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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• Insiders Thoughts on Interchange Plus
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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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• Interchange Compliance – Guidelines
• Merchant Accounts for the Rich and Famous

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

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

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

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

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.

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• What is Straight Pass Through – Video
• What is Straight Pass Through?
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• Eight Ways to Save Money – Method #2
• Interchange Plus Explained

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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Interchange Plus Pricing A Beneficial Package?

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

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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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Authorization

1. Your customer presents their credit card (or the card number, expiration date and security code) to you or your employee.

2. You swipe the card or key in the credit card data using either a credit card terminal, a POS system communicating over the Internet or. If this is an online transaction, a payment gateway will capture that data.  Irregardless of the method, the data is sent to the merchant account provider.

3. The merchant account provider communicates the card information to the VISA or MasterCard network.  Usually this is done via an intermediary, a larger Payment Processor.  In our case this is usually First Data or TSYS.

4. MasterCard or VISA asks the cardholder’s bank (issuing bank) if the funds are available.  If the funds are available, the transaction will be authorized and the funds will be placed on hold in the customer’s credit or debit card account.

5. The issuing bank informs MasterCard or VISA of the result of the authorization attempt (either authorized or declined).

6. MasterCard or VISA communicate the results of the authorization attempt back to the merchant account provider.

7. You receive the results of the authorization attempt.  If the authorization was successful you provide the goods or services to the customer they just paid for.

Settlement

8.  At the end of the day you “batch out” the day’s transactions to the merchant account provider.  If you are using an Online Gateway or an IP-based terminal the batching is most likely happening automatically.  If you’re not set up this way you might want to request “auto batching” from your current merchant account provider. If you are using an older dial-up terminal may have to hit a special button to initiate this process but “auto-batching” should still be available to you.

9. The merchant account provider sends the results to MasterCard or Visa.

10. The Issuing bank adds the transaction amount to the cardholder’s bill and you no longer need to be concerned about whether your client pays their credit card bill or not. Of course there are the issues of chargebacks or a refund that could pop up later.  Bottom line: collecting the transaction amount from your customer is the issuing bank’s job.

14. The Issuing bank transfers the money to the Merchant Account Provider, using an ACH (Automated Clearing House) transfer.

15. Your Merchant Account Provider deposits the proceeds into your business checking account.

And so goes the journey of a credit card transaction.  Believe it or not, there is more detail I could have added above.  However, the list above give a good simplified view of the whole process.  Questions?  Leave a comment below and I will answer you back or drop me an e-mail.

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• Video: Merchant Accounts – What to Look For and Ask About, Part 2
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• Where do Processing Fees Come From? Pt. 2
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How to Deal With Credit Card Mumbo Jumbo

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