Merchant statements for April 2012 may include a bulletin about fees. This is a bulletin from an actual statement.

EFFECTIVE WITH MAY 1, 2012, YOU WILL BE CHARGED DUES AND ASSESSMENT FEES WHICH SHALL BE CALCULATED AS FOLLOWS: 0.110% (MASTERCARD) APPLIED TO ALL SETTLED MASTERCARD CONSUMER AND COMMERCIAL CARD SALES BELOW $1,000 AS WELL AS PREPAID AND SIGNATURE DEBIT CARD SALES REGARDLESS OF THE TRANSACTION AMOUNT, 0.13% (MASTERCARD) APPLIED TO CONSUMER CREDIT AND COMMERCIAL CARD TRANSACTIONS EQUAL TO OR GREATER THAN $1,000, 0.110% (VISA) AND 0.105% (DISCOVER) MULTIPLIED BY YOUR GROSS SALES VOLUME. CONTINUING YOUR MERCHANT ACCOUNT WITH US OR USE OF YOUR MERCHANT ACCOUNT AFTER 30 DAYS WILL REPRESENT YOUR ACCEPTANCE TO THESE TERMS.

EFFECTIVE JUNE 1, 2012, YOUR MASTERCARD “US CROSS BORDER FEE” WILL BE INCREASED TO .40%.

EFFECTIVE JUNE 1, 2012, A .80% MASTERCARD “US CROSS BORDER FEE” WILL BE ADDED TO YOUR ACCOUNT. THIS FEE WILL BE APPLIED TO TRANSACTIONS IN WHICH THE CARD PRESENTED WAS ISSUED IN A COUNTRY OTHER THAN THE UNITED STATES.

All of the fees above are mandatory and non-negotiable. Merchants see these fees on their statements if they are on PASS THROUGH or INTERCHANGE PLUS pricing. We call this ‘wholesale’ pricing. This is the best price plan for merchants because costs are transparent. If the merchant does not have these fees itemized, then they are on a bundled price plan. The downside is that higher profits can be hidden in bundled pricing.

Note, cross border fees are fairly new, yet they are climbing rapidly. Some merchants are under the misconception that these fees do not apply to them with their particular merchant processor, however, if you read the fine print, you’ll find them everywhere. For example, Paypal charges a 1% cross border fee. Why the difference? Because it’s Paypal cross border, not card association specific ie Discover, Visa, MasterCard which each have their own rates. Paypal is a bundled price program. They can charge whatever they want.

MasterCard updated their merchant interchange rates and fees portion of their web site. It’s a useful for all merchants. The missing link to all this data however  is a clear identification of which transactions are qualified and which ones are not.  For example, if a merchant is on Interchange plus pricing, it lists all the interchange rates the merchant paid. But it doesn’t indicate which ones are qualified and which ones downgraded to a higher rate. Some processors provide this information, with a section call ‘non-qualified’ transactions, however, the software frequently shows transactions as non-qualified that truly are the best qualified rate that a merchant can receive.

As a merchant I would want to know which rates are the best possible for a given card type at a glance. Why should a merchant have to hunt through hundreds of pages to figure it out? Interchange is not getting less complicated. Our team offers merchants an automated solution to qualify transactions for the best interchanges rates. Contact us for details.

3D Merchant maintains a list and links of all official interchange rates here.

For Paypal Virtual Terminal and Paypal Payments Pro users it may be time to change vendors. According to Paypal, key entered fees will be increasing to 3.5% April 15. Ecommerce fees will be the same. The only time 2.7% applies is for swiped transactions.

I stand by my earlier comments here http://tinyurl.com/6np9tac . ACH, check, credit all good. So here are some of the negatives regarding the Paypal here release for non-SOHO.
1. Fees. Anyone with sizable volume (let’s just use $1M annually for convenient $ amt) has an effective rate far less than 2.7% all in, even for card NOT present, and we’re talking about retail swipe with this.
2. It’s not actually ready yet. Get on the list.
3. Funding- Paypal transfer to your bank account is currently an inconvenient manual process that takes 3 business days, plus fees are netted per transaction; up to 6 days for checks. Compare to standard merchant account with 1-2 days automatic ACH deposit and fees paid monthly.

No information yet on how this will impact non-profits.

For businesses over $1M in annual processing, contact us for alternative solutions.

Merchants must understand interchange in order to understand why credit card processing fees can vary with the same bank issued card from one transaction to the next.  The cardholders financial institution remits to the merchant financial institution (merchant processor) the transaction amount, less the interchange rate. The interchange rate may be a directly negotiated rate between the bank and the processor or it may be a default rate set by Visa, Discover or MasterCard.

When the rate is created, there are stipulations or criteria to qualify for the rates. For example, the rate applies if x, y, and z are present. But if only x and y are present charge a higher rate. If only x is present, charge even more. Here’s where merchant confusion comes in. How does a merchant know what is needed? How do they know if they qualified for the lowest rate or a higher rate? It is possible to train cashiers or order processors? Of course not!

Many merchants have been trained to make sure that level 2 data is supported, which is pretty universal today. Unfortunately, they’ve been lulled into believing this is the fix-all for getting better rates. How come so many transactions don’t qualify for commercial data rate 2?  Instead, merchants hit one of the others illustrated below, commercial standard or commercial data rate 1.

This is a single excerpt of many, many pages related to commercial credit card processing. Merchants need to know there are multiple rules for all types of credit and debit card transactions, not just commercial cards.

What is enhanced data required?  It depends on the card issuer and the card brand. For example, Visa commercial cards for travel & entertainment (T&E) have different requirements than other commercial cards. Do you understand why ” supporting level 2 data” is not enough? 

What terminal will give you the best rate? It’s virtually impossible for a merchant to qualify for the best interchange without a system- what individual has access to all the rules, could keep up with the changes, and could train all employees to do the right thing to qualify your transactions?

1. Your payment solution must dynamically identify the card issuing bank, also known as bin management. Anything else is just not realistic because you can’t depend on employees to become payment processing experts.
2. The solution then must intelligently require the data needed to qualify for the best rate AND pass that data through.  Incredibly, there are solutions that capture data, but do not pass it through. There are even some solutions that capture the data, but then submit their own fake data because they don’t trust your employees to not make mistakes. If you’re particularly adept at reading merchant statements, you can be lulled into believing you have great interchange qualification, however, your company is at great risk of getting caught for violating presentment rules.
3. Your processor must support the receipt of the data. Not all processors can!

Rates and requirements are completely unknown to merchant employees who process transactions (cashiers) and the most educated financial staff. CenPOS proprietary technology is a private cloud, SaaS payment processing platform that AUTOMATICALLY optimizes transactions to QUALIFY for the BEST rates, saving you up to 1.05% per transaction by avoiding downgrades to non-qualified rates.

Contact Christine Speedy, Global Business Development, for more sales, agent, and reseller information.

 

Following Visa’s new merchant fee announcement, MasterCard will launch a new annual fee for acquirers on July 1, 2012. No specifics of the fee has been released, however, it will be based on credit-card volume and pin-debit volume will be excluded from the calculation.

Once again, CenPOS retail customers will have another advantage at escaping increased fees. CenPOS pin debit conversion rate averages over 75% across all USA markets. Pin-debit also mitigates merchant risk with only a 14 day window for consumer disputes vs 120 days for signature debit.

About CenPOS : “Creating efficiencies through payment innovation”

Founded in 2009, Miami-based CenPOS is a payment technology provider committed to providing its customers and partners with innovative solutions for today’s rapidly evolving consumer payment choices. CenPOS is an intelligent payment-processing network that streamlines the payment experience for businesses and consumers by using state-of-the-art technology to replace inefficient, outdated payment systems.

CenPOS sales: Christine Speedy direct (954)942-0483

 

Visa announced a new fixed fee for merchant acquirers that will surely be passed on to merchants. “The fixed fee for merchant acquirers is expected to be $2 per month for about 60% of merchants and $5 or less per month for about 80% of merchants, Visa” said Friday. Visa said it also is waiving the fixed fee for acquirers that work with “qualifying charitable organizations.”

Visa Inc.’s new Fixed Acquirer Network Fee (FANF) is targeted at boosting profits after the Dodd-Frank Act, particularly the Durbin Amendment, changed debit fees and network rules, impacting Visa’s revenues.

• Interchange, is collected by acquirers and paid to card issuers.
• Visa’s FANF and Acquirer Processing Fee (APF) are fees that Visa charges acquirers and books as its own revenue.

Although there is no official release as to the final numbers, here is some data that is circulating:

Retail or Card-present merchants, excluding fast-food restaurants:

• 1-3  locations $2 per location, per month FANF
• 4 + locations up to to $65 per location for merchants with more than 4,000 locations.
• 1-3  locations high-volume will pay $2.90 per location per month; possibly more than $85 per location for merchants with more than 4,000 locations.

 Card-not-present merchants, merchant aggregators, and fast-food restaurants:

• $2 per merchant account per month for sales of $50 or less up to $40,000 per month for merchants with more than $400 million in gross sales. The monthly fee will be assessed based on Visa volume.
•  Possibly 16 tiers of fees.

The fee goes into effect beginning April 1, 2012 and merchants who are on ‘pass through’ pricing can expect to see the new fee on their statements as a separate line item, reflecting whatever fee is applicable to their account type, beginning in July 2012.

The Visa Acquirer Processing Fee (APF) will be reduced from 1.95 cents per debit authorization to 1.55 cents, as per the July 2011 announcement coinciding with new debit rules.

See Also Wall Street Journal article:  UPDATE: Merchants Face Cost Changes As Visa, MasterCard Unveil New Fees

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What are the total costs of using Paypal to accept payments vs a regular merchant account and with another gateway, such CenPOS? Paypal is just another bundled pricing plan which always costs more. ( I still recommend Paypal for small businesses as an easy way to get started accepting credit cards if in a card not present environment. ) All credit card processing fees are subject to interchange rates, but in the case of Paypal, merchants see only one rate. Paypal has calculated an average cost of all interchange fees that will be incurred and then added a profit margin on top to come up with their simplified merchant rate structure. It’s easy for merchants to understand, but it’s not the least cost.

On the surface, it looks pretty straightforward. Just check your business volume and then see which rate you’ll fall under.

$.30 per transaction is particularly hefty if you have a low average transaction, such an online donations.

Here’s 5 Ways a Regular Merchant Accounts cost less, particularly for mid to large businesses, or those processing at least $1 million annually.

1. Fee refunds: With Paypal, the Fixed Fee portion of the Transaction Fee will be deducted from your Account at the time of the refund, in addition to the full payment amount that is refunded to the buyer. With the pricing above, the refund is $.30.  You don’t get back the 2.4% fee. For a regular merchant account, the merchant can have interchange fees refunded ( though not all merchant accounts are set up that way).
2. Debit: As a percentage, Regulated debit is now .05%. Unless you’re strictly B2B, you’re average effective rate will be significantly lower with a regular merchant account, since as much as 30% of  your transactions are likely to qualify for this rate. You’ll never exactly what your costs would be to compare outside of Paypal because there is no breakdown of what types of cards your customers presented for payment.
3. Cross Border or Foreign Card Fees: Paypal charges a 1% surcharge for cards issued outside the US, but the most credit card processors will simply pass through the actual fees which ranges from .40% to .55% depending a the card.
4. Paypal nets fees daily vs monthly. This represents lost opportunity for working capital.
5. Paypal Recurring Billing Monthly Fee: $29.95. This is a free service with many other solutions.

See more Paypal blog articles, such as When should I convert from Paypal to a merchant account?

This is Part 1. At a later date I’ll compare the gateway fees and benefits for Payflow Pro.

 

Effective November 1st 2011, the MasterCard Processing Integrity fee will increase by $0.01 to an amount of $0.055. Unless your merchant account is on a special type of bundled pricing, all merchants will see this on their November 2011 merchant statement, delivered in early December.

WHAT IS THE FEE FOR? This fee is applied to authorized transactions that are not followed by a matching MasterCard cleared (settled) transaction (or in the case of a canceled transaction, not properly reversed). The fee can be avoided by clearing (settling) your transactions. If an authorization is not needed, the authorization must be electronically reversed within 24 hours for face to face authorizations and reversed within 72 hours for Card absent authorizations.

WHO PAYS IT? All merchants pay the fee if triggered by the fee rule.

HOW WILL I KNOW IF I RECEIVE THE CHARGE? All merchants on “interchange pass through” or “interchange plus” pricing will see these charges listed as a separate line item, when the fee applies. If you are not on this type of pricing, then it’s up to the processor how your fees are bundled, though in most cases, I think merchants will see this fee regardless of the type of pricing.

HOW CAN I CANCEL OR REVERSE AN AUTHORIZATION AND AVOID THE FEE? This varies by many factors, including how you are processing.

• Yahoo stores now have a Reverse Authorization button on the Order Details page.
• Authorize.net has issued an API. Shopping cart engines are integrating the API, but it is not yet widespread.
• Check with your processor or POS software provider.

Can you give me an example of when this fee would be applied? An ecommerce store receives an order for an item. The item is backordered and will be back in stock in 3 weeks. The merchant does not want to cancel the order and does nothing. The authorization will be automatically dropped because it exceeds the 7 calendar day maximum. The merchant will also incur the MasterCard Processing Integrity fee.

The fee does NOT apply to:

MCCs 3351-3441 (Car Rental Agencies)
MCCs 3501-3999 (Lodging-Hotels, Motels, Resorts)
MCC 4411 (Cruise Lines)
MCC 7011 (Lodging-Hotels, Motels, Resorts –not elsewhere classified)
MCC 7512 (Car Rental Agencies – not elsewhere classified)

NOTE: The penalty for failure to reverse authorization is $.055 but the merchant per transaction fee is likely even higher. Unfortunately merchants will be hit with two fees in order to reverse an authorization for the benefit of the customer. Here’s a better idea to improve consumer satisfaction. Why not require card issuing banks to fund  consumer accounts faster when merchants issue refunds?  The money comes out of the merchant account per the merchant termsn, usually upon settlement, but the consumer doesn’t see there money usually for 3-5 days, sometimes longer.