The gift card industry continues to grow at very fast pace, more than doubling in less than 3 years. Gift cards have replaced the old paper gift certificate. Gift card companies are now creating programs that cater to the small to medium size businesses with specialized programs with smaller card order minimums and lower pricing. 

Gift cards have many uses and advantages to business today.  The following are a few way that they can help:

Advantages/Benefits:

• Brings in repeat and referral business
• Retention of existing customers (each card has an average of 3 transactions)
• Helps with cash flow and float (93 days on average)
• Performed electronically – report available on-line, no more paper tracking
• Great for refunds and returns – Keeps cash in the draw
• Gives the customer what they want – 46% of the consumers surveyed would rather receive a gift card that anything else
• Great Return on Investment (ROI) up to 400%

Uses for Gift Cards – Marketing for the Merchants
Gift cards are little billboards in the customer’s wallet and they help the merchant build name recognition and gain repeat/referral customers.

The following are some uses for giftcard, that can help you think outside the box! Promotional marketing tool

• Ad space costs more than promotional gift cards
• Discount cards mailed to targeted customer group
• Used as a gift with purchase

Corporate incentives

• Sell to companies to use as employee incentives/rewards

Prepaid vehicle for recurring sales

• Coffee Shops, Dry Cleaners, Auto Detail, Oil Change Programs, etc.

Store credits, returns & refunds

• Keeps cash in the drawer

Customer appreciation and retention

• Reward loyal customers
• Turn customer disputes into retention opportunities

Fund raisers

• Sell cards at a discount to schools & non-profits, helps create traffic and goodwill in the community.

This article was written by Craig Peterson, Vice President of Business Development for TenderCard, a national gift and loyalty card solution.  Craig is a Board of Trustee for the Ohio Restaurant Association. For additional information for resellers or questions you can reach Craig at 800-383-8280 ext 277 or cpeterson@tendercard.net

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We have many clients that have multiple merchant accounts. For example, wineries typically have at least two accounts, one for their tasting room set up as a retail account and the other account for their wine club set up MOTO (mail order telephone order). Occasionally they will have a third account for their website, which is set up as a ecommerce account. We set them up this way because it helps them track distinctive parts of their business and most importantly, it saves them money.

Each type of merchant account (Retail, MOTO, Ecommerce, Restaurant, etc.) has different guidelines and rates. So if you have a retail merchant account setup for your website, your transactions will not meet the guidelines of a retail account, resulting in being downgraded which results in a higher rates. I am not going to into specific examples n the post but if you want to see an example of how this works read this post: What is EIRF?

Bottom line: Yes you can, and sometimes should, have multiple merchant accounts. Also, make sure your account is set up correctly to match the environment your transactions are being accepted in.

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Credit treatment can cut card fees

Dear Karen: I saw your recent discussion on credit card fees. I work for a credit processor and found that 85% of merchants don’t know that they can get “straight pass through” treatment to help reduce their fees and surcharges.

Answer: You’re right about the benefits of straight pass through, but it’s likely that more than 95% of small merchants are unaware of it, said Bob Carr, chairman of Heartland Payment Systems Inc. of Princeton, N.J.

Straight pass through treatment, common for larger merchants, means that you’re charged the Visa and MasterCard interchange rates without extra costs added on from various credit processors. The processing fees are listed separately, so your costs are more transparent. Few small retailers get the benefit because they don’t know to ask for it, Carr said.

Ask your credit card processor to separate out what they are charging you from the interchange rates. “You may find as many as 12 middlemen processors, all charging fees you never knew about,” he said.

I wish Karen would have quoted me but I must thank her and the Los Angles Times for mentioning this subject.

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Master Card

Change #1 – MasterCard will no longer require the registration of utility merchant locations (MCC 4900); the “U” code is no longer a requirement to qualify for existing Utility Interchange programs.

Change #2 -The following merchant categories with consumer debit transactions will no longer be eligible for the UCAF Debit (Full and Merchant), Merit I Consumer Debit, and Merit III Consumer Debit interchange programs:

• Insurance-Direct Marketing (MCC 5960)
• Insurance- Sales, Underwriting, and Premiums (MCC 6300)

Change #3 -MasterCard will no longer allow Real Estate merchants (MCC 6513) with consumer debit transactions to qualify for Merit III (Base) interchange rate programs.

Visa

Change #4 -Visa is making two adjustments that will affect U.S. transactions processed under all three commercial products (Small Business, Corporate, and Purchasing Cards):

• The Level 2 interchange rate will be increased by five basis points.
• The Standard interchange rate will be increased by 25 basis points.

Change #5 -Additionally, Visa is making adjustments specific to Visa Corporate and Visa Purchase Card products:

• For Visa Corporate products, Visa is reducing the Retail interchange rate by 10 basis points and increasing the Electronic interchange rate by five basis points.
• For Visa Purchase Card products, Visa is increasing the Retail interchange rate by 10 basis points, the Card Not Present interchange rate by 15 basis points, the Electronic interchange rate by 20 basis points, and the GSA Large Ticket rate by 25 basis points and $4.00 per transaction. The GSA Large Ticket program will no longer have a $5,000 minimum.

Change #6 -Visa is introducing a new interchange fee program and rate for domestic debt repayment transactions. The CPS Debt Repayment program (Fee Class 177, 0.35% + $0.50) is limited to Visa consumer debit cards on collectible consumer debit for auto loans, credit card payments, mortgage payments, and student loans.

• CPS/Debt Repayment requirements:
1. US Merchant registered with Visa with MCC of 6012 (Financial Institutions-Merchandise and Services) or 6051 (Non Financial Institutions- foreign currency, money orders (not wire transfer) and travelers cheques.
2. Card must be issued in US
3. Merchant Verification Value must be present and valid
4. CPS requirements are met
5. Processing code must be 50
6. Market specific data identifier must be B (Bill Payment)
7. Special condition indicator must be 9 (existing debt indicator)

And you thought you knew something about how merchant accounts work! After reading this I am sure you now have an idea of how deep the rabbit whole can go when it comes to these things. I even held back disclosing all the changes because most of them will not affect 99% of merchants.

Here are some of my summary thoughts on these changes:

• Most importantly, unless you are accepting payments from government entities or are primarily taking Visa Corporate Cards these changes will have very little, if any effect on you.
• If your rates were increased across the board due to these changes, you may have a good reason to complain since most of the Interchange rates stayed the same.
• If you are accepting credit card payments for debt repayment, Visa says you can only accept debit cards and has some very specific guidelines for doing so. If you re accepting regular cards for debt payment watch out a fine may be in your future from Visa.

My next post will reveal all the changes to Discover Interchange programs. If this post has caused a question to pop up in your mind feel free to contact me or leave a comment below; I will be sure to respond to your inquiry.

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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.

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What watch out for:

Super low discount rates – the lower the advertised rate is the greater your effective rate typically will be.

Free terminals or gateways – in business nothing is free in the long run. Chances are if you are paying nothing for a $300 terminal you are gong to receive a higher rate and a nice three year contract with a $300 early termination penalty.

Proprietary gateways, software and terminals – if you cannot use the “point of sale” products they are providing with other merchant account providers reject the offer. If you want to leave them but cannot transfer your data you are stuck! Or maybe you like buying new terminals every time you move to a new provider.

Questions to ask:

Can I have interchange plus pricing?

Do I receive rebates when I issue a credit to a customer?

Do my rates go down when a customer uses a check card? (Swiped Visa -.51% + $.05; swiped MC -.53% + $.05; keyed in Visa ad MasterCard -.25% + $.05)

Are there any other additional fees, margins, costs, etc. that you have not mentioned to me?

If you are going with a tiered rate plan ask for a break down of what card types are included in each tier.

If there is a minimum monthly discount fee, ask if that fee is waived if your discount fees for the month exceed that amount.

Is there an early termination penalty? If so, what is it?

Is there an auto renewal clause in your contract? If so, can I get rid of that?

When I have customer service issue who do I call? If they do not provide their own name or someone else’s, say good bye, you deserve better.

What is EIRF ad how can I get rid of it? If they can’t answer this basic question, say bye bye.

There are more things to look for and ask about, but this is a good start. If you have any thing you think I should add to list let me know. If you have any questions about this topic please add them to the comment section below or click the contact tab above.

NOTE: I have added a second part to this post, check it out here.

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-Processors need to have a Sponsoring Bank in order to gain access to the Visa and Master Card networks. When a Processor or other entity has made such an arrangement with a Sponsoring Bank to resell their services, they are called an Agent of that bank.

-Any entity that sells Visa or Master Card must disclose themselves as an Agent of their Sponsoring Bank. Such sales entities may be a Processor, or an ISO/Agent of the Processor or Processor/Bank alliance.

-Some banks are also their own processors, while other banks will use a Third Party Processor to handle this processing for them (in their own brand name in some cases).

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If you would like to lower your merchant account fees by switching to a “straight pass through” account go here, fill out the short form and we’ll have you saving money in no time.

If you would like us to analyze your current merchant account and show you how much a “straight pass through” merchant account can save you go here, and we’ll have the numbers back to you with in 24 hours.

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