How Much for Your Mid-Quals, Non-Quals, and Qualified Transactions?
March 1, 2010 3:33 PM Subscribe
OK, I know they have us over a barrel, but we have to use their barrel. So what are the "insider" tricks to know and traps to avoid when "negotiating" with a processor for online and in-store credit card processing merchant services?
I need to choose a credit card processor for both in-store and online sales. It's pretty obvious that this is a huge racket of a business, that there are plenty of unscrupulous players, and that they go out of their way to make it incredibly difficult to compare offers. I've done my research and feel pretty comfortable with the terminology and various fees that I'm going to be hit with once we start accepting credit cards, but want to make sure I'm not missing anything big before we sign on dotted line.
Basically, we're being offered "interchange plus" pricing of 0.20% + 10 cents per item as our "processing fee" with "interchange," "assessments" and "authorization" fees being "pass thru." From what I've been able to discern, this seems like fairly decent pricing for a new business. The Authorize.Net monthly fee being charged by this processor is $15.00 with a $0.10 transaction fee (which makes our actual online processing cost 0.20% + $0.20 per transaction).
So, what else do I need to be on the lookout for when evaluating the various pricing structures?
* The Google is almost entirely useless in trying to research this stuff given the number of "informational" sites, blogs and whatnot that are nothing more than thinly (and not-so thinly)-veiled reseller adverts.
I need to choose a credit card processor for both in-store and online sales. It's pretty obvious that this is a huge racket of a business, that there are plenty of unscrupulous players, and that they go out of their way to make it incredibly difficult to compare offers. I've done my research and feel pretty comfortable with the terminology and various fees that I'm going to be hit with once we start accepting credit cards, but want to make sure I'm not missing anything big before we sign on dotted line.
Basically, we're being offered "interchange plus" pricing of 0.20% + 10 cents per item as our "processing fee" with "interchange," "assessments" and "authorization" fees being "pass thru." From what I've been able to discern, this seems like fairly decent pricing for a new business. The Authorize.Net monthly fee being charged by this processor is $15.00 with a $0.10 transaction fee (which makes our actual online processing cost 0.20% + $0.20 per transaction).
So, what else do I need to be on the lookout for when evaluating the various pricing structures?
* The Google is almost entirely useless in trying to research this stuff given the number of "informational" sites, blogs and whatnot that are nothing more than thinly (and not-so thinly)-veiled reseller adverts.
Here in the UK I'm a member of the Federation of Small Businesses, and our membership gives us discounted transaction rates with their preferred bank. I'm not sure if there's a similar organisation in the States, but it might be worth checking whether an org offers this sort of discount as a perk to its members.
posted by ukdanae at 3:50 PM on March 1, 2010
posted by ukdanae at 3:50 PM on March 1, 2010
Best answer: I worked for a credit card processor for about two years. The best accounts by far were the so-called "house accounts", set up and maintained for clients directly by the boss or his staff and therefore bypassing any sales reps. This type of account was set up pretty much at-cost, i.e. no or minimal surcharges above what Visa/etc. charged the processor, and there was no need for extra income in the form of residuals to pay the sales representative. To get such an account, you would have to get to the manager directly (call and ask - it worked for a lot of clients at my former employer) and explain that you don't want to deal with sales reps for whatever reasons.
Read the terms and conditions. It's a dozen pages of tiny, tiny print, but you need to be aware of what you are signing. Sometimes, the reps would "forget" to show and fail to make a copy for the client of the first eleven pages and just bring us the last page, signed and dated.
Make sure that the company is explicitly offering free 24/7 support. Some companies will charge you per instance every time your equipment/network is failing, you have a question or need help over the phone.
Another fee to look out for is the account change fee or whatever your sales rep may call it. Our company didn't have one, but sales reps would often charge their clients every time they had the sales rep update the phone number/address on the account or change the deposit bank account. A co-worker who had to manually enter into the billing system these and a bunch of other fees the sales reps made up every month ("statement explanation support fee", I'm not kidding), would call it the "stupid fee".
Don't buy any equipment from sales reps. EVER. They'd have people paying $49/month for 5 years for machines that could be had for $150 on eBay, accessories included. I wish I were making this up.
Make sure to ask what the chargeback fees are, as well as you "retrieval request" fees. A retrieval request means that someone called their bank when they saw the charge on their statement, didn't remember making a purchase and just wanted to know the full name of the merchant who charged it. This simple phone call can cost you, the merchant, up to $20 every single time. That'll be hidden somewhere in the terms and conditions.
To avoid retrieval requests in the first place, make sure that your shortened name, the one that appears on customers' statements, is as descriptive as possible. Include your phone number if there is room.
When you are calculating your actual cost, do you factor in setup fees (the company will have to pay for your credit report, there is no way around it), "statement delivery fees", monthly maintenance fees (those are real, but can be waived if your revenue is very high) etc?
The 0.20% fee you mention (counterintuitively named "discount rate") will not apply to all of the cards you actually accept, and for many of them the rate will be higher. That's because Visa and MasterCard group cards into categories that are each assigned a different discount rate: e.g., charging a Visa business card will be more expensive to you than charging a "signature" personal Visa. It goes against Visa regulations for you, the merchant, to charge different prices or refuse transactions based on the type of the card.
Tl;dr sales representatives have to feed their children too; a few (but not all) of the ones that I had the pleasure of dealing it were not beyond lying and cheating to make it happen.
posted by halogen at 4:59 PM on March 1, 2010 [2 favorites]
Read the terms and conditions. It's a dozen pages of tiny, tiny print, but you need to be aware of what you are signing. Sometimes, the reps would "forget" to show and fail to make a copy for the client of the first eleven pages and just bring us the last page, signed and dated.
Make sure that the company is explicitly offering free 24/7 support. Some companies will charge you per instance every time your equipment/network is failing, you have a question or need help over the phone.
Another fee to look out for is the account change fee or whatever your sales rep may call it. Our company didn't have one, but sales reps would often charge their clients every time they had the sales rep update the phone number/address on the account or change the deposit bank account. A co-worker who had to manually enter into the billing system these and a bunch of other fees the sales reps made up every month ("statement explanation support fee", I'm not kidding), would call it the "stupid fee".
Don't buy any equipment from sales reps. EVER. They'd have people paying $49/month for 5 years for machines that could be had for $150 on eBay, accessories included. I wish I were making this up.
Make sure to ask what the chargeback fees are, as well as you "retrieval request" fees. A retrieval request means that someone called their bank when they saw the charge on their statement, didn't remember making a purchase and just wanted to know the full name of the merchant who charged it. This simple phone call can cost you, the merchant, up to $20 every single time. That'll be hidden somewhere in the terms and conditions.
To avoid retrieval requests in the first place, make sure that your shortened name, the one that appears on customers' statements, is as descriptive as possible. Include your phone number if there is room.
When you are calculating your actual cost, do you factor in setup fees (the company will have to pay for your credit report, there is no way around it), "statement delivery fees", monthly maintenance fees (those are real, but can be waived if your revenue is very high) etc?
The 0.20% fee you mention (counterintuitively named "discount rate") will not apply to all of the cards you actually accept, and for many of them the rate will be higher. That's because Visa and MasterCard group cards into categories that are each assigned a different discount rate: e.g., charging a Visa business card will be more expensive to you than charging a "signature" personal Visa. It goes against Visa regulations for you, the merchant, to charge different prices or refuse transactions based on the type of the card.
Tl;dr sales representatives have to feed their children too; a few (but not all) of the ones that I had the pleasure of dealing it were not beyond lying and cheating to make it happen.
posted by halogen at 4:59 PM on March 1, 2010 [2 favorites]
Here are your "pass through" interchange rates. You'll see that none of them comes even close to 0.20%.
posted by halogen at 5:02 PM on March 1, 2010
posted by halogen at 5:02 PM on March 1, 2010
I wasn't clear. Your actual costs will be whatever that table lists, plus 0.20% and $0.20 and that may not include the authorization. Authorizations ($auth fee) are just to make sure that there are sufficient funds, and may or may not lead to a transaction (and the respective transaction fee). You will be charges an authorization fee even if the buyer has insufficient funds.
posted by halogen at 5:11 PM on March 1, 2010
posted by halogen at 5:11 PM on March 1, 2010
Response by poster: Halogen: Thanks very much for that inside look.
Yes, I understand that MC/Visa has rigged the game so that merchants, not MC/Visa, are paying for points, miles, and other benefits of "premium" credit cards that us consumers so dearly and foolishly covet. So I'm not expecting only 0.20% for processing fee, but whatever the "pass through" rate is for the customer's particular card PLUS the 0.20% PLUS the flat per item charge. It's their barrel.... Great idea re. the "retrieval fee" and how to minimize these.
posted by webhund at 6:58 PM on March 1, 2010
Yes, I understand that MC/Visa has rigged the game so that merchants, not MC/Visa, are paying for points, miles, and other benefits of "premium" credit cards that us consumers so dearly and foolishly covet. So I'm not expecting only 0.20% for processing fee, but whatever the "pass through" rate is for the customer's particular card PLUS the 0.20% PLUS the flat per item charge. It's their barrel.... Great idea re. the "retrieval fee" and how to minimize these.
posted by webhund at 6:58 PM on March 1, 2010
If you play hardball -- and educate yourself a bit -- you should have no trouble getting pass-thru + 0.05%.
posted by mmdei at 8:19 PM on March 1, 2010
posted by mmdei at 8:19 PM on March 1, 2010
Play VERY hardball. There is always another company if you go too low and the person on the other end of the phone does not want to play with you anymore. Try to purchase near the end of the month. Also, be aware that I continued to receive marketing calls for six months after I chose my processor. It was horrible.
posted by 2legit2quit at 12:25 AM on March 2, 2010
posted by 2legit2quit at 12:25 AM on March 2, 2010
This thread is closed to new comments.
Have your rep calculate as close as possible the different rates you'll pay for different cards as debit/credit transactions. Many customers are indifferent to running as credit or debit and if you know exactly at what dollar amount you'll save a few cents either way and it will add up.
My biggest recommendation though is from day one encourage your customers to use cash or even checks for trustworthy people. This is a monthly expense you have some control over...exert it.
posted by vito90 at 3:48 PM on March 1, 2010