Merchant Account Blog - Straight Pass Through » Rates and Fees

Why You May Need Multiple Merchant Accounts

Robb Lejuwaan — Fri, 12 Dec 2008 15:58:34 +0000

From time to time I review the search terms and phrases that being people to this blog to get ideas for posts. Today one of the first search phrases was “are you allowed to have two merchant accounts?” So here is a quick answer to that question – yes.

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.

More on Free Authorize.net

Robb Lejuwaan — Wed, 10 Dec 2008 18:42:55 +0000

Back in August of this year I wrote a post about freeauthnet.com offer of Authorize.net for “free;” you can see that post here. I tried to show that a free authorize.net account ended up costing an extra $232.40 more than if you just paid the $15 set up fee for authorize.net through my company, Cocard Synergy. Those numbers are still true today but I have changed my mind on what we are offering. I have decided to pay the $15 set up fee for all our new clients from this point forward and still offer the same pricing on the monthly fees. So here are the two offers side by side:

Authorize.net Fees

Fees	Freeauthnet.com	Cocard Synergy
Setup Fee	$0	$0
Monthly Gateway Fee	$15.95	$12.50
Transaction Fee	$0	First 250 free, then $.05

Not too sexy is it? If you go with Cocard Synergy you would save a whopping $41.40 per year. It’s a good thing that is not where the savings stops! When we compare the merchant accounts offered by both companies the savings jump up.

Merchant Account Fees

Fees	Freeauthnet.com	Cocard Synergy
Base Discount Rate	2.14%	Cost Plus .30 %
Transaction Fee	$.24	$.20
Statement Fee	$8.95	$7.50

As you can see from the chart above the Base Discount Rates differ greatly. Freeauthnet.com uses tiers for their price model, Cocard Synergy uses “straight pass through.” If you do not know the difference between these two price models check out this short video that explains it all – What is Straight Pass Through.

Because I do not know what freeauthnet.com charges for their "mid-qualified" and "non-qualified" tiers I cant figure out the price difference. What I can tell you is it is extremely rare a tiered rate program is cheaper than a straight pass through program. On top of that Cocard Synergy does not have any of the following:

Minimum monthly fee
Annual fee
Early termination fee

Again, I am not sure if freeauthnet.com has any of these fees or not. However, typically when a company chooses to give their customers tiered pricing they have all three of those fees.

Bottom Line: I believe Cocard Synergy has the best free authorize.net program available in the market place today. If I am wrong please leave a comment and let me know; I always invite opposing opinions on this blog.

If you would like to take advantage of this offer just go hear:

Cocard Synergy Free Authorize.net Offer.

Straight Pass Through Highlighted by LA Times

Robb Lejuwaan — Wed, 10 Dec 2008 05:43:13 +0000

Yesterday I saw the traffic of this blog triple and I had no idea why. I did a little research and I found out the Los Angles Times mentioned the term “straigh pass through” in a business focused column written by Karen E. Klein yesterday. You an go here to see the column or just read it below:

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.

Merchant Account Compliance Fees – Legit?

Robb Lejuwaan — Tue, 09 Dec 2008 00:11:44 +0000

As you may know, I review business merchant account statements on regular basis. One thing I keep seeing more and more on statements are terms like “Annual Compliance Service Fee” or “PCI Compliance Program.” The shocking thing about these fees is how much they are; I have a statement on my desk that reads $119.75 for such a fee. So what are these fees for? What do you get from them? Are they legitimate or just another profit center for merchant account providers?

I am sure there are going to be some industry insiders that wildly disagree with what I am about to say, but here goes any way. I believe these fees, for the most part, are just another profit center for this industry. Here is why:

If you pay these fees are you made PCI Complaint? Answer: No you are not.
Are you given tools or guides for becoming PCI Compliant when you pay these fees? Answer: Only sometimes.
If you have a security breach and you were not following the rules of the PCI Security Standards Council are you insured against the fines you’ll receive? Answer: Probably not.

So what are you getting for these fees? Most of the time – zip, nada, and nothing!

I know there are exceptions to this but they are few and far between.

The next issue I have with these fees is they typically are added without any foreknowledge of the merchant. In other words they just show up on the statement, with what seems to be hope that the merchant will not see them. If these fees are legitimate why the secrecy? If these fees bring real value why not communicate what that value is? I think the answer is obvious – they provide little to no value so the fees are snuck on to the statement.

The last issue I am going to bring up (I could bring up many more!) is the lack of choice. Typically these fees are not optional, they are mandatory. These fees almost have a feel like they were mandated by the US Government or maybe even God! How dare we question such fees! Here is why I am puzzled about the lack of an option. I have a client that is a restaurant, they have a band new terminal and pin pad, the software file that was installed on that terminal is PCI compliant, the Pin Pad is PCI-PED approved, they have taken their PCI Self Questionnaire. So why do they need to pay this fee, they are compliant, why don’t they have the option to say no to this fee? That would be fair and logical wouldn’t it? I am afraid the answer is that providing such an option would reduce the profit of the merchant account provider.

The truth is that PCI Compliance has created some much needed data security guidelines while at the same time providing a wonderful tool to increase profits for this industry. We can use the fear of a $50,000 fine for not being compliant to manipulate you into paying fees like these. I know this hard to believe that anyone in the financial services area would use such tactics to increase profit. Wait a minute, that is not hard to believe at all is it!

Here are my suggestions for dealing with these fees:

1. If you see these fees on your statements call your provider and ask what you are receiving in return for your money. If you don’t like their answer find a provider who either does not charge these type of fees or actually provides something of value for the fees.

2. Educate yourself on becoming and staying PCI Compliant. Here are some links check out:

The Basics of PCI Compliance

PCI Compliance Guide

PCI Security Council

Security Metrics (They will assist you in becoming compliant)

PCI DSS News and Information Blog

PCI Compliance Demystified blog

Bottom line: Educate yourself about PCI Compliance, take what ever steps you must to become PCI compliant and stop paying these fees if they provide no real value for your business.

Please feel free to add your comments below. I would love to have someone defend these fees, I am very open to being wrong on this.

Visa and MasterCard Interchange Program Changes

Robb Lejuwaan — Sat, 06 Dec 2008 00:54:30 +0000

I had planned to write this post several months ago but we have been so incredibly busy that I had to put this on the back burner. So finally, here is a summary of the key changes that occurred in October to Interchange from Visa, MasterCard:

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.

Interchange Program	Old Rate	New Rate
Business Card -Level 2	2.00% + $0.10	2.05% + $0.10
Business Card-Standard	2.70% + $0.10	2.95% + $0.10
Purchasing Card-Level 2	2.00% + $0.10	2.05% + $0.10
Purchasing Card-Standard	2.70% + $0.10	2.95% + $0.10
Corporate Card-Level 2	2.00% + $0.10	2.05% + $0.10
Corporate Card-Standard	2.70% + $0.10	2.95% + $0.10

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.

Interchange Program	Old Rate	New Rate
Corporate Card-Retail	2.20% + $0.10	2.10% + $0.10
Corporate Card-Electronic	2.20% + $0.10	2.25% + $0.10
Purchasing Card-Retail	2.20% + $0.10	2.30% + $0.10
Purchasing Card-Card Not Present	2.40% + $0.10	2.55% + $0.10
Purchasing Card-Electronic	2.45% + $0.10	2.65% + $0.10
GSA Large Ticket	0.95% + $35.00 (1.35% min.)	1.20% + $39.00

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:

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.
Card must be issued in US
Merchant Verification Value must be present and valid
CPS requirements are met
Processing code must be 50
Market specific data identifier must be B (Bill Payment)
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.

Quickbooks Compatible Merchant Accounts Can Save You Big $$

Robb Lejuwaan — Thu, 18 Sep 2008 18:45:05 +0000

I just added a new client that uses QuickBooks Pro 2008 to run their transactions. They were setup with Quickbooks Merchant Services because they thought they had no other choice. Just to make sure that was the case they went searching on the internet and came across this blog. They filled out a form requesting a merchant account analysis and with 48 hours made the switch to Cocard Synergy as their merchant account provider. Why did they act so quickly? Here are the main reasons:

We were able to lower their rates significantly resulting in a monthly savings somewhere between $800 – $1000 per month!
We set them up with a plug-in that allows them to continue to enter their transactions inside of QuickBooks
We guaranteed their effective rate would be 1.01% below their previous effective rate with QuickBooks Merchant Services.
Our guarantee says if we miscalculated the savings we will refund the difference and lower their rate further to match our guaranteed effective rate.

You may be wondering if this is normal experience for merchants with Quickbooks Merchant Services and all I can say is from my experience this is pretty much the norm. In case your wondering what type of credit card volume this merchant had it was about $85,000 per month in Visa, MasterCard and Discover Volume. Now my company’s monthly profit on this deal is about $200 that means QuickBooks’ profit was somewhere between $1000 and $1200 per month!! Wow, that is just amazing!

So if you, or someone you know, uses Quickbooks and Quickbooks Merchant Services stop it! You are over paying for your merchant account services. If you want to start saving on your merchant account and still be able to process transactions through the QuickBooks accounting software fill out the same form my newest client did. I guarantee you will not regret your decision!

10 Things Supermarkets Need to Know about Merchant Accounts

Robb Lejuwaan — Thu, 18 Sep 2008 06:37:26 +0000

Do you or one of your clients operate a supermarket? Is so, there are a few things you should know that could result in some significant savings on merchant account fees. Here is the list:

1. Visa has lower Interchange rates for consumer cards used at a supermarket:

TRANACTION TYPE	RETAIL	SUPERMARKET
Swiped Consumer Card	1.54% + $.10	1.24% + $.05
Swiped Debit Card (Less than $19.41)	1.03% + $.15	1.03% +$.15
Swiped Debit Card (More than $19.41)	1.03% + $.15	Flat $.35

2. MasterCard has lower Interchange Rates for consumer cards used at a supermarket:

TRANACTION TYPE	RETAIL	SUPERMARKET
Swiped Consumer Card	1.58% + $.10	1.48% + $.05
Swiped Debit Card (Less than $19.41)	1.05% + $.15	1.05% +$.15
Swiped Debit Card (More than $19.41)	1.05% + $.15	Flat $.35

3. Discover has lower Interchange Rates for consumer cards used at a supermarket:

TRANACTION TYPE	RETAIL	SUPERMARKET
Swiped Consumer Card	1.62% + $.10	1.40% + $.05
Swiped Debit Card	1.02% + $.16	1.02% +$.16

4. Pin Based debit network fees are lower for supermarkets; here are a few examples:

DEBIT NETWORK	RETAIL	SUPERMARKET
Interlink	.75% + $.15 (Capped at $.50)	$.24
Star	1.25% + $.03 (Capped at $.45)	$.24
Pulse	.65% + $.10 (No cap)	$.21

5. If a merchant account for a supermarket is not set up with Interchange Plus pricing the merchant will not receive these special, supermarket rates. In other words if the merchant account has rate tiers such as “qualified”, “mid-qualified” and “non-qualified” then they are not receiving the benefit due them.

6. To received these lower supermarket Interchange rates the merchant account must be set up with very specific details when it is created. So make sure you are using a merchant account provider that has experience in this area.

7. The acceptable MCC Code required for these rates is 5411.

8. Some banks still require supermarket merchants to register with Visa and/or MasterCard as supermarkets. To do so questionnaires must be filled out with questions like, “how much of the floor space is used for perishable items?” And “How many register lanes do you have?” If you are asked to complete these registrations ask the person you are working with at the merchant account provider if you will pass the tests for certification. If you don’t you may waste a lot of time filling out forms and fielding questions from Visa and MasterCard.

9. If you do not want to go through the process of being certified keep searching for a different merchant account provider that does not require the registration; there should be plenty of them out there.

10. Supermarkets often have fairly sophisticated Point of Sale Software they are using. Make sure your POS Software is certified with the merchant account provider you are planning to use. I have seen many occasions where a supermarket chose POS software only to find out they would have to switch merchant account providers in order to use the new software.

BOTTOM LINE: If you are a supermarket know that you should be receiving lower rates than other retail merchants and find someone who knows how to set you up correctly to recieve these better rates.

If you have any questions about supermarket Interchange rates or anything else to do with merchant accounts feel free to contact me anytime.

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.

Free Authorize.net? You Got It!

Robb Lejuwaan — Wed, 27 Aug 2008 06:13:57 +0000

That’s right I, Robb Lejuwaan, have chosen to give away authorize.net for nothing! My company has been charging a small fee of $25 up to this point but I just realized with a free authorize.net account I make more money!! That’s right more money for me if I give you authorize.net for free. Here is a table that shows my original and new authorize.net fees:

Fees	Original Offer	Free Authorize.net
Setup Fee	$25	$0
Gateway Fee	$12.50	$15.95
Transaction Fee	$.05 after first 250 transactions	$.09 from the first transaction

So lets say you process 200 transactions a month and you keep your account for 12 months, how would these two offers differ?

Fees	Original Offer	Free Authorize.net
Setup Fee	$25	$0
Gateway Fees	$150	$191.40
Transaction Fees	$0	$216
Total Fees	$175	$407.40

See what I mean? If you take my free authorize.net offer I make an extra $232.40! The problem is you pay an extra $232.40.

So maybe you are wondering where I am coming up with the free authorize.net numbers. I’ll tell you where from – www.freeauthnet.com. Their gateway and transaction fees are right on their website.

You also may be wondering if I am being serious about offering free authorize.net and I am; however my transaction fee will stay the same as it was originally which is $.05 after the first 250 transactions. Yes the gateway fee will be the same as freeauthnet.com but I am paying the setup fee out of my own pocket so I need to make sure I at least break even. On the other hand, if you want my original offer you are free to choose that as well.

Oh there is one other thing you will not receive if you sign up for my “free” authorize.net account, that is a merchant account with hidden fees inside the famous tiers of “mid-qualified” and “non-qualified.” In other words we will set you up with a straight pass through merchant account.

I wrote this to show you that when the word “free” shows up in any marketing, at least in the merchant account industry, that is code for “your overall cost will be much higher than if you just paid for what you were receiving”. This applies to free terminals, gateways and anything else that has a real cost to it. So beware of the word “free” and use your brain to figure out what the real cost are. If you’re lazy and just want the easiest path to take, contact me and I’ll get you your stuff for free and I’ll let you know what “free” is going to really cost you.

Insiders Thoughts on Interchange Plus

Robb Lejuwaan — Fri, 22 Aug 2008 16:08:32 +0000

I just ran across an article written by an executive at Global Payments about Interchange Plus. It was written for people who are inside the merchant account industry. In the article he concludes that Interchange Plus pricing is not the best thing for merchant account providers, for several reasons including a reduction in profit. Check out the article by clicking the link below and come back and add your comments:

Interchange Plus Pricing A Beneficial Package?

Merchant Account Blog - Straight Pass Through » Rates and Fees

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