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.

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.

 

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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.

 

Accept payments via mobile, internet, and at fundraising events all with a single gateway solution that provides optimum security and cost containment. Fundraising solutions for any candidate must include a variety of payment methods, cost controls, reporting tools, and be simple to implement. This article explores how our solution achieves this.

Just like a business, accepting funds via credit card can be expensive when running for Congress, Senate, President or other offices. However, thanks to debit legislation under the Durbin Amendment that went into effect October 2011,  it’s not nearly as much as it used to be. With a wholesale cost of .05% and $.21 per transaction for non-exempt debit cards, the overall cost of credit card processing has been greatly reduced. With a wholesale merchant account, you’ll pay interchange fees at all levels plus a small merchant discount.

Understanding merchant accounts.

1. You can apply for an ecommerce merchant account, MOTO (mail order/phone order), or Retail (card present /swipe). It’s against card association rules to process ecommerce transactions on a MOTO or Retail merchant account. But if you have an ecommerce merchant account, you’ll pay higher card not present rates on swiped transactions. The solution? Our CenPOS gateway  automatically identifies the transaction method and sends the appropriate data so that the transaction will qualify for retail. The CenPOS patent pending switching technology is not available from other vendors and saves big money. For example, save .3% on Visa Rewards cards- the difference between retail and card not present.
2.  Fees are made up of fixed non-negotiable interchange fees, network fees, card association fees, fees that vary by vendor (some hard costs vendors incur may vary), and negotiable merchant discount fees. Altogether when you divide your total fees by the net transactions we call this your effective rate. With a wholesale merchant account, an estimated effective rate for political fundraising campaigns is 2.2%, or 3.5% for very small campaigns. If you’re not paying any where near that, contact us for alternatives.
3. Different payment acceptance points can result in disparate reporting, which is never a problem until you’re trying to research something and then it becomes a nightmare.
4. A gateway is required to accept payments online. You need both a merchant account and a gateway. CenPOS is a universal gateway, compatible with all major processors.

Campaign Fundraising Concerns and how we solve them with the CenPOS gateway:

• Need to accept payments via many methods:  At the core of CenPOS is a Virtual Terminal for card swipe, online payments, mobile payments and any other method. CenPOS automatically switches payment routing for least cost.
• Need to accept multiple payment types: Check and credit/debit cards are currently accepted, and more options will be available in 2012.
• Large volunteer base may assist in payment collection. This creates potential liability for data security, but also a need for simple solution. Have you ever handed out donation cards at a fundraising event that requests credit card information to be written down? Identity theft is a major threat. Instead, use smart phones with the free CenPOS app and get cards swiped at the table or door, or add a card reader to any laptop. Micro manage user permissions and shut them down on demand. CenPOS prompts both the user and the donor for the appropriate actions. “Dummy proof” your payment collection to reduce costs and improve record keeping.
• Donor Management: An API (application interface) is available to exchange data with your donor management software. CenPOS supports recurring billing and can send the appropriate secure token to your software as well. CenPOS stores 7 years of data storage vs the typical 18 months of merchant services providers and gateways.
• Finance scrutiny and Fraud protection: CenPOS mitigates risk of fraudulent cards and also offers advanced protection to block certain payment types including anonymous and foreign issued cards. You’re in control of how tight you want to control donations.

 

 

Which merchants will receive the new low debit fee rates? This video provides a detailed look at rate differences and how to examine your merchant agreement schedule A and statement. While all merchants qualify for them, only a fraction will actually have debit discounts passed down from their processor. Will you be one of them? Pull out your merchant statement, then watch the video so you can compare data.

On October 1, 2011, new debit interchange rates go into effect as a result of the Durbin Amendment, part of the Dodd-Frank Wall Street Reform Act.

The new cap on debit fees card issuers may charge is $.21 and 5 basis points according to the Dodd–Frank Wall Street Reform and Consumer Protection Act. Rather than reducing the costs merchants end up paying, the status quo will remain for most merchants, and there even is room to increase rates. By requiring that all providers allow at least two debit network options, the hope is that competition will keep prices down.

Examples of MasterCard interchange rates for signature debit effective April 2011:

Consumer Debit Full UCAF .90% + USD 0.25
Consumer Debit Emerging Markets 0.80% + USD 0.25
Consumer Debit Standard 1.90% + USD 0.25

For the best signature debit the customer is expected to be present, swipe their card, and sign the sales receipt. Debit standard results when the transaction did not meet all the criteria for the lowest rate set by the card issuer. This ‘downgrade’ could be for many reasons, including cashier error.

Pin Debit rates vary, but the most common networks are charging 95 basis points, or .95% and $.20 per transaction. In these transactions, the customer is present, swipes their card, and enters their pin number into the terminal or pinpad.

What will merchants pay under the new regulation? To be eligible for the new rates:
- The debit card must be issued by a bank, together with its affiliates, that has assets of less than $10 billion. A rough estimate is 80% of cards in the marketplace today qualify.
- The debit card must be swiped.
- A signature is required.
- All other criteria for the lowest rate would still apply such as settling the transaction within 24 hours, and authorization and capture must be for the same amount.
- The merchant must have true pass through interchange pricing per schedule A of their merchant agreement.

In addition to lower interchange, the Frank Dodd Act also requires that when a bank issues a credit card, it must have at least two network symbols on the back so that debits can process on two different networks. Theoretically, this is so merchants can benefit from competition and have a lower cost pin debit option. How does the merchant get the lower cost fee if there are two debit networks? The merchant must have these debit card processing technology capabilities:

– It must recognize the type of card when swiped as debit or credit.
– It must interact with a smart system that can identify the two competing network costs.
– It must determine which one will cost the merchant less.
– It must route transaction to the lower cost network.

This cannot be done by the processor. It cannot be done with dial up machines. It cannot be done with over 95% of the equipment on the market today.

It will require a host based solution that can dynamically identify the data being sent, know the costs for every option for the transaction and intelligently make decisions for the merchant. Oh, and make it quick because customers don’t want to wait. This may sound simple, but imagine having to create a database with the identity of every bank card issued (not the individual card owner, but the card issuer). How readily is that information available? It’s not. That’s a primary reason why solutions are not prevalent in the marketplace.

To manage the cost of debit processing, merchants will need to upgrade their technology. There are limited options on the market today. At 3D Merchant Services, we’ve offered customers a solution for several years that accomplishes all the tasks needed. While other vendors will enter the market, CenPOS technology is proven in the marketplace and extremely robust with benefits beyond lowest cost routing. Merchant fees are on a transaction basis.

Here’s how we can empower merchants to make risk and financial based decisions automatically:
- IN addition to meeting all the criteria above, merchants can:
- create rules to send debit transactions to signature

The regulation governs what the card issuers can make. It does not govern what fees merchants pay to their processor. Merchants that are not on pass through pricing will not likely see a decline in their processing fees. Most processors will simply keep the extra money and boost profits.
Contact us for more information.

See related articles:
Federal Reserve issues standards for debit card interchange fees
What will merchants really pay in debit card fees under Fed proposal?

May brings the usual April interchange update. There are two noticeable bumps for MasterCard. An overall assessment increase to .012% for all transactions over $1000, and up to .04% more for WorldCard. Full article and link to 2011 Interchange Rates and Criteria.

BUSINESS CREDIT CARDS: The typical interchange rate to merchants for corporate cards is 2.2% or 2.4%.  The non-qualified rate is a whopping 3.17% on MasterCard, which can be avoided with proper interchange management. Depending on your business type, you may qualify for large ticket (minimum $1000) rates which can save you up to 1%. To manage these business card fees, check your merchant statement PENDING INTERCHANGE CHARGES to see what rates you’re hitting. If your eyes glaze over at the complexity of interchange fees, merchant discounts etc, read the 3D Merchant Services blog or email a request to be included in our next interchange insights webinar. TIP: With our payment platform you can automatically offer discounts to your customers if they use lower cost debit cards.

MOBILE PAYMENTS: We’ve officially launched our app for iphone, itouch and ipad. This enables you obtain swipe rates from the field, including signature capture or you can key enter. Receipts are emailed to customers. For service companies, you can swipe the card the first time, then re-bill via a secure token for subsequent charges. In both cases you qualify for the lowest rate, plus mitigate risk with the initial swipe. Droid is available for key entry only, with retail swipe coming by June 30.

Payment Card Industry (PCI) COMPLIANCE AND DATA SECURITY: The number of 2010 data breaches exploded in companies with 11 to 100 employees. A key commonality is simply the opportunity was there. Read the full 2011 Data Breach report which includes insider theft so you can identify your own weaknesses and take corrective action. Your company is not PCI Compliant and protected under Safe Harbor unless you can prove you’ve been compliant continually, not just when you completed an annual report. Trust me, all parties will look for ways for you to assume the full burden of costs associated with any data breach.  Every operation I visit or speak to has weaknesses so please put this on your priority list!. Need help? Call and lets discuss.

What’s in your merchant statements?  Multiple locations are now achieving over 90% pin debit penetration using our universal processing platform, CenPOS. Way to go!

Highlights of the April 2011 traditional bi-annual interchange rate updates are presented in this article, specifically for our client types including retail, wholesale, B2B, hospitality, healthcare and non-profits, so you don’t have to sift through grocery store and other non-relevant data.

MasterCard changes effective April 15, 2011.

• Travel Industries Premier Services Program (TIPS). The registration requirement has been eliminated.  The rates are:

credit 1.58% + $.10
enhanced 1.80% + $.10
World 2.30% + $.10
debit 1.15% + $.15

• Service Industries Incentive Program (SIIP).  All merchants processed under MCC 4814 (Telecommunications Services), 4899 (Cable, Satellite and Other Pay Television and Radio Services) may qualify for the recurring payment Service Industries rates.

core 1.45% + $.10
rewards 1.45% + $.10
Premium 1.45% + $.10

Premium Plus 2.30% + $.10
debit .90% + $.20

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• World Merit III card increases from 1.73% + $0.10 to 1.77% + $0.10.

• World Full UCAF (the rate for a world card e-commerce credit transaction conducted with merchant security and cardholder verification) will increase from 1.83% + $0.10 to 1.87% + $0.10.
• World Merchant UCAF (the rate for a world card e-commerce credit transaction conducted with merchant security only) increased from 1.73% + $0.10 to 1.77% + $0.10.
• MasterCard will increase the assessment fee (a flat transaction fee added to the cost of processing each credit card sale) from 0.11 percent to 0.12 percent on consumer and commercial credit volume for transactions of $1,000 or more.

Full MasterCard Interchange Rates and criteria (pdf).
Also in April, Visa Inc. reportedly added an Interregional Super Premium Card with a rate of 1.97% + $0.00 and four new Interregional Full Chip Cards with an interchange rate of 1.10% + $0.00. All of the new cards also have the 0.40% and 0.45% international service and acquirer fees associated with them.
World cards are generally 20-30% of merchant cards received, so there will definitely be some creep in credit card processing fees.

In addition, MasterCard will increase the assessment fee (a flat transaction fee added to the cost of processing each credit card sale) from 0.11 percent to 0.12 percent on consumer and commercial credit volume for transactions of $1,000 or more. For a complete list of interchange fees go to  interchange rates. Also in April, Visa Inc. reportedly added an Interregional Super Premium Card with a rate of 1.97% + $0.00 and four new Interregional Full Chip Cards with an interchange rate of 1.10% + $0.00. All of the new cards also have the 0.40% and 0.45% international service and acquirer fees associated with them.