Merchant Account Blog - Straight Pass Through » Straight Pass Through

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.

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.

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.

Let’s Get Rid of Your EIRF!

Robb Lejuwaan — Wed, 23 Apr 2008 13:30:45 +0000

If you are seeing a Visa transaction category named “EIRF” on your merchant account statement you are probably paying much more in discount fees than you need to. If you do not know what EIRF is, read this post and then come back: What is EIRF?

So how do we get rid of EIRF? Here are some options:

1. Make sure your merchant account is set up correctly – I just reviewed a merchant account statement for a 100% “card not present” merchant. They have over 95% of their Visa transactions going to either EIRF or EIRF debit. Why? Their account was set up retail which means their address verification service (AVS) guidelines require an exact match for zip codes from the customers issuing bank.

Solution: Have your merchant account changed to a MOTO (mail order telephone order) account. If you do this, as long as there are any numbers populated in the street number and zip code areas, your EIRF will will pretty much disappear. MOTO accounts do not require the matching address information that a retail account does.

2. Make sure your employees never skip a terminal prompt and set up your software or payment gateway to require the appropriate fields to be entered. If one of these is skipped, you may have yourself an EIRF transaction.

Solution: Train your employees and/or make sure your payment gateways require this information to be entered.

3. Batch your transactions every 24 hours. If a transaction is authorized and does not batch with in 24-hours you will have an EIRF downgrade.

Solution: See if you can set up your terminal, software or payment gateway to auto-batch at the same time every day. Call your merchant account provider to see what time they suggest for this.

Give these solutions a try, if they don’t work feel free to write me . I will be happy to work with you find another solution.

Interchange Compliance – Guidelines

Robb Lejuwaan — Fri, 28 Mar 2008 01:03:29 +0000

Rules. It seems like we have more rules in our lives every day doesn’t it? I am writing this post to make you aware of some more rules. These rules are for merchant accounts and if you don’t follow them you will you will be fined! Well maybe not fined but you will end up paying more for your merchant account.

It would be real nice if these rules were posted for all merchants to see and then follow. However, that is not the case. Finding what these rules are, even in this age of the internet, is extremely hard to do. That is where I come in. I may not be an interchange compliance expert but I do know the key rules that apply to most of my clients.

Let’s look at how this system of rules (guidelines) work. Here are a few examples:

Example one: You own a book store and you have 34 transactions in one day, all swiped and face to face. You have a new point of sale (POS) system that unbeknown to you was not set up to auto batch at night. The result? Your authorized transactions just sit there, they don’t batch and no money is deposited into your bank account. Best of all of the Visa transactions that do not settle with in 24 hours will be downgraded to a card category named EIRF . Cost of the fine – .76% increase to your discount rate and that is if you have straight pass through . If you have tiers on your merchant account statement like “mid-qual” the penalty will probably be much worse, even up to 2.0% or more!

Example two: You own a B2B cigar distributorship, so most of your transactions are with business or commercial cards. You were set up with a payment gateway like authorize.net when you opened your merchant account. When you login in to the gateway to enter a transaction you are not asked for a tax amount. This is results in a downgrade to a card category named Commercial Card Standard. Cost of fine – .85% increase to your discount rate if you have straight pass through.

How is a merchant to know if these downgrades are happening to them? Would your monthly statement tell you? Maybe, but have you tried to read one of those lately? How about your merchant account sales rep? Maybe, but I have spoke to many that did not even know there were more categories than “qualified,” “mid-qualified” and non-qualified” (I am not exaggerating at all!). So what are you to do? Find somebody who knows this stuff. Whether it is me or someone else does not matter just find someone and have them review your merchant account statement. You will be happy you did.

To help you along with this tomorrow I will be writing part two of this post and will provide you with a list of the 10 most important interchange guidelines to know about. In the mean time if you would like me to review your merchant account statement you can fax it to my attention at (714) 624-3833 or fill out the form here .

April 2008 Interchange Changes

Robb Lejuwaan — Tue, 25 Mar 2008 16:48:24 +0000

I have been seeing competing merchant account providers raising their rates because Visa and MasterCard are making some adjustments to interchange rates. So what is really going on? Are the interchange rates really increasing? Here is what I know:

Visa

Effective April 2008 Visa is raising their "Signature Preferred – card not present" rates by .10%.

Here is a link to Visa’s current interchange rate guide: Visa Interchange Rates

MasterCard

Effective April 2008 MasterCard is adding new Merit 1 interchange categories for Insurance and Real Estate. These new levels will be pointed to "non-qual" categories by most merchant account providers.

Here is a link to MasterCard’s new interchange rate guide: MC Interchange Rates

So if your merchant account provider is raising your rates across the board it may be time for you to look elsewhere. If you are ready to see how much a straight pass through merchant account can save you go here and fill out the form or give me a call .

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.

Straight Pass Through Explained

Robb Lejuwaan — Wed, 27 Feb 2008 13:00:00 +0000

Check out one of my Power Point presentations about merchant accounts and straight pass through:

| View | Upload your own

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 Secrets – Eight Ways to Save Money

Robb Lejuwaan — Mon, 19 Nov 2007 16:07:09 +0000

I know the word “secrets” could be construed as an overstatement. However, I talk to merchants from all over the country every day and most of them do not know one thing about how to keep merchant account fees as low as possible.

Why is there a general ignorance about these methods? It is simple, the information is in the hands of companies that make more money if you don’t know this information. No, I am not saying there is some dark, industry wide conspiracy to keep merchants in the dark. I am just saying the motive to share this information is not present. Can you imagine a gasoline company coaching people how they can increase their gas mileage? So it is with many merchant account providers.

So why am I sharing this information? The way my company is set up, we do not profit from you making mistakes with your merchant account. Therefore, we are motivated to inform you, the merchant, so we can stand out above our competition.

What are these eight ways to save? We’ll get started on my next post.

Merchant Account Blog - Straight Pass Through » Straight Pass Through

Straight Pass Through Highlighted by LA Times

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What is Straight Pass Through – Video

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The Three Price Points of a Merchant Account

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Let’s Get Rid of Your EIRF!

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Interchange Compliance – Guidelines

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April 2008 Interchange Changes

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An SPT Processing Statement is a Sales Tool? What?

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Straight Pass Through Explained

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Debit or Credit?

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