Merchant Account Blog - Straight Pass Through » Interchange Plus

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.

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?

Video: It’s Time to go Interchange Plus! (October Rates Changes)

Robb Lejuwaan — Fri, 22 Aug 2008 00:15:10 +0000

Watch this video to learn about changes to Interchange coming in October and why, if you have a merchant account with tiers (qualified, mid-qualified and non-qualified), it is time to switch your account to an Interchange Plus price model.

Check back here in the next few days for more specifics on the coming changes to Interchange.

Case Study: Napa Valley Winery

Robb Lejuwaan — Mon, 18 Aug 2008 17:41:42 +0000

Case Study – Winery

Business Type: Napa Valley Winery (specific name withheld)

Initial Status: To the untrained eye this merchant account statement looked just fine; here are a few of the problems that stood out to me:

One merchant account for both their tasting room and wine club
25% of there Visa transactions going to a “non-qualified” status
Transactions being grouped into “mid-qual” and “non-qual”
No rebate given on debit card transactions
Effective rate of 2.76%
Base rate of 1.77%
Mid-qual rate of 2.35%
Non-Qual rate of 3.35%
Transaction fee broken up into two line items on the statement totaling $.30
Old Tranz 330 terminals in the sting room

The controller of this winery very was very committed to their local bank and satisfied with the fees. In other words, I was privileged to even get a look at their merchant account statement.

Solution: Here is what I did to get this merchant account in shape:

1. Split up the account into to accounts, one for the tasting room and one for the wine club. I did this because it will help to reduce the amount of wine club transactions that end up coming in at a higher rate. Also it will give the winery a clearer picture of how each profit center is performing.

2. Removed the broad and expensive categories of “mid-qual” and “non-qual” and replaced them with transaction specific categories that have no hidden profit added to them.

3. Gave them the following rates:

Tasting Room – Retail account with a base discount rate of 1.90% + $.15 per transaction and straight pass through on all their surcharged transactions.

Wine Club – MOTO account with a base discount rate of 2.21% + $.15 per transaction and straight pass through on all their surcharged transactions.

4. Provided a brand new VeriFone Vx570 terminal for the tasting room.

5. After receiving the first statement I reviewed it and found that one of the tasting room employees was skipping the prompt for an invoice number when a customer called in an order. The result was some transactions coming in at a higher rate. I was able to talk to the tasting room manager and prevent that from happening any more.

Results: We brought down there effective rate from 2.76% to 2.32%, a .54% reduction. Dollars wise, the winery ended up saving $665.02 per month or $7980.25 a year.

The controller accepted my offer and told me the hardest part of the whole process was calling her bank to let them know about the switch.

If you would like to see how I would get your merchant account in shape click here.

Video – It Could Happen to You! – Save 22%!

Robb Lejuwaan — Thu, 14 Aug 2008 23:20:25 +0000

Watch this video and save significant money on your merchant account.

What is Straight Pass Through – Video

Robb Lejuwaan — Tue, 29 Jul 2008 08:32:04 +0000

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.

Robb Makes it into US News and World Report!

Robb Lejuwaan — Mon, 07 Jul 2008 22:17:49 +0000

I received a call from a reporter at US News an World Report two weeks ago. His name was Matt Bandyk, a business writer for the magazine. He had found me through my other blog straightpassthroug.biz and he had some questions about how businesses could lower their merchant account processing fees. We talked for over a half hour and the I provided him contact information for two of my favorite clients who he also interviewed for the article. That is enough of my story, here is a link to the article:

How to Deal With Credit Card Mumbo Jumbo

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.

Merchant Accounts for the Rich and Famous

Robb Lejuwaan — Mon, 10 Mar 2008 20:04:44 +0000

Have you ever wondered what kind of merchant account the rich and famous businesses of the Fortune 500 have? Just in case you have the answer is Interchange Plus .

What is Interchange Plus?

First lets start by defining Interchange . Interchange is the set discount rates from Visa and MasterCard for various types of businesses and credit card transactions. These rates represent the cost of the service a merchant account provider has and that cost is the same all providers. Click the links below to see what these rates look like:

Visa Interchange Rates

MasterCard Interchange Rates

Interchange Plus Defined

Simply put, Interchange Plus is the Interchange rates plus a margin for the merchant account provider. The margin will be expressed as either a discount rate, such as .35%, and/or a transaction fee, such as $.15 a transaction.

What Are the Advantages of Interchange Plus?

There are two reasons to go with this pricing model for your merchant account:

Simplified Pricing

First, it strips away the ability to hide fees in the "mid-qual" and "non-qual" categories. This allows you to shop around and compare "apples to apples" rates. So if you were to call three merchant account providers you could say, "I want Interchange Plus pricing, what is your margin?" The answer you would receive will depend on your volume but would go something like this, ".50% and $.10per transaction." If the next company you call tells you they will give you .35% and no transaction fee, you would clearly know who had the better pricing.

Rebates on Credits

The second reason to go with this model is to receive a refund on all credits your business issues. With a normal merchant account you are charged on the gross amount of credit card transactions. If you have $10,000 in credits you still pay the full discount rate on those credits. With interchange Plus you are charged on your net amount of sales. In other words, when you issue a credit you receive a rebate for close to the full discount amount you paid when the transaction originally went through.

A good example of how this benefits a business is with a hotel client of mine. Often their clients would reserve a room with one credit card and then pay with another. As a result they were issuing over 50 credits equaling over $10,000 a month. When I set them up with Interchange plus they saved $263.80 a month just by receiving rebates on all the credits they issued.

Get Interchange Plus for your Business

If this type of merchant account sounds interesting to you contact me and I will show you how this type of account can benefit your company’s bottom line.

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.)

Merchant Account Blog - Straight Pass Through » Interchange Plus

10 Things Supermarkets Need to Know about Merchant Accounts

Related Posts

Insiders Thoughts on Interchange Plus

Related Posts

Video: It’s Time to go Interchange Plus! (October Rates Changes)

Related Posts

Case Study: Napa Valley Winery

Related Posts

Video – It Could Happen to You! – Save 22%!

Related Posts

What is Straight Pass Through – Video

Related Posts

Robb Makes it into US News and World Report!

How to Deal With Credit Card Mumbo Jumbo

Related Posts

An SPT Processing Statement is a Sales Tool? What?

Related Posts

Merchant Accounts for the Rich and Famous

Related Posts

Debit or Credit?

Related Posts