Are all credit card processing salespeople alike? Of course not.

Do all credit card processing salespeople share the same information with their customers and prospective customers? No.

Nearly everyone I consult with will hear information that NO ONE ELSE has shared with them. Information that makes a big difference in their merchant processing costs. So it is fair that the merchant then goes back to their current processor and says, “hey, I just found out all this stuff and you should be giving me a much better deal. I want this, this and this.” And the merchant processor that has been collecting the biggest fees they could for years suddenly says, ” Oh yeah, I reviewed your account and you qualify for that now.” (That last line is usually just something they make up to save face.)

No it’s not fair, but that’s the world of business. If you can get your current vendor to meet your demands, then you don’t have to change, and we all know that CHANGE can be scary.

Case in point, I recently had a call back from someone I consulted with last year. He went through the motions, got a better deal with his current processor, and is calling me again. The question is why? He wants to save money and he’s not confident his vendor is looking out for him. He didn’t have time to deal with it last year, and yet now he’s going through the entire process again.

The next time you are thinking about doing that to the vendor who brings you the insider secrets, ask yourself these questions.
If I hadn’t brought this to their attention, would they ever have given me a better rate on their own?

What else aren’t they telling me? What might I miss out on later?

Will I really lose my preferred loan and other banking relationship rates if I move my credit card processing?

Can they explain things to me in terms I can understand?

They’ve agreed to make some price changes, but will they provide account services that include regular reviews and account management to ensure I’m hitting the lowest interchange rates possible?

If I stick with the same processor now, am I confident that I will never have to look at this cost center again?

The last two items are the most critical. With our consulting services, you can be confident that you have someone watching out for you, and it will be the last time you’ll ever need to change processors again.

I’ve owned a couple of ecommerce stores for several years. I chose Paypal years ago when the store first started. It was just a ‘buy now’ button. Then it became a full fledged store, and I upgraded from regular paypal to Paypal Payments Pro. With Volusion, I bought the Volusion branded security certificate and used in the integrated Paypal checkout. This means customers would pay with a credit card just like on any other web site. Shoppers normally never know who a company’s processor is. They just get a receipt from the business they bought from. I also kept the Paypal option. This means a customer could also check out with Paypal.

Summary:
Paypal regular- you checkout on the paypal web site
Paypal Payments Pro- you checkout just like any other store with your credit card.

In 2008, Paypal raised their monthly fee to $30, and rates went up as well. When I started I was at 2% flat rate every transaction. As everyone knows, Visa & MasterCard charge many rates, so the processor that offers one rate needs to charge enough to cover all the different rates for fees they will actually incur. Their hard cost. My stores are B2B. The average corporate card is 2.2%. Paypal was losing money on me. The rate structure has now changed. When you look at the rates, you’d have to be pretty saavy to understand the rates now.

Did you see the “Merchant Rate qualification required”. They do not answer the question what it takes to be qualified. They do not answer what your costs are if not qualified. As I recall, this is now in the fine print, but only after you sign up. My costs escalated so that my effective rate was 3.75% when last checked.

Not posting all rates and the details until after you fill out online forms is very common. Most businesses do not have the knowledge to know what questions to ask.

In conclusion, I recommend Paypal to businesses that are just starting out, but after you’ve been in business for at least 2 years, or have at least $100,000 in annual processing, you’ll want to start looking for other options. Our own minimums for doing business are much higher, and we welcome you to read our blog for lots of tips.

reference: My B2B ecommerce stores
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One last note: You can find lots of negative information about Paypal. If you run an honest successful business, I can’t imagine you ever having a problem. I never did. If you run a consumer site and have lots of chargebacks maybe you should look somewhere else, but whatever you do, make sure you are not locked into a long term contract.

Are you confused by quotes that are all over the place from sales reps?

This online prospect, a small restaurant, had one offer that was interchange plus 19 basis points. He said he was currently paying 54 basis points. He also had another quote for 41 basis points.

Is the quote real? Was he really paying interchange plus to start with? After questions by several others in the payment processing business it’s still unclear. The current costs were definitely not just interchange plus. Additionally, small businesses like this don’t get offered interchange plus. Why? Risk and reward. Interchange plus is generally reserved for larger businesses, of at least $1,000,000 or more, or restaurants that are part of a hotel operation.

Should the businessman take the 19 basis points? Without seeing the contract details, it’s tough to answer. On the surface it sounds…incredible. We do know there is a 3 year minimum and $299 minimum termination fee. As a general rule, if it sounds too good to be true, it probably is.

What’s really funny is one of the experts said that all the offers were too high; that he knew people who only charge $.07 per transaction, plus straight interchange. This type of comment is exactly why business owners are confused. Let’s do the math. $250,000 in annual revenue with average ticket is 5000 transactions X $.07= $350 for the processor. Now the processor and the sales rep will split that amount, let’s say 50/50. $175 each per year. Deduct the cost to print and mail monthly statements and let’s call it $150. Deduct the cost to process the application (even if merchant is not charged) and it’s zero profit the first year. Restaurants are high risk, small businesses even riskier. I don’t know ANY processor who is willing to take on that risk in the hopes the business will still be around to collect $150 for the second and third year. What’s the point of being in business if you can’t make money?

The scenario described illustrates a couple of important items.
There are merchant processors willing to work for peanuts. Will they still be around later? Or is this just a ploy to build account numbers so they can sell their business portfolio?

Will the payment processor take care of the customer if the merchant has problems? Given the potential profit, I can’t see how they would have a good support team.

Will the payment processor work to help the customer qualify for better interchange rates? Again, at these rates, they can’t afford to.

If the restaurant is doing $2.5 million per year, the whole picture changes. In that case, the merchant must select the processor that will provide the greatest interchange management support, not the processor with the lowest ‘basis points’ add on (merchant discount). Why?

A downgrade can cost the merchant up to 70 basis points and that number continues to increase. Which is better for you? Managed interchange where you hit the lowest rate possible for your transaction, or the lowest merchant discount, where you might have a high number of transactions downgrading? I’ve seen the downgrade percentage as high as 100%. Yes, the customer had every transaction downgraded! Why is another story, but the point is with the right management team on your side, you’ll pay a little more on the surface, but you’ll more than make up for it with better interchange qualification.

If the last paragraph was confusing, that’s OK. It’s confusing to most of the people in the industry, especially those offering cut rate deals. You hire the most skilled people for every position in your company. It only makes sense to hire the most skilled team to assist you with managing your payment processing costs.