I don’t have the answer for which Retail POS Solution you should choose, but I do have some extremely important tips.

1. Do not enter into a long term contract for your payment processor unless you have been in business for at least 3-5 years.
2. Do not choose a POS solution that has limited choices for who will do your credit card processing.

This is a true story. I contacted a specialty retail shoe store that I shop at to discuss their credit card processing. They are using http://www.ricssoftware.com/ which seems like an excellent solution for this merchant store. In fact, it seems like a great solution for any shoe retailer, their target audience. But no where does it mention, that I could find, that the customer has NO CHOICE about who their payment processor is. That’s right, no choice! RICS is only compatible with ONE merchant service provider.

I talked to RICS about who they use. It’s a quality company, but they don’t necessarily provide the best solution for the retailers. In fact, I’d bet that 50-70% of their retailer merchant accounts could save significantly on credit card processing with a different merchant service provider. I’m not guessing. I know that a certain portion of them are too small to realize any significant benefit. Most of the rest of them are on a price plan usually reserved for very small businesses, or new businesses.

New businesses always pay a premium for merchant card processing fees. That’s because they are higher risk than established businesses. The most stringent underwriters, those that you can get the best deals from, require two years healthy financial statements. Once your business is established you are in a better position to get a permanent solution for managing credit card costs. What do I mean by permanent? One that enables the merchant to see how they are qualifying for interchange levels and what interchange levels they are hitting. Without that transparency, you can’t even begin to manage your costs.

In summary, make sure you choose a retail POS solution that is OPEN and doesn’t lock you into a single vendor solution- whether it be hardware, merchant service provider, or some other service. The more flexibility you have, the easier it will be to grow and expand later without disruption to your business.

Recent alert from Chase Paymentech for Tier 4 Retail merchants (less than $450M in Interlink sales/ 13 M transactions):
Interlink Network = $.75% + $.15 (no cap), switch fee $.04
Pulse network- added new small ticket category- registration is required to receive this rate

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Customers process most transactions using the Visa/Mastercard Interchange system which includes a % of transaction sale, plus per transaction fee for most businesses. The debit network works outside of interchange. Most businesses access this network by installing a PIN PAD attachment to their terminals. The debit network enables merchants to process most transactions for a FLAT PER TRANSACTION FEE instead of a PERCENTAGE FEE. If you do not have a pin pad or do not know if you are taking advantage of the lower cost debit network, CALL NOW.

The most obvious answer is any credit card processing rate increase is bad and your business is going to get the squeeze. But there is another side to this story. A reporter from US News & World Report interviewed me the other day regarding this very topic. Here are the ways it can have a big impact on your business and why it might not.

The businesses most likely to be hurt by increased interchange rates are not just small businesses. It’s any business that is on a 3 tiered pricing plan - Qualified, non-qualified, and mid-qualified. It’s also any business that cannot see what interchange level they qualify for. Does your statement show CPS Retail, Commercial Card, Rewards card and a whole slew of other categories? If not, you are almost certainly going to be hurt by increasing interchange rates. Your costs are buried and hidden. You cannot readily see the relationship between interchange and your fees.

The first item I brought up is, “What’s a small business?”. In credit card processing, a small business has a different definition than the US Small Business Administration. If you’ve read other posts, then you know that interchanges rates are basically the same for all size businesses, unless you are truly have mammoth volume of credit card processing, in the hundreds of millions. In my own world, we define a small business as anyone doing less than $1 million per year in credit card processing. For the purpose of the interview, I suggested that the businesses doing less than $100,000 would be a small business. They really don’t have much control over what they pay. The processor who wants to make any money has to charge a lot because the volume is so low. So the small business must factor in a rate of 3%-4% into the cost of sales for credit card processing. If the rate goes up a little, they pay a little more.

But the bigger company, say doing $1,000,000 who gets hit by an increase, will pay a lot more in total dollars. At this point, it’s important the merchant look at all factors that affect the credit card processing costs. A company this size could actually lower their costs, if they have the right information.

The ultimate answer to the question “Can increasing credit card processing rates help your business”, the answer is YES, if the business seeks out a resource that will help them manage their costs. Getting a newer ‘better rate’ is not the solution or else the next rate increase they’ll be back at the same place they were over and over again. Cost management assistance is the permanent solution.