is evident that when one does the math, the rate is much higher. This merchant statement gives no indication of how many transactions really qualified at a higher or lower rate. The Processing Detail section above that shows the fee for processing rate is not detailed at all and does not show the merchant the reason for the vast difference between his valued customer rate of 1.65% and what his is really paying. This is a clear example of a merchant missing out on full disclosure of Interchange. Need Help With Your Merchant Statements? Call: 866.999.4622, email: sales@commercepaymentsystems.com