Merchant Account Blog - Straight Pass Through » Customer Service

Video: Merchant Accounts – What to Look For and Ask About, Part 2

Robb Lejuwaan — Fri, 29 Aug 2008 23:46:29 +0000

If you haven’t watched part one of of this two part series go here to watch the first video.

The theme of part two of this series is that there is much more than just price to pay attention to when shopping for a merchant account. Watch the video and take a look at my notes below to see what I am talking about.

In part one of this series I wrote mostly about rates and contract terms to watch out for when shopping for your merchant account. In this video I talk about characteristics you should look for in your relationship manager, you know the person you call when you need something regarding your merchant account. The one person who takes full responsibility for every aspect of your account. What, you did not know a merchant was supposed to have a person like that assigned to them? Wow, I hope you watched the video!

Here is are some characteristics to look for in your merchant account relationship manager:

1. Equipment Knowledge – of your software, terminals and gateways.

2. Interchange Knowledge -to ensure your transactions are qualifying or the lowest rates.

3. Proativeness – they go the extra mile ensure your merchant account installs and operates smoothly.

4. Reachability – each of my clients have my cell phone number and I ask them to always call me first if the have a question or an issue. I do not want them wasting their time on hold waiting to talk to some call center.

5. Communicator – Clearly communicates with all parties involved with your merchant account; even third parties like software and payment away companies.

6. Cool under pressure – when things go wrong with your merchant account is your relationship manager able to take the lead, communicate with you and fix the problem or do they run and hide from you?

7. Networked – Does this person have a business network they are willing to share with you for your benefit?

8. Value Creator – Does this person look for other ways to add value to your relationship, to your business.

Last, but not least, you should like them. Life is too short to not enjoy who you are working with just to save a few dollars.

Did I miss something in my list? If you think so, please leave a comment below.

Straight Pass Through as a Lifestyle?

Robb Lejuwaan — Sat, 12 Jul 2008 18:20:18 +0000

When I first thought up the name of this blog as "Straight Pass Through" (SPT) my focus was merchant accounts alone. It was all about exposing the truth behind interchange and how it affects a business’s bottom line.

However, in the year this blog as been up my understanding of that phrase has been expanding. SPT has become more of an overall business philosophy to me that can be defined in several words – transparency, openness, sharing, listening, and most importantly, serving. That last word really sums it all up, SPT is synonymous with the phrase, "how may I serve you" and really meaning it. This is just basic "golden rule" stuff, treating others as you wold want to be treated.

Would I want to receive pricing for my merchant account that is confusing and results in me paying more than I need to for your account? No way! So I only write up accounts with clear and simple pricing. Would I want someone to not share all their knowledge with me so they could make more money off me? No way! So I share everything I know can that can benefit my clients. You probably get the idea here, this is real simple stuff.

The philosophy is so easy and simple that I am almost shocked when I see the majority of sales people and businesses not operating this way. I know U.S. business culture is moving in this direction, but wow do we have a long way go. Yesterday I was talking to a industry colleague and he was complaining that honesty does not pay off, that potential clients always seem to go with the competitor that is acting deceptively. This type of thinking is probably one of the reason why SPT is not lived out more. People feel like they must compromise their own values and ethics to be able to survive.

You can probably guess I do not agree with this line of thinking at all! In fact I am completely contrary to that line of thinking. I believe the fact that most do not operate by the idea of SPT is a great thing. Why? Because it allows me to distinguish myself from the pack. Living the SPT business life style enables me stand out and feel good about what I am providing my clients.

Speaking of clients, SPT allows me to attract the type of clients I want to work with. Are you familiar with the saying, "like attracts like?" My experience has shown me this saying is mostly accurate, we tend to attract people into our lives that share the same interests and values. So if I am deceptive and greedy in my business practice, I will attract clients of the same ilk. Many of my clients end up becoming friends and I truly enjoy serving them because they tend to operate by SPT.

I am going to stop here, I do not like to write long blog posts because they do not get read! In closing I want to say two things. First, if you have not tried to live the SPT lifestyle, try it; but don’t jut dip your toe, jump in with great passion and strong action. I guarantee you will not regret it. Secondly, if you have any questions about this topic, contact me . I love to talk about this stuff and always enjoy meeting others who work this way.

The Three Price Points of a Merchant Account

Robb Lejuwaan — Sun, 08 Jun 2008 20:42:00 +0000

How challenging can managing a merchant account be? I review 5 – 10 merchant account statements each week and almost everyone one starts out looking like it is written in a foreign language! Some statements have fees from three separate months! Other statements are extremely vague and seem to be intentionally hiding information. So the answer is that managing a merchant account can be very challenging.

Three Simple Things

Below I have included three price points for you to focus on as you manage your merchant account.

#1 – The “Front Rate”

Also known as your “base rate,” or “advertised rate.” The key thing to understand here is this rate is only good for standard consumer cards that are swiped. You may have noticed every transaction where the credit card is not present or is a rewards or corporate or a world card do not come in at the base rate, right?

As a result, many of my clients, before they come to me, have a low base rate but their effective rate is much, much higher.

Bottom line: The front rate is used to draw you to sign up of for a merchant account. The lower your front rate is the higher your back end fees are.

#2 – The “Back End Fees” or “Surcharges”

This is where most of my clients have the greatest confusion and frustration. Visa and MasterCard have something called “Interchange.” This is a guide for surcharges to be added to your base rate for transactions that do not have a standard consumer card present.

The norm in our industry is to take these surcharges from Visa and MasterCard and add percentage points before they are passed on to you. For example, if you have a retail account and a customer calls in an order with a standard consumer card, Interchange says the surcharge should be .31%. However, what I typically see on a competitor’s statement is surcharges of .81% or .91% or even 1.21%! So the merchant account provider is making an additional .50% or .60% or even .90% on each of those transactions.

You may have noticed this type of fee on the last page of your monthly statement. The list of surcharges is typically confusing to the point of frustration and most of my clients previously just paid the fees because it would take too much time to figure them all out.

So what is the solution? How can you get rid of these hidden fees? The answer is something called “straight pass through.” What this term means is having the Interchange surcharges passed through to you at cost.

What? Is that even possible? You bet it is! That is our niche at Cocard Synergy.

Normally, straight pass through is only made available to large corporations such as Macy’s, Costco and
Wal-Mart. However, we give it to each of our clients.

Bottom line: You either have hidden fees or you don’t – make sure you have straight pass through and watch your fees decline immediately.

#3 – Qualification

If your machine is not programmed correctly or you have employees that skip terminal prompts you are definitely paying more than you should be on many of your transactions.

Here is a classic example; a customer with a standard consumer card comes in and buys some widgets from your company. When the terminal prompts your employee for transaction ID the employee skips to the next prompt with out entering any information. The result? An increase of .76% on your surcharge! Ouch! And that is at straight pass through; what if your surcharges are being padded?

So every statement should be reviewed to see if prompts are being skipped or if the software or terminals need to be reprogrammed. However, if you do not know Interchange well, you will not be able to do this.
Qualification guidelines are just too complex for the person who has better things to do than study the interchange book.

Bottom line: If your merchant account provider does not review your account for qualification problems at least quarterly move on to one that does.

Summary

If these three areas above are in order, then your overall “effective rate” will be as low as it can be.

The interesting thing is that 9 out of 10 people whose statements I review do not have straight pass through and have qualification issues but they love there front rate. When I call them back with an offer to lower there fees by 10% to 55%, sometimes while increasing their front rate, they are surprised. But that is typically how it goes.

Testimonial #2

Robb Lejuwaan — Wed, 21 May 2008 23:07:43 +0000

I received a very nice, unsolicited testimonial today. This is from my main point of contact at one of my favorite clients, Horizon Moving Systems in Tuscon, AZ. This is what Susanna Main e-mailed me after we fixed an issue with their virtual point of sale:

“Robb, this is why EVERYONE wants to work with you. Because you are so good at what you do and your customer service is excellent. Thank you for all that you do for Horizon and for all the help you give me. I appreciate every little bit of it!! Have a great rest of the week!!”

Testimonial #1

Robb Lejuwaan — Fri, 16 May 2008 15:08:15 +0000

I just asked for my first testimonial from a client of mine. After reading what she wrote I think I need to start asking for more of these! Allow me to show off a little:

"I have been in the business world for over 25 years. In that time I have had the pleasure (and pain) of dealing with many vendors, tech support people and service reps. Robb Lejuwaan, from US Merchant Services, has renewed my faith and set an exemplary standard for customer service. When he first called, quite frankly, I didn’t want to be bothered and was not only suspicious of yet another sales pitch but was busy and didn’t want to even consider taking the time to switch to a different company.

He never pressured me, was patient and very professional. After 6 months I decided he deserved at least the chance to explain his services. From then on it was quick and painless! He seamlessly did the set up, it didn’t cost me any time or money except for the 6 months of savings for not doing it sooner.

I would definitely recommend Robb Lejuwaan to any business.

- Maureen Lee / Maryhill Winery , Goldendale, Wa.

The End of Business as Usual

Robb Lejuwaan — Fri, 11 Apr 2008 22:31:58 +0000

In recent weeks I have come to learn about a business person who works in one of my key industries – wine. His name is Gary Vaynerchuck and he owns a retail wine business in New York and is the world famous host ofwinelibrarytv.com.

I was recently watching an interview of his where he spoke about his transformation from old school business thought to business, or web, 2.0 style thinking. Don’t have any idea what I am talking about? First watch the video below as Chuck passionately communicates his basic business philosophy and then go buy The Clue Train Manifesto and you will get a glimpse of where business is headed.

I must say this stuff excites me! Providing customer service that goes well beyond what is expected is fun and makes me feel good inside. What about you? Do you buy into to this stuff?

An SPT Processing Statement is a Sales Tool? What?

John Robinson — Mon, 24 Mar 2008 22:10:05 +0000

by John Robinson

We know you’re successful business people. (I mean, you’re reading StraightPassThrough.biz, right?) And this means you probably have a pretty good idea who your customers are.

But what if you could use your processing statement to really market to specific customer groups? What if your statement was a powerful sales analysis tool?

Wow.

The statement, when you are receiving some form of SPT, is probably the most overlooked marketing and analysis tool. Imagine the following scenario:

Let’s say your average sale is $150. Now, for this example, you look at your statement and realize that a large percentage of your customers are using Rewards/Enhanced cards (the cards that give cash back or airline miles or whatever). On a whim, you divide the $ volume of Rewards/Enhanced transactions by their # volume.

Omigosh! That average ticket is only $75! That’s only half your total average ticket! From a marketing or positioning point of view, this would be a disaster. You see, most people who get Rewards and Enhanced card offers are usually good credit risks and more affluent than the average card holder. They should be spending more money, not less.

In this instance, you may create a campaign to push a few higher ticket items, or create some package deals to entice this audience to spend more with your company.

This is a simplistic example, but a powerful one. An SPT statement can also be used to make sure you are aiming your goods/services at the correct audience in the first place…or successfully doing so. You’d be surprised how many companies believe their credit card business is B2B when their statements claim it’s B2Consumer. And vice versa.

So pull out that statement and see who your customers are and if you’ve positioned yourself to best service them! And then keep looking to see how well you’re pulling it off. You might find this is the best marketing and sales analysis tool you’ve got.

Debit or Credit?

John Robinson — Tue, 26 Feb 2008 21:58:13 +0000

by John Robinson

Debit or Credit?

If you’re a brick-and-mortar merchant, do you accept PIN-based debit? If not, you may be missing out on a tremendous opportunity to reduce your bottom line. If so, you may not be aware of several ways to improve on that reduction, as well as a few pitfalls you should avoid.

Debit? What Do You Mean?

I’m sure most of you reading this are familiar with (and even carry) ATM cards that have either the Visa or MasterCard logo on them—meaning, of course, that they can be used like a credit card requiring signatures. However, if you flip them over, you’ll see a bunch of other logos for Star, Pulse, Accel, etc. These are the debit networks and they function a bit differently than the credit networks.

I probably should also mention that, just as there are credit cards that cannot function as ATM cards, there are ATM cards that cannot function as credit cards.

Saving $$$ Even Without PIN Numbers

All of you who take credit cards, unless your only customers are businesses—and sometimes even then—are accepting debit/check cards. You just may not know it. Some cards explicitly say “DEBIT’ on the front, usually above any Visa or MC logo. Others would need to be flipped over to look for the debit network logos.

Either way, Visa and MasterCard charge far less for debit cards being used as credit cards than they do for credit cards! The argument (made several years ago by Wal*Mart and a judge) is this: If the payment is coming directly from a customer’s checking account, and the transaction is authorized based on whether the money is there or not, why should this transaction be as expensive as a credit card’s? Compare “they either have the money or they don’t” to the risk involved with a credit card’s “they promise to pay us later” approach.

For an example comparing the costs I’ll use a retail processing environment and assume the customer is using Visa. Whatever your rate is for a regular consumer card where you got a signed receipt, subtract 0.51% and add $0.05 for the same transaction done with a debit card. That should be your cost.

0.51%! That’s a huge discount. And yet, many processors don’t inform their merchants that Visa charges so much less for debit cards. Let’s face it, 0.51% makes a fantastic addition to a processor’s profit margin if you’re not getting straight pass through.

But Wait! There’s More!

Now, as if that isn’t enough, being able to act like an ATM can create even greater savings! Now, the cost to the processors varies a little from debit network to debit network, and all processors will want to take some profit from these transactions. That being said, check out the following example:

You carry a $100 widget. Three customers come in to buy one widget apiece. Customer A will use a regular consumer credit card, Customer B a debit card that he signs for, and Customer C a debit card that he’ll use with his PIN number (as if at an ATM).

If your base discount rate is 1.89% + $0.15 but your debit is a flat $0.45 per item, this is how the costs to you would stack up:

Customer A = $2.04 (1.89% * $100 + $0.15)

Customer B = $1.58 ((1.89%-0.51%) * $100 + $0.15 + $0.05)

Customer C = $0.45 (flat per item fee)

The difference between A and B would be a 23% savings if A actually had a check card and your processor wasn’t giving you straight pass through. But the difference between A and C would be 78% if A had a check card and you had him enter his PIN!

However, you may want to consider your ticket sizes. Take the following example, where we’re changing the widget’s cost to $8.

Customer A = $0.30 (1.89% + $0.15)

Customer B = $0.31 (1.38% + $0.20)

Customer C = $0.45 (D’oh!)

If you sell almost exclusively very small ticket items, you may wish to ignore PIN-based transactions. However, as most merchants are doing $15 and up, depending on what pricing you’ve gotten, PIN-based is the way to go. If you’re a large merchant doing thousands of transactions a month, it may be worth getting sophisticated equipment that you can program to automatically ask for PIN numbers when tickets are larger and automatically ask for signatures when tickets are small. Which leads us to:

Getting the Most Bang

I used to have clients voice concern that customers would say “credit” when asked “Debit or credit?” Here’s an easy fix: Don’t ask. All you readers out there who’ve been to Target or Best Buy or wherever have experienced the little machine that, when we slide our debit cards through, instantly ask for our PIN. By not asking, you’re doing the verbal version of what Target does. (They, by the way, have a variation of those systems I mentioned above.)

Here’s the caveat: It’s against the rules to force a customer to use their PIN instead of their signature. The brilliance of the “don’t ask” method is that it puts the onus on the customer to request the other payment form. Most customers (myself included) figure, “Whatever—It’s coming out of my checking account either way,” and happily punch in that PIN number.

DO CASH REFUNDS FOR PIN TRANSACTIONS!!!

I can’t emphasize the above enough. It’s very rare, but every now and then an employee gets taught how to run transactions, PIN-based or signature-based, but isn’t told that he needs to refund cash for PIN-based transactions. And this can cause headaches. Here’s the background:

When you run a credit card transaction, the request for an authorization goes from you to the acquiring bank (the bank that’s in charge of giving you your money, then goes and “acquires” that money from the customer’s bank) who then forwards it to the customer’s bank (“Hey, does your cardholder have enough credit?”) Assuming your customer has credit, his bank will place a hold on that amount of credit and tell the acquirer to authorize the transaction. The acquirer then issues you that authorization.

This is also the procedure when a customer uses a debit card like a credit card, except that the hold is placed on actual funds. In either case, the money, whether actual funds or funds on credit, stay where they are until the transactions are captured—that is, you’ve settled a batch. At that time the acquirer will start the process of giving you your money and collecting its money from your customer’s bank.

Now, debit transactions function differently. When your customer enters that PIN, the request for an authorization goes to the acquirer and on to the card-issuing bank. Then the issuing bank withdraws the funds!!! and sends it to the acquirer, who then holds the funds and waits for the batch settlement.

What?

Yup, your customer’s account is debited immediately, as if they did an ATM transaction. In fact, an ATM transaction is basically what happened. (I’m sure you’ve been prompted for “cash back.”)

But you won’t get your money until the acquirer gets that batch. This is where the refund can become an issue.

Because the transaction is essentially a debit withdrawal, you can’t just reverse debit transactions that are being refunded. If you or an employee attempts to do so, that transaction is considered corrupted and will prevent you from settling any batch with that transaction in it.

The headache is that you’ll likely need to clear your terminal and “offline” (hand-enter and accept the price downgrade) all the credit card transactions for all days you haven’t batched.

However, debit transactions cannot be entered offline—this would double charge the customers as money was immediately withdrawn from their accounts—and you will be unable to capture those transactions to release the funds from the acquirer. (To do so would require knowing your customers’ PINs, and you don’t want that.)

Your fix here is to contact your processor and ask what the process is to get those PIN-based transactions “captured” so that the acquirer will release those funds to you. Have receipts and your batch reports clearly marking which transactions were PIN and which were not. You may also need to include a letter explaining what happened and what you need done.

Better yet, make sure employees know to give those PIN-based refunds in cash, rather than through the customers’ cards! (Remember, you’ll want to have enough cash on hand to cover any big-ticket returns!)

Still, taking PIN numbers for card-present transactions is one of the easiest and best ways to reduce your fees. The risks are far outweighed by the positives, and are easy to avoid. And due to so many people attempting to avoid increasing credit card debt, and the avoidance of carrying cash, debit cards use is rising.

So if you can, take those cards, get them at cost, and start saving a bundle!

(John Robinson is one of Robb’s compadres at US Merchant Services. He has previously been published in a letter to Inc. Magazine (”Shedding Tiers”) referring to an article on reading merchant statements. If you wish to reach him, just click here, or call 714-827-7000 x220.)

Eight Ways to Save Money – Method #6

Robb Lejuwaan — Wed, 05 Dec 2007 15:19:01 +0000

Gain Authorization/Settlement Mismatch Exceptions

In general, any variation between authorization and settlement amounts cause a downgrade resulting in higher fees. However, certain industries are allowed authorization/settlement variances. These industries include restaurants, taxi cabs and limousines, bars, taverns and cocktail lounges, beauty and barber shops and health and beauty spas.

Because an authorization amount will not include a figure for a tip, this amount typically differs from the settlement amount for industries where tipping is commonplace. For businesses whose accounts are setup with a suitable Merchant Category Code, Visa and MasterCard can recognize this and forgive mismatches up to a specific limit, which can vary by industry.

What You Can Do

Talk to your credit card processor to confirm that your industry classification exempts you from mismatch downgrades. Also ask them to make sure your account is properly coded to allow this exemption. Lastly, ask them to help you understand any mismatch limitations your industry has. Of course, if your current processor can’t help you with any of this feel free to contact me for a free merchant account analysis.

Tip of the Iceberg – Missing Debit Card Rate Reduction

Robb Lejuwaan — Wed, 07 Nov 2007 02:20:34 +0000

I am reviewed three merchant account statements today and they all have one thing in common – these businesses are not receiving a reduction in rate when a customer uses a debit card. On one statement there is no debit card activity noted at all. So just in case you have not heard or you forgot – when a customer uses a debit card your rate should be lower…if your merchant account provider is passing along the savings they receive to you.

Here are the interchange rates for Visa debit transactions:

Visa Debit Card Present 1.03% + $.15
Visa Debit Card Not Present 1.60% + $.15

Interchange for a regular swiped Visa is 1.54% so with Visa the reduction in cost is .51% for a swiped debit card and .25% for a key in one.

Here are the interchange rates for MasterCard debit transactions:

Visa Debit Card Present 1.05% + $.15
Visa Debit Card Not Present 1.64% + $.16
Interchange for a regular swiped MasterCard is 1.58% so with Visa the
reduction in cost is .53% for a swiped debit card and .25% for a key in
one.

If you do not see a rate reduction on your debit card transactions matching what is above you are paying more than you have to. In other words you do not have straight pass through and you are probably paying inflated rates on your other categories of transactions.

The savings you would receive through lower debit card rates may not be large. However, not having the lower fees is usually as strong warning sign that your merchant account is not in order. Is your merchant account set up right? Are you receiving lower rates on other transaction categories? Do you have any EIRF? Isn’t it time to find out?

To have your merchant account reviewed fill out the form here and I will show you how we can significantly reduce your overall costs.

Merchant Account Blog - Straight Pass Through » Customer Service

Video: Merchant Accounts – What to Look For and Ask About, Part 2

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