Merchant Account Blog - Straight Pass Through » merchant

Merchant Account Gift Card Program = Increased Revenue

Craig Peterson — Fri, 23 Jan 2009 01:42:15 +0000

Written by Craig Peterson, Vice President of Business Development for TenderCard

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

Where do Processing Fees Come From? Pt. 2

John Robinson — Wed, 16 Jul 2008 17:05:03 +0000

By John Robinson, of Cocard Synergy

For the remainder of this discussion, I’ll discuss interchange fees and then a little about the fees to the merchant account provider. The assessment fees paid to the associations, both being small and not negotiable, can wait for another day.

Interchange fees usually make up roughly 80% of the fees you pay per transaction. (If they are less, then you are almost certainly being overpaying for your merchant account.) They’re the fees paid to your customers’ banks. These issuing banks are members of either Visa or MasterCard’s association, and issue cards with those logos on them. They define what the interchange fees will be based on what kinds of cards they’ve given your customers and whether or not you include certain information when entering a transaction.

Once upon a time, issuing banks earned all their money from fees charged to their cardholders; meaning the merchant fees were fairly low and meant only to cover costs. However, as time went on, certain types of cardholders (namely those using rewards cards, signature cards and commercial cards) often paid on time and in full, leaving the banks without income from late fees and interest fees in those areas, so the banks looked for ways to increase revenue on the use of credit cards by those cardholders.

Likewise, merchants often wish to still accept cards when some of the provided information doesn’t match with the issuers’ databases, and obviously the banks want to hedge against potential losses in these transactions by increasing the cost to do them.

Also, they need to cover the costs of their rewards programs…and so there you go. Banks will be banks, and they have shareholders, etc. In other words they must make their profit someway.

But:

Do you remember I said, back in Part 1, that there’s a fee area which could “vary wildly”? This happens to be something you and your merchant account provider have some control over…and which is the basis of our philosophy here.

Obviously things like the credit card volume figure into the profit margin merchant account providers are shooting for. We need to know we’re making enough off a small account to justify giving it as much love and service as one of our large accounts…I can’t speak for other providers, but we won’t take on accounts that we can’t give a lot of attention to. However, there are other factors that account for those wildly varying fees.

Most merchant account providers don’t stick to a certain margin above their costs for a particular transaction. Most add additional profit on transactions that have a higher interchange cost. For example, if a provider is charging a .30% spread above their cost on a regular consumer card, that’s what you’d expect them to charge above their cost on a rewards card. Now, in a face to face retail environment (where cards are swiped), a rewards card has an interchange cost that’s .11% above a regular card, so a retail merchant should expect to pay only an additional .11% on those cards. However, many providers charge .35% or .50% or higher. Then, if you ask why rewards cards are so expensive, they’re not untruthful when they say, “Well, it costs more for us”…they’re just omitting that it was only .11% more.

You shouldn’t need to be an expert, but you should know enough to spot an expert and be able to keep an eye on whether they’re actually providing good service or not. What you need is a basic understanding of who gets these fees, how much, and which part you can negotiate and work with. And a great provider (such as Cocard Synergy!) should be willing to show you this.

Eight Ways to Save Money – Method #2

Robb Lejuwaan — Wed, 21 Nov 2007 15:11:24 +0000

Accept Pin Debit

This means having a pin pad for your clients to enter their PIN number when they use their debit card. These transactions normally have a flat rate per transaction. Let’s compare the fees paid between a normal credit card transaction and a PIN-based one:

Transaction Amount: $150
Credit card rate: 1.85% + $.10
Credit Card Fee: $2.88
PIN-Based Rate: $.50
PIN-Based Fee: $.50

In the example above the merchant would have saved $2.38 by having their customer use their pin pad. That kind of savings could add up to a substantial amount quickly and the larger your average ticket is the greater your savings will be.

Warning: If your average ticket is average ticket is below $25 you may lose money by accepting pin based debit. So make sure you have an expert crunch the numbers to ensure that does not happen to you.

What You Can Do

Consider beginning to process PIN-based debit for your transactions where the credit card is physically present if you do not already do so.
For PIN-based debit, make sure your terminal is properly set up and has a PIN pad.
Figure out the point where you start to save money on PIN-based transactions and let your employees know that number.

Merchant Account Blog - Straight Pass Through » merchant

Merchant Account Gift Card Program = Increased Revenue

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Where do Processing Fees Come From? Pt. 2

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Eight Ways to Save Money – Method #2

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