SmartBusiness
01-19-2008, 03:41 PM
Do you accept credit cards now? Thinking about it? You should. It can make it easy to get paid faster, and also make your billing time a bit faster. There are some hazards with dealing with credit card processors though. If you already accept credit cards, please keep reading.
The credit card processing industry is probably one of the most deceptive and greediest of any of your suppliers. There is only a handful of credit card processing companies. Names like First Data, Nova, RBS Lynk. There are thousands of resellers of credit card processing, including your local bank. These companies simply set you up, markup the processing fees, and move on. There is nothing wrong with this, because you cannot open an account directly with Master Card or Visa, or most of the major processors. You just need to now what you are actually being charged for their services. This is where the problem comes in.
If your cards are currently being processed by First Data, you have no idea what you’re paying for processing. Because First Data will not tell you. Look at your monthly statement and you’ll see a series of charges called "interchange fees". These fees are in addition to whatever your discount rate is. The "discount rate" is the fee that the processor keeps for the services. First Data customers pay their discount rate, plus ridiculous amounts for "interchange fees". You think you’re paying about 2%, when in fact your actually paying closer to 5%.
Here’s the deal when shopping for a credit card processor:
1. The discount rate means very little. Processors advertise rates as low as 1.60%. It means nothing. You will never be charged a rate that low. Why? Because those lowball rates are for "qualified" sales. You will almost never, ever, make a qualified sale. Every sale you make will be downgraded from "qualified". If any of the following occurs, your transaction in no longer qualified.
* Keyed in sale. (not swiped).
* Business or corporate cards
* Rewards or miles cards.
* Wrong address, zip, or security code.
Get the point? You’ll never be charged the lowball rate that you signed up for.
1. You need to shop for a processor that will give you 3 discount rates."Qualified Rate’ – Lowball rate which you will never be charged
"Mid Qualified rate" – This is the most important. Most of your sales if you enter them correctly, will downgrade to Mid-qualified.
"Non-Qualified rate" – This is the worst case and the absolute highest rate you can be charged. It’s not terribly high, but at least you know exactly what you are paying if the card is non-qualified. With "interchange rates" you never know what you are being charged.
2. Below is a fair set of rates.
Qualified - 1.80%
Mid Qualified 2.30%
Non Qualified 2.80%
There may be a small charge added like 25 cents in addition to the rate. In this industry, where the normal ticket sale (charge amount) is fairly high, the 25 cents per transaction is not significant.
The point is… you know that no matter what…you will never, ever be charged more that 2.80% for your worst case card, with the above scenario. The rates you actually negotiate may be a bit lower or higher than the example above.
If you are shopping for a credit card company, and your processor uses First Data, I advise you to run, don’t walk, run as fast as possible. I have a business friend that asked me to review his First Data statement. His discount rate was a respectable 2.20%. But he was being charged an interchange fee of +1.95% for every downgrade. His effective rate was
4.15% on every sale he made. He was getting screwed silly.
OK. Time to look for a new, or replacement credit card carrier. The best and fairest deal I have found amongst all the credit card thieves is RBS LYNK. They are a gigantic processor owned by The Royal Bank of Scotland. They also own Citizens Bank which there are plenty of in New England. RBSLynk will give you competitive rates and actually charge you those rates. No interchange fees or other hidden charges. Their customer phone service is fantastic, and you can understand their statements. I'd recommend calling any Citizens and speaking to their credit card processing salesperson, rather than calling the RBS 800 #. It'a easier to deal with a local person and they have road salesman that will meet with you at your convenience.
Equipment
Do not buy, lease or rent your terminal from the processing company. Just buy the terminal online from a diiscount equipment company like Payment Stuff or Merchant Warehouse. The Hypercom T7plus is the workhorse standard of the industry and costs about $190.00. Don't let these equipment guys try to sell you processing also. Stick with RBSLynk for that. RBSLynk will walk you through the programming on the phone.
The credit card processing industry is probably one of the most deceptive and greediest of any of your suppliers. There is only a handful of credit card processing companies. Names like First Data, Nova, RBS Lynk. There are thousands of resellers of credit card processing, including your local bank. These companies simply set you up, markup the processing fees, and move on. There is nothing wrong with this, because you cannot open an account directly with Master Card or Visa, or most of the major processors. You just need to now what you are actually being charged for their services. This is where the problem comes in.
If your cards are currently being processed by First Data, you have no idea what you’re paying for processing. Because First Data will not tell you. Look at your monthly statement and you’ll see a series of charges called "interchange fees". These fees are in addition to whatever your discount rate is. The "discount rate" is the fee that the processor keeps for the services. First Data customers pay their discount rate, plus ridiculous amounts for "interchange fees". You think you’re paying about 2%, when in fact your actually paying closer to 5%.
Here’s the deal when shopping for a credit card processor:
1. The discount rate means very little. Processors advertise rates as low as 1.60%. It means nothing. You will never be charged a rate that low. Why? Because those lowball rates are for "qualified" sales. You will almost never, ever, make a qualified sale. Every sale you make will be downgraded from "qualified". If any of the following occurs, your transaction in no longer qualified.
* Keyed in sale. (not swiped).
* Business or corporate cards
* Rewards or miles cards.
* Wrong address, zip, or security code.
Get the point? You’ll never be charged the lowball rate that you signed up for.
1. You need to shop for a processor that will give you 3 discount rates."Qualified Rate’ – Lowball rate which you will never be charged
"Mid Qualified rate" – This is the most important. Most of your sales if you enter them correctly, will downgrade to Mid-qualified.
"Non-Qualified rate" – This is the worst case and the absolute highest rate you can be charged. It’s not terribly high, but at least you know exactly what you are paying if the card is non-qualified. With "interchange rates" you never know what you are being charged.
2. Below is a fair set of rates.
Qualified - 1.80%
Mid Qualified 2.30%
Non Qualified 2.80%
There may be a small charge added like 25 cents in addition to the rate. In this industry, where the normal ticket sale (charge amount) is fairly high, the 25 cents per transaction is not significant.
The point is… you know that no matter what…you will never, ever be charged more that 2.80% for your worst case card, with the above scenario. The rates you actually negotiate may be a bit lower or higher than the example above.
If you are shopping for a credit card company, and your processor uses First Data, I advise you to run, don’t walk, run as fast as possible. I have a business friend that asked me to review his First Data statement. His discount rate was a respectable 2.20%. But he was being charged an interchange fee of +1.95% for every downgrade. His effective rate was
4.15% on every sale he made. He was getting screwed silly.
OK. Time to look for a new, or replacement credit card carrier. The best and fairest deal I have found amongst all the credit card thieves is RBS LYNK. They are a gigantic processor owned by The Royal Bank of Scotland. They also own Citizens Bank which there are plenty of in New England. RBSLynk will give you competitive rates and actually charge you those rates. No interchange fees or other hidden charges. Their customer phone service is fantastic, and you can understand their statements. I'd recommend calling any Citizens and speaking to their credit card processing salesperson, rather than calling the RBS 800 #. It'a easier to deal with a local person and they have road salesman that will meet with you at your convenience.
Equipment
Do not buy, lease or rent your terminal from the processing company. Just buy the terminal online from a diiscount equipment company like Payment Stuff or Merchant Warehouse. The Hypercom T7plus is the workhorse standard of the industry and costs about $190.00. Don't let these equipment guys try to sell you processing also. Stick with RBSLynk for that. RBSLynk will walk you through the programming on the phone.