In this newsletter, we are going to look at different ways your business can continue to process customer payments as well as introduce a way for merchants to protect themselves during this difficult time. Many businesses have been turned upside down, and now more than ever each merchant needs to be informed on various ways to utilize their merchant account.
Gateway- Virtual Terminal
Offices, restaurants, and many other types of business have been forced to close their physical locations. For most, it is imperative to find a way to continue to accept customer payments in another way. Setting up a virtual terminal is a great solution to fill this void. A virtual terminal enables the business to accept payments anywhere an employee has access to the internet. The card information is keyed into the virtual terminal, and the payment is processed just as any transaction would be. We have had many requests for this service from merchants, and for most, the set-up process is quick and simple. Depending on your current processor, additional charges may be required. Typically, it is an additional monthly charge to pay for the service, as well as an additional transaction fee.
Customer Facing
Recently, we have fielded many requests for alternative payment solutions. Many merchants have simply stopped accepting cash payments due to contamination, and many more merchants have requested some sort of customer-facing device, so their employees do not have to handle customer cards. We suggest speaking with your processor to see what type of options they have for customer-facing payment processing. One of our most popular devices is the Clover Mini with a rotating swivel stand. As well as having access to one of the more robust systems in the industry, this option keeps the merchant from ever touching a customer card or exchanging receipts. There are many options in the industry, but now more than ever is the time to take precautions for the protection of your employees.
Cash Advance
It is no secret during this difficult time, many businesses are having trouble maintaining a steady income stream. Business owners may have access to existing solutions that they may not be aware of. One such solution is a cash advance by your merchant service provider. Cash advance programs are quite simple when compared to modern business loans. Businesses are approved for a cash advance based on their past processing history. As an example, a business that averages $10,000 monthly through their merchant account can typically qualify for up to a $10,000 cash advance. These cash advances are typically paid back through the merchant’s own credit card processing. A percentage of each batch is taken through the merchant account (typically 10%) until the advance is paid in full. These advances can be used to pay for anything the business may need with no restriction and no interest. It is to be noted that these programs may differ greatly depending on your processor, but programs like this exist for the very reason they may be needed today. A good credit card processor will do anything within their power to keep you processing and support you as a business partner.
Please note these programs and services vary depending on
your processor. This information is based on experience, and what The Merchant
Store is doing for our merchants. We are here to talk! Any questions, concerns,
or interest in our services please contact us!
This seems like a perfect time to talk about contactless and customer facing payment options. In a world of social distancing and constant hand washing there is even more reasons to limit touching other people’s belongings. The point of sale is one of the primary physical points of contact between a business and its customers, and customers and eachother. We are going to explore some processing options that you can implement in order to limit physical contact at the point of sale.
Contactless Payments: Most modern credit card terminals and PIN Pads are capable of accepting contactless payments via Near Field Communication (NFC). NFC is what is used by Apple Pay, Samsung Pay, and contactless credit cards. The nice thing about this option is the consumer’s device or card never leaves their hand and never comes in physical contact with the physical payment components. All the customer must do is hold their device or card within a couple inches of the point of sale and the card or device will begin the transaction process. Contrary to what you may think, this method is extremely easy. Once setup all the clerk needs to do is use the credit card terminal like normal and the consumer does the rest.
If this is not already functioning on your device, in many cases it’s just a matter of a software update. If you don’t already have an NFC capable device, they are quite inexpensive. For most new processing customers, we can provide NFC capable devices free of charge.
If you do have a contactless device, all you really need to do is start promoting it. We offer free Apple Pay stickers for merchants to help get the word out. You can also ask your employees to inform consumers that they may pay through NFC. Sure, not every consumer will know how to do it, but for those who do, simply reminding them that it’s an option will do a lot to limit contact.
Customer Facing Devices: You have seen these kinds of setups everywhere. The store clerk rings up a transaction and the consumer completes the transaction via a second consumer facing device. This can usually be setup very inexpensively if need be. If you have a standard credit card terminal, many times you can add an EMV + NFC enabled PIN pad that can act as your customer facing device. If you have a full feature point of sale system, PIN pads might work, or the POS vendor may have many different options.
If you have a Clover or are looking at switching to a Clover POS you can use PIN pads, or you can even use a secondary device like an additional Clover Mini as your customer facing device. Keep in mind if you have a Clover Mini, you are already setup for contactless payments that we discussed above.
Online Payments: Online payments aren’t just for retail eCommerce. Many restaurants today offer online ordering with at-location pickup or delivery. There are several larger retailers that have made this option available over the past few years. But, this option isn’t something only large companies have access to. Keep in mind, this path will take some additional planning on your part, and you may be required to setup an additional merchant account to separate the internal retail transactions from the ecommerce transactions. You are also likely going to see a higher cost per transaction for those keyed, but that cost increase could be negligible if you are able increase or even maintain sales.
Invoicing: We are able to add online invoicing to any new or existing merchant account for just dollars per month. This option allows businesses to submit email invoices to customers with a link to pay that invoice over the internet.
Online invoicing enables consumers to pay without having to meet up physically. This capability is great for service businesses, and we have seen unique ways other merchants have also used this option. While this may not be for everyone, it’s another great tool that can be very useful for many businesses.
Conclusion: We are all in this together and finding ways to better serve each other doesn’t just help improve things today, but also opens your business up to more growth once we get these difficult times behind us. If you have any questions don’t hesitate to call or email us. We are here to help in any way we can and will always provide the best information to help you make an informed decision.
Dejavoo was founded by the original founder of Lipman USA, and seems to be founded on the same principles that Lipman was: rock-solid products that are easy to use and very reliable.
Dejavoo Z8- Countertop Terminal
The Z8 is one of the most widely used counter-top terminals in the industry. Able to connect through Ethernet, dial, or using WiFi it captures payments for the modern customer using a touch screen display and built in thermal printer. A 2.4-inch LCD backlit screen gives the business owner and customer an easy to use payment system. With swipe, EMV, and contactless capability, the Z8 can accept payments from even the most Apple or tech. savvy customer.
Dejavoo Z11
While the Z8 is a very commonly bought and used terminal,
what is not set in stone is the price tag. I have heard quotes from processors
upward of $800 for this terminal. It is of note that the Z8 is a simple, easy
to use, standard terminal. By doing just a little bit of research, a business
owner will be quick to note their processor is marking up the price tag by
upwards of 300 percent at times. If your processor is marking up something as
simple as equipment for you to use (which you as a business owner need to even
process) how much do you think they are marking up your rates? Don’t settle on
overpriced processing and equipment, become a Merchant Store partner.
The Z9 essentially asks the business owner exactly what how
they want to process. With the wireless capability able to connect through
Wifi, or using a 4G/3G network this terminal does it all. This terminal features
EMV, Swipe, and contactless payment methods which you can take anywhere that
your cell phone works. With an upgraded battery that enables any business owner
uninterrupted processing, the Z9 is the go-to for many mobile, retail, or
restaurant businesses. Another unique feature of the Z9 is the ability to queue
customer support to call your business directly from the terminal by pressing
the F4 button.
Much of the same on quotes when it come to pricing and mark ups with various processors on the Z9. But I recently ran into even more of a horror story with a business owner. “John,” the business owner was just starting his business, his local rep. suggested the Z9. Without a lot of capital starting the business, his sales rep. suggested bundling the terminal cost into his fees. Essentially signing John up for a lease to own at the price of 39 dollars monthly. After a period, John saw the Z9 for sale for 4-5 hundred dollars. Realizing the terms of what was sold to him, John realized 39 dollars for 48 months wasn’t an ideal situation. While this is hopefully an isolated incident involving a deceitful sales representative, it is all too common of a practice. As is common in almost every business, if you are paying too much for one aspect, more than likely you are paying too much for every aspect.
Dejavoo Payment Software
Our team recently did a full demo on Dejavoo’s new payment software & cloud POS Technology. It seems this is Dejavoo’s answer to other software systems such as Clover, Lavu, Shopkeep, Revel etc. They have made every facet (including price) highly competitive to other similar programs. This software is tailored to virtually any business with specific setups for retail, restaurant, and a specific setup for salons and service businesses. This software is so specific we had to stop the demo for over saturation of information. That does not mean that it is not easy to use, what it means is that this software can be tailored to exactly what the business wants as far as inventory, employee management, item configuration, merchandise tracking, customer management, restaurant specific management, basically its got how ever robust a system as you need.
One of the biggest benefits with this software, is the all inclusive manager portal. Designed to give the business owner oversight over their entire operation. The simplicity of the system is also the equipment. Compatible with most standard tablets that require a simple download, the program is able to communicate and work seamlessly with an existing Dejavoo terminal. This means instead of expensive thousand dollar set-ups, a business can utilize specific software for as much as a computer and a Dejavoo terminal. Whether on the move, pay at the table, or at the counter top everything functions together and can be seen through the friendly master portal.
To Finalize
Dejavoo is moving in the right direction when it comes to equipment and software. At the Merchant Store we utilize and count on these terminals and software for our merchants, and trust the Dejavoo is constantly striving to improve, and stay up to date with the latest in security and technology. It is worth a look for any business to see if this could be the most beneficial, and also cost effective solution for their business.
For information, to schedule a demo, or to receive quotes on equipment please feel free to contact The Merchant Store (888-898-3436) or visit www.merchantequip.com
In short, no. You may have received marketing information describing the perfect world of having free credit card processing. While it is possible to establish an account and have the business pay zero processing fees, it simply means that those fees are being assessed to someone else. Welcome to the new world of merchant services, it’s called Cash Discount.
Let’s go through a scenario. It’s a new year, and you want to maximize your profits and are looking at ways to cut down on your costs. One of the most obvious ways is to reduce what you pay on processing fees. Looking over your processing statements, you equate your effective rate to 4 percent. So, for every $100 dollars you are receiving, you are paying $4 effectively. You call your processor, and the sales agent mentions a program called Cash Discount, which essentially takes away the cost of your processing fees.
How does this work?
Enrolling in a Cash Discount program, your processing fees will be passed onto your customers. While it differs between processors, the standard is around 4%. One way this works is by increasing retail pricing of goods and/or services by 4% and then offering to discount the sale by the same percentage for certain forms of payment. Usually the discounted form of payment is cash, but you could also give discounts to any other form of payment like checks or in-store gift cards. If you are interested in details about the other ways this is being implemented check out are article entitled, Tired of paying credit card processing fees?
It is important to note; customer satisfaction should always be a considered, which is why this model may not work for everyone. It is up to the business owner to see if and how this model will fit into their business. While a 4% increase to retail costs may be unnoticed by some consumers, others might be a more price sensitive. Businesses need to know how they can best explain the their discount program to their customers in the right way.
Cash discounting has been around for 20+ years, but its really starting to pick up steam. It would be surprising for anyone who regularly uses credit and debit cards to have not been offer a discount to use cash, or discount reversal percentage at the bottom of their credit card receipts. There has been some backlash in the industry, calling the cash discount nomenclature just a name for an additional surcharge. Some even calling for its outright ban, and unconvinced of the longevity of the practice. In any form, as of the beginning of 2020, many business are rushing to get in and offset their processing costs. Business owners are beginning to see a vast expanse in the array of various cash discount applications, programs with processors, and pressure from sales agents to investigate the programs and see if it is right for their business. While the program seems like a simple concept, there is a difference between surcharging customers, and offering a true cash discount.
VISA has mandated the program to abide by certain regulations. While the practice is completely legal when done correctly, where the grey area lies is the difference between a cash discount and a surcharge program. A true Cash Discount program is when the businesses list the credit card prices for the goods and discount the 4% or whatever the processing fees upon payment in cash. A surcharge program (an extremely common practice, and considered by some to be mislabeling of cash discount), is when the prices posted are for the already discounted cash prices, and the processing fees are charged on top of the listed price to the customer. According to VISA, the practice of the surcharging is against its regulations. The Durbin Amendment, made surcharging against the law for debit cards altogether. Additionally, specific states have set laws against Surcharging practices all together (CO, CT, FL, KS, MA, MS, OK). It is important for each merchant to do their research to determine exactly what type of program they are getting into, and whether it is in line with the standards and practices set-forth by card associations.
To summarize, it is worth any retail merchant to investigate whether this practice is right for their business. In the long run, this practice has the potential to save the business hundreds, or even thousands of dollars per month. While the program may seem like a savior to some businesses, it’s not going to be for everyone. It is also important that if a business implements a method of cash discounting that they continue to look for changes in regulations and laws, and make sure everything is above board because changes are always taking place.
If you have any questions we are always willing to lend whatever knowledge we have. Feel free to reach out to us at (888) 528-0058 .
What is is my contract length? Can I cancel my service without penalty?
Every merchant is under a contract with their processing bank, whether there is a penalty to cancel service is another aspect. It is also possible that your processor has helped supply your business with equipment, which in this case you will have to work out a repayment or return of that equipment. Contracts vary depending on which processor you choose, it is important to go over the terms and conditions prior to signing and being aware of any penalty for canceling the service. Some aggressive contracts may include liquidated damages provisions which basically make the cost of terminating, what the processor believes they would have profited on the account for the entirety of the contract. For higher volume merchants this can be tens or even hundreds of thousands of dollars.
What are my monthly
fees and processing rates?
Processing Rates
Depending on your business, these fees will vary. For instance, if the business is eCommerce, or keyed entry, the fees will differ from a retail business. Each merchant is charged a standard interchange fee from the card issuer, this fee cannot be waived. Your actual cost will depend on what the processor marks up above interchange. It is important to note that interchange will vary depending on the type of card and how you are accepting it.
There are over 800 interchange categories and each can have a different cost. Its easy to get caught up in all of the minutia and miss something seemingly small that ends up costing you later. A potential processor can perform rate reviews and show you an apples to apples comparison between your current rates and what they can offer.
In order to have a processor to provide you a real comparison they will most likely need a copy of your processing statement. That said before you send your statement to a processor its important that you ask them what fees they are quoting you. You have a real advantage over the processor when you ask them to quote you rates, and then ask them to do a comparison to show you how those numbers work out. This way they don’t see what your paying now and just slightly undercut it.
Monthly Fees
Standard monthly fees apply for all business. Typically, merchants will be charged a statement fee, but depending on the services being provided and the specific processor, there may be other fixed fees. Each processor writes accounts differently based on the type of business and processing history. Some of the fees can be waived, but it is important to note that some of these fees are being charged directly from Visa and MasterCard are are typically passed through to the merchant.
Make sure to ask each processor what each monthly fee is for. If you are reviewing multiple processors you will find that many of the fees are the same. Any fees that are outside of the norm should be questioned.
General rules of thumb: Retail – Monthly fees should run $20 or less even if you don’t process in a given month.
eCommerce and phone order – You should expect your monthly fees to be the same as retail, however keep in mind you may have an additional monthly fee for a payment gateway or virtual terminal. Generally these run between $5.00 and $15.00 per month in addition to the merchant fees.
What kind of Equipment do you suggest for my business, and what are the costs?
Using the right equipment tailored for your business, is not only important for your customers convenience, but also for the business’s fees and costs. It can be a burden for any business getting caught in an expensive lease for an extended term, especially if that equipment is unnecessary.
See future Newsletter: “Leasing, the Little Upside with
Major Pitfalls.”
Equipment costs vary depending on the processor, some will provide free equipment for the use of the business, while some mark prices up to turn a profit. If your processor suggests a piece of equipment at a specific price, it can be beneficial to do research and learn precisely what that piece of equipment costs on the open market. You would be surprised how much some processors will attempt to charge for equipment.
Can you perform a
rate review for my account?
If you feel you are paying too much for your credit card processing service, simply ask your sales agent or processor to perform a rate review for your business. Sometimes there are minor changes that your processor can do, and they can make a major impact.
For example, if you are using a terminal that is out of compliance, you may see additional charges on your monthly bill. Simply by upgrading your equipment, could reduce your overall effective rate drastically.
Another example is perhaps your account was initially written with the wrong fee schedule for your specific business, and by switching to a new rate structure you can reduce and prevent additional fees.
It is not out of the realm of possibility that your processor or agent would refuse this service, or simply tell you that your fees cannot be lowered. If this is the case your processor should be able to explain in detail your fees and why they’re not able to be lowered. That said don’t take their word for it. Call around and ask other companies what their rates are, and then ask them for a side by side comparison of current statement.
Some times you find that the deal you have with your processor is really good. Some times you find that you can save a lot by switching. Either way its worth contacting a couple companies.
How much am I paying for my PCI compliance?
As mandated by higher authorities that make up this industry, every merchant must be certified PCI compliant in accordance with the Payment Card Industry Security Standards. Quite a mouthful. Each processor is responsible for making sure their merchants are secure and the fees for this service will vary depending on the processor. Some charge monthly, some charge annually, and some processors may charge you both an annual fee with a nice monthly fee as well. It is important to be compliant and certified and it is probably more important to you to not be overcharged for taking a simple survey or having a scan performed. Your processor should be able to easily explain how much and when they will charge you.
While this fee is generally not negotiable with any given processor, they each have their own deal with PCI security assessors and so the pricing to the merchant will vary from one to another. Generally speaking this fee should come out to between $90 and $120 per year while compliant. Non Compliant accounts are generally assessed around an additional $20 per month until they become compliant.
Who handles customer service after business hours or on holidays?
Hopefully you process with a company that has excellent customer support. That said, sometimes that support is not available at all hours of everyday. It can be imperative to the business owner, to know how their processor provides support after normal business hours, and on holidays in case any issues arise. The last thing a business needs on a weekend or holiday when their terminal goes down is to get an answering service when they need to be processing cards.
Also a help desk is testable. Feel free to call into your processors help desk and see how long it takes them to answer, how they act on the phone, and how knowledgeable they are. You can also ask them about specific fees on your quote. While the help desk probably wont have access to your quote you can ask them what their company typically charges for X, Y, or Z. You can compare that information to the quote that was provided. This wont always work as some support people don’t handle the rate side of the business, however its worth asking a question or two.
Lets boil this down.
We have gone over a lot of information here so lets simplify it. If you are looking at changing processors ask them what their rates are, then ask them to breakdown your statement. Keep your monthly fees at or below $20 per month if your retail and $30 per for other businesses. Ask for no early termination fee and never lease processing equipment. Most importantly reach out and ask for help. People in this industry will bend over backward to lend their knowledge to those who ask.
If you have any questions we are always willing to lend whatever knowledge we have. Feel free to reach out to us at 800-937-3850.
There are two sides to a credit card transaction; Authorization and Settlement. Between these two stages of the transaction process there are 4 basic functions to all credit card terminals. In this write up we are going to go over both sides of the transaction and each of the basic functions in detail. While this is going to be a highly simplified explanation it should be more than enough to firmly grasp the concepts and proper use of a standard credit card terminal.
Sale:
Running a sale on a terminal initiates the authorization side of the transaction. This is when the terminal communicates and makes the approval request. If that request is approved the terminal will receive an approval code from the issuer and the transaction is stored in the terminal until the settlement is processed. At this point the transaction has only been authorized and no money has been moved and you are still able to alter the transactions.
Don’t confuse the Sale function with functions like Authorization Only. While auth only is outside the scope of this writing, it is not the same as a sale.
Settlement:
The settlement process finalizes all transactions processed on the terminal. This is the point when funds begin to move, discount rates are charged, and you are no longer able to alter transactions.
Transaction manipulation for most businesses refers to the voiding which we will get into shortly. Still other businesses like restaurants or lodging may utilize tipping or check-in check-out functions. You can only manipulate a transaction before it has settled.
If your terminal is set to automatically settle each day it is a good idea to review your settlement report to make sure it shows the batch settled successfully. It’s ultimately the merchant’s responsibility to verify that the terminal is settling.
Void:
A void is a type of refund that is done before a transaction is settled. When you void a transaction, it keeps the funds from moving, and therefore keeps the business from having to pay discount fees on the original sale. Voiding effectively just deletes the transaction from the settlement entirely. This results in the card holder seeing a pending transaction on their account for a few days before it eventually disappears.
There is also a function called a reversal which voids the sale and contacts the issuer requesting that the authorization or pending amount be released back to the card holder. For some devices this can be included as part of its batch function, for some it’s a separate function, and for others it’s not an option at all. If you have a reversal option on your terminal you should contact your processor for information about how to use it, as it’s a better customer experience.
Return:
If a transaction has already settled and you need to refund the card holder, your only option is going to be to perform a return. Unfortunately, that means funds will have already started moving and you are going to be charged your discount rate for having settled the sale. You really shouldn’t be charged an additional percentage for the refund however, we have seen processors who did charge their merchants for returns as well. If your processor charges an additional discount for returns, then it’s probably a good time to look for other processing options.
It’s also important to note that it is extremely important that you refund card holders the same way they originally paid. For example, don’t give a cash refund to someone who paid you on a credit card. The reason is there is no paper trail for the refund. If the card holder contacts their issuer and disputes the original transaction, you cannot prove you refunded previously, and will most likely lose the dispute as well as the money you already paid. Also, if a customer pays cash you wouldn’t want to refund them on their credit card, as that could cause some risk related issues on your merchant account.
Conclusion:
There are many functions a standard credit card terminal can do. For most every merchant these are the only 4 you will ever use. If a customer or issuer ever tells you to use a function that is not listed here, you should immediately contact your processor and explain the situation and get support on whether you should do what they are asking. Card holders and issuers should not be trusted when it comes to how to process sales or refunds. Many times, they will be trying do something fraudulent, other times they could cause problems down the road for you just due to their lack of understand the functions they are asking you to use.
MasterCard has entered phase two of its Dispute Resolution Initiative (MDRI) and so we felt that now was a good time to shoot out some information about what has changed in the world of chargebacks and what changes are still on the horizon. But first some history…
While credit itself has been around about as long as the world’s oldest profession, it wasn’t until the 1950’s when Diners Club released the first credit card, for our modern system of credit issuing and acceptance to take form. In the mid 1970’s, chargebacks were introduced to help build consumer confidence in a time when many people were still wary about revolving credit accounts. Since then times have changed and the credit card along with them.
The credit card industry is in a constant state of change, but it requires deliberate effort to make those changes. The chargeback system is a part of the industry that has been largely neglected for the past 50 years, but a year ago that started to change.
In April 2018 Visa released its Visa Claims Resolution (VCR) initiative which was a major overhaul of its chargeback system. VCR was designed to stop fake or fraudulent chargebacks as well as streamline the entire chargeback process. Before VCR, the average chargeback resolution time-frame for Visa was a whopping 46 days, with some disputes continuing for more than 3 months. Visa’s new chargeback initiative has just turned one, and it’s still too soon to tell how it will mature, so far there have been mixed reviews at best.
Unlike Visa, MasterCard is rolling out its new system relatively slowly in 4 phases over 18+ months. Phase one started in Oct 2018 requiring issuers to collect more information from cardholders before allowing a chargeback for a number of reason codes. This additional information should help MasterCard weed out invalid disputes before they start attempting to limit outright fraud on the part of cardholders who issue deliberately false chargebacks, typically known as friendly fraud.
Phase 1 – Affected Reason Codes:
4831 – Incorrect Transaction Amount
4834 – Point of Interaction Error
4853 – Cardholder Dispute
4863 – Cardholder Does Not Recognize
Phase 2 is where we catch up to present day and effects how merchants handle chargebacks and refunds. Basically, if a business receives a chargeback under these new rules the business should not refund the original transaction. Instead the merchant should continue to work through the chargeback process and let that process handle the funds.
If a business receives a chargeback and later decides to refund the card holder, even after winning that chargeback, the issuer can still issue a second chargeback resulting in the business being out the money twice. While there is a way to contest the double debit it would be easier to just not have to deal with that in the first place.
This phase also shortens the filing time frame on reason code 4834 (Point of Interaction Error) from 120 day to 90. It also removes two reason codes all together.
Phase 2- Affected Reason Codes:
4834 – Point of Interaction Error – Chargeback time-frame lower form 120 to 90 days.
4840 – Fraudulent Processing of Transactions – Removed as a chargeback reason code.
4863 – Cardholder Does Not Recognize – Removed as a chargeback reason code.
Phase 3 is an unknown at this time. We know its scheduled to start in October 2019, however MasterCard has yet to state what exactly this phase is. We will post an update as we get more information about this phase and what to expect.
Jumping to April 2020 and beyond, phase 4 will stop allowing subsequent chargeback reason codes. Instead, issuers will be able to continue a dispute with pre-arbitration which is very similar to Visa’s new setup.
Only time will tell how effective these changes are at improving the chargeback system and minimizing bogus chargebacks. So far, just based on Visa’s VCR initiative, we wouldn’t expect too much, at least initially. It is promising to see both Visa and MasterCard taking steps in the right direction. However, it may take many years before we see any real improvement at the merchant level. Until then, we will move forward cautiously optimistic that associations are attempting to level the playing field and making the chargeback process more fair to merchants.
Regardless of your market accepting credit cards is just part of today’s world. Doing so can be an intimidating task for an uninformed business owner. Yet the process to accept payments does not have to be an arduous task. Following some simple steps and having a basic understanding of the credit card industry, any business owner can feel confident in choosing a payment provider.
First Step
The first step to accepting non cash payments, is to understand how the business will be accepting payments. Are they going to be using a counter top terminal or a point of sale systems? Are they going to be accepting sales over the phone, keying in the transactions, or online through an eCommerce store? It can even be a combination of these options. If the business is going to get quotes from providers, it’s best to know what they need or might need in the future. This allows the business to confirm upfront what it’s going to cost, and if it’s something the processors they are talking to are able to support.
Choosing a Payment Provider
Many business owners, when just opening their doors, first go to their bank to accept credit cards. This is not always the best option, as these banks typically have higher rates, less knowledge across the industry, and have a lack of personalized customer service.
The reason for this is pretty simple. Traditional banks specialize in savings and loans and payment processing is a value add that they offer. Since it’s only a side offering they do not dedicate their resources to it, and instead use a third party to handle the account setup and maintenance. In this case it’s the same as going through any other independent agent or merchant account sales organization. Generally banks and those third parties expect people coming directly through them are not likely shopping around much. Which is typically why they can get away with charging higher prices than the rest of the industry.
When choosing a provider, it can be extremely beneficial to find one that specifically deals in credit card processing and payment acceptance across various platforms. Specialized processors are able to provide competitive equipment pricing, competitive rate structures, and specific acumen for each individual business needs.
Choosing who to trust your business with, is the most important factor when entering the industry of credit card processing. It is important to do the research, and know the questions to ask.
How long have you been helping businesses accept credit cards?
Do you have a testimonials or references?
What is your primary website?
What kind of equipment/service would you suggest for my business?
What are your monthly fees and processing rates?
What kind of contracts do you offer?
How long will it take before I can start accepting payments?
While these are just a few pertinent questions, it is important to note the preparedness and sincerity of the feedback. The answers to these questions will help the business owner be able to compare between various processors, and make an educated decision on which company will provide the best option for the specific business needs.
In our next article we will go over several great questions to ask your processor and what answers you should expect.
Being prepared for the process of underwriting will drastically prevent the chances of any delays. Sometimes businesses need to get up in running as soon as possible, but run into issues with applications.
Applications departments typically run separately from the sales teams, and sometimes it would seem they do their best to block incoming applications. It is however their job to assess risk and prevent any sort of fraud or illegal business from accessing the payment network.
Business owners should be prepared to fill out the application completely, and return it complete with a voided check or bank letter. The business may also want to include the following as processors may request this information, especially for a new business.
Proof of Existence
Governmental filings: DBA, EIN , Business License
Marketing Docs: Promo Material, advertisements
Photos of business location inside and out.
Business Financials (less likely for most businesses)
1 to 3 years of complete financials
previous years tax return if financials are not audited
Industry Licences (if applicable)
If the underwriters have this information at hand when looking at a new account, it can really speed up the process. This also allows them to get a better understanding of the business and to confirm its legitimacy.
The underwriters will then take into account all materials given, and decide to either Approve, Decline, or Pend, the account requesting more information. This process typically lasts only a day or two, however circumstances may cause this process to take longer.
Getting Started
It will now be up to the processors technical team to do the work. Once the processor has built the file and has deployed the equipment your business will use, you can now begin to accept payment from your customers. To make sure everything is set up correctly, you should run some test transactions to verify you know how to use the system and are receiving deposits. The business owner should also train their staff on proper use of the equipment. Making sure the staff understands how the equipment functions, and how to use it properly. This is something the processors tech support group should be very willing to assist with.
For more information on setting up a merchant account, please email info@merchantequip.com, or by calling (888) 979.6882
Its be long believed by many that PIN debit transaction are cheaper than signature debit and while that may be the case in some instances that is not always the case.
First off a quick clarification, signature debit is when a customer’s debit card is accepted just like a credit card without having the customer enter their PIN number. Conversely, a PIN debit transaction is when the debit card is accepted and the customer enters their PIN as they would do at an ATM machine.
Short answer:
If your ticket size is less than $50, you’re probably better off running a transaction as signature debit. If your ticket is higher than $50 you’re usually better off with PIN debit. The biggest savings as a percentage of the transaction will be on the smaller ticket sales.
For example if you have a $5.00 sale and your PIN debit transaction cost is $0.50 then you’re paying 10%. That same transaction with signature debit could cost you about $0.23 which is more than a 50% savings over the PIN Debit Fee.
But there is a lot more to it than that..
Cost Drivers:
There are 3 primary drivers of cost when talking about debit transactions. The first is going to be whether or not the card being accepted is a regulated or unregulated debit card. The second is which network is being processed through. Finally, the third is the dollar amount being processed. You can look at these three areas to work out a rough idea of your possible costs.
Regulated and Unregulated Cards:
The Durbin amendment set a price cap of effectively 0.05% + $0.21 for cards issued by banks with more than $10 billion in assets. The amendment allows for an additional $0.01 per transaction to be charged in most cases. For issuers under $10 billion in assets there is no regulation as to what they can charge to move funds.
With regulated cards having a $0.22 transaction fee from the network, small tickets are going to have a higher effective cost than unregulated until the transaction amount is above $7.00. For transactions beyond $7.00, regulated debit cost is by far cheaper than unregulated.
Unfortunately, you’re not going to be able to tell what cards are regulated or unregulated. That being the case we are going to focus the rest of this article on unregulated cards where the other two cost drivers come into effect.
Unregulated Network Pricing and Ticket Size:
Each payment network prices transactions differently, however higher dollar transactions will end up with the lower effective cost. No matter if you are accepting PIN or signature debit, if you can increase your per transaction amount, it would be in your best interest from the perspective of effective cost.
The table below shows a breakdown of the network cost for a single transaction between $2.50 and $500. The first 9 networks represent the effective cost per transaction on PIN Debit. The lower two show the effective cost of processing the same transaction as signature debit.
As you can see, when look at just the network fees, signature debit is effectively the lowest priced option until between $25 and $50 transactions. At $50.00 and higher, the debit networks begin to consistently a cheaper way of accepting the card. With that in mind notice that PIN Debit is at most a savings of 0.30% on a $500 ticket. That’s not a huge savings on one transaction but on a month of volume it can really add up.
The biggest take away here would be for merchants with very small ticket sizes. It would be in their best interest to avoid PIN debit. As a percentage of the transaction amount, signature debit would be their most cost effective option.
Another Important consideration:
Before making changes to how you accept payments just based on your per transaction size, take a look at how much regulated debit you are accepting now. Review your merchant statement or ask your processor about your regulated debit volume.
While you’re at it check and see what your processors is charging you for regulated, and unregulated debit. Make sure to specifically as about signature and PIN debit rates for both transaction types.
You might find that you accept a lot of regulated signature debit, but your pricing on those cards is the same as unregulated, meaning you are not seeing any of the cost savings of those transactions. You might also find that other transaction fees make one transaction type less cost effective that it should be. If this is the case its probably time to re-evaluate your current setup and see what other options are available.
If you have any questions understand a processing statement feel free to reach out to us at 800-898-3436, and we will do breakdown and explanation on any merchant processing statement. You can also email us.
Starting early in 2019, many businesses in the US will lose the ability to force transactions. A forced sales happens when a merchant uses an existing authorization number to push a transaction into the settlement system. While many businesses will never have to do this, it is very common for others. Legitimate reasons for forcing transactions include when sales are processed offline such as a mobile terminal without access to a cellular network, or merchants who still manually imprint cards.
The problem with forcing transactions, is that there is no ability to verify the authorization number before processing the sale. So this is an extremely common method that criminals use to defraud cardholders and processors. They just enter a card number and some random digits for an authorization number and process the card. This has a variety of consequences, but generally ends in the card holder or card issuer requesting a chargeback.
About a year ago, card associations decided they were fed up with the amount of fraud being committed using forced sales so they passed a new regulation requiring processors to disable the ability to force sales for all businesses and only allow it on a case by case basis. This regulation goes into effect in January and will remove the ability to force transactions for most merchants. Some processors are taking it a step further and making it very difficult to force sales even for businesses who have a legitimate need to do so.
So, if you are a business who routinely or occasionally needs to force transactions, be aware that this function is likely to disappear from your terminal, POS system, or payment gateway in January. If you have a legitimate need for it, you will likely be granted access to the function, but it may be literally on a case by case basis.
Colorado’s Online Sales Tax Mess Disaster
While collecting sales tax is a complicated process for ecommerce businesses, Colorado just made it a million times worse by requiring online retailers, both instate and out of state, to collect and remit taxes for sales made in the state of Colorado. Unlike most states who have attempted to make collecting and remitting sales tax easier, Colorado has an extremely complex sales taxation mechanism with dozens of taxation districts and even within these districts the total taxes can be different because Colorado collects taxes based on numerous factors. And to make it even worse, Colorado has a home rule law, where different cities are allowed to control the collection process entirely.
Effective Dec. 1, 2018, the Colorado Department of Revenue will adopt new sales tax rules. The new rules state that sales tax must be collected and remitted based on the jurisdiction’s tax rate at the point of delivery for the taxable good when taxable goods are delivered to a Colorado address outside the retailer’s jurisdiction. This includes any applicable state-administered local and special district taxes. For example, if a retailer delivers taxable goods to a customer’s address, sales tax must now be collected at the rate effective for the customer’s address, not the taxes that are in common between the customer’s address and the seller’s location. For a complete list of location/jurisdiction codes for sales tax filing go here.
So, an out of state online retailer will have to figure out the specific taxation rate depending on the shipping address of the customer at the time of checkout. And, then will have to figure out how to remit those taxes to the state and/or city themself. In other states with consolidated sales tax rates, this isn’t such a problem, but in states like Colorado with complex sales taxation, it is a nightmare for businesses trying to comply with the state’s policies. This is a clear example of putting the cart before the horse and is going to cause serious problems for the few small remaining online retailers who have so far managed to not get put out of business by Amazon.
