[2013 | Keywords: Business, Operations, Credit Card Processing]
Looking for ways to cut business expenses? If so, one area that could potentially save you hundreds (perhaps thousands) of dollars each year is your merchant credit card program.
The Association office regularly receives calls from companies all over the U.S. wanting us to switch to their program, in addition to calls from members who’ve received similar inquiries. Often, what “X” processor offers sounds (and is) too good to be true. Because when specific, detailed questions are asked that’s usually the case (though sometimes not admitted until written verification is requested about what they’re offering).
Recently, while helping a member sort through what they’d been told about a processor’s fees, etc. the Association Googled the processing company’s name and the top response on the list was the Better Business Bureau (BBB) website. Upon reviewing the BBB info we found 9 of 13 complaints involved “deceptive or inaccurate” marketing/sales techniques. Buyer beware.
Considering changing processors? Here are some things to consider when comparing program features:
- Does your current program have a set contract expiration date? If a new program will help your business reduce costs you may still finish ahead if you buy-out your contract, even if there is an early termination fee.
- Does your processor charge optional fees? MasterCard and Visa (MC/V) publish the rates they charge. These rates generally appear on merchant statements as Interchange and Assessment fees. Another cost listed on your statement is your “acquiring bank” (processor) fee to cover their operating costs. Beware of optional charges set at each processor’s discretion, including:
- Set-Up Fees – Some processors charge to set up all new accounts, while others charge a set-up fee only if transactions will be processed via an Internet gateway.
- Monthly Processing/Service Fee – Some processors charge a fee when total monthly credit card sales fall below a specified dollar amount. Others may charge a set monthly fee regardless of the sales volume. (Note: It is standard for merchants that process transactions though the internet to pay a monthly Internet service fee.)
- Statement Fee – Some processors charge for statements, even when delivered electronically.
- Annual Fee – Another optional fee charged by some processors is a flat annual fee.
- Payment Card Industry (PCI) Standards Fee – MC/V want merchants to protect their customer information from credit card fraud and identity theft. So, they require businesses to demonstrate how they secure customer information. While MC/V monitors these procedures, processors may establish their own PCI Compliance Fees. Some charge PCI fees on a monthly or annual basis, with an average $119 a year to considerably higher amounts.
- Does your processor use tiered rates? If the statement from your processor lists just three or four different Interchange rates, chances are they have created a tiered rate structure. In this situation, the processor groups rates published by MC/V into tiered levels. Each tiered rate is generally closer to the highest rate in that tier rather than the lower rates. In this scenario, you will typically pay higher fees than if the standard MC/V Interchange rates had been used.
- Are you leasing a terminal? Leasing a credit card terminal almost always translates to a higher expense over time since fees are usually $35 – $70/month for terms as long as 36 to 48 months. Terminals may typically be purchased for an average price of $400-$450 – a significant savings over leasing.
- NOTE: Your statement may also include legitimate costs for items such as: ACH Reject, Voice Authorization, Cross Border (non-U.S. issued cards), Chargeback, AVS (Address Verification Service) or other miscellaneous fees. Call your processor for an explanation of fees on your statement that you do not understand.
Association Merchant Bankcard Program
When the Iowa-Nebraska Equipment Dealers Association (I-NEDA) decided to start accepting credit card payments in 1997, several processors’ features/costs were reviewed. I-NEDA’s selection, Wells Fargo Merchant Services (WFMS), was based on its competitive rates and fees, and that the WFMS program was administered locally – first in Des Moines, Iowa and now in Lincoln, Nebraska.
Periodically, I-NEDA does extensive comparisons between the Association program and programs offered by other processors. Each time, the WFMS program has remained very competitive with, and most often better than, other processors. This is typically due to the fact that 1) the Association/WFMS program uses the standard published MC/V Interchange and Assessment rates, 2) has lower Acquiring Bank (processor) rates and 3) does not charge the optional fees mentioned earlier. (Exception: there are fees for Internet Gateway set-up and processing.)
The WFMS program also offers top-notch customer service. On several occasions, they have gone above and beyond the call of duty to assist Association members with out-of-the-ordinary situations. In addition, since the Association uses the WFMS program members may also call the Association office with their questions.
After receiving calls from I-NEDA members experiencing increased processing fees and less-than-acceptable customer service, the Association began offering a free program comparison last fall. Members are encouraged to e-mail, fax or mail their current statement to the Association for a free review. A staff member will analyze the statement and will let you know if 1) your processor is competitive, which will give you ‘peace of mind’ knowing you’re not being overcharged or 2) there would be a cost savings with the WFMS program.
Money Saving Tips from Wells Fargo Merchant Services
- Swipe cards whenever possible – When a card is swiped through a card reader, the full account data from the magnetic stripe is captured. Card Not Present (CNP), or hand-keyed, transactions have a higher risk of error and/or fraud than swiped transactions because less data is obtained. Higher risk usually results in higher fees.
- Use Address Verification Service (AVS) – AVS uses the billing information associated with a card to verify the cardholder’s address. This is particularly important for CNP transactions. Businesses that do not use AVS – or use it incorrectly – can be subject to higher Interchange rates. While a one-cent fee is assessed for each AVS transaction, you’ll pay a higher Interchange rate if you don’t enter AVS information, so that penny is well spent.
- IMPORTANT – When card numbers need to be hand-keyed, make sure you’re prompted to enter the cardholder’s address and zip code.
- Perform a Batch Settlement Daily – Batches need to be settled within a specific time frame after authorization to avoid higher Interchange rates. You will pay higher fees on the same customer charges if the batch of transactions is settled after the cutoff time than if the batch was settled on time. Make it standard operating procedure to batch and send transactions as soon as possible after authorization.
- Accept PIN Debit Cards – The Interchange rate for credit card transactions is usually higher than the rate for debit card transactions. By enabling your customers to enter their PINs when paying with debit cards, you can lower your Interchange costs on these transactions.
Take a minute and send your merchant credit card statement to the Association for a free review. Who knows? You may be pleasantly surprised by what they find!
For additional information on the Association Merchant Credit Card program, contact Donna at 1.800.622.0016.