Q&A with author Christine Speedy. This response is related to an excerpt from yesterdays enewsletter:

Subject: Business to business credit card rate reduction. Sending level 3 data can reduce interchange fees over 1%. Not all processors support level 3, and even if yours does, you may not qualify for them. Validate if you’re getting level 3 on your merchant statement with these examples:

• NONQUALIFIED: corp data rate 1, corp data rate 2, bus std, EIRF.
• BEST QUALIFIED: corp prd 3, EVPSCRPDATAR3, Commercial Data Rate 3

If not , it could be your processor, your price plan, your merchant account set up, or the terminal you’re using that is the cause. Contact your representative to find out which. Contact me if you want technology, not people, to manage how transactions qualify.
CenPOS has supported level 3 data for retail and key entered. NEW, CenPOS supports level 3 for customer initiated payments on our hosted pay pages, including electronic bill presentment and payment (EBPP). Call for help to take advantage of this service (no extra fee).

Customer Question: We have a customer who uses a level III card to pay multiple invoices at once. This charge is always relatively large, and we’ve noticed it’s categorized under the MasterCard section – “COML LARGE TICKET 2 FLEET”. Would you know what this category is, and if it is associated with level III at all?

Answer: Below is screenshot of  page 93 from the MasterCard U.S. and Interregional Interchange Rates and Criteria, effective as of October 2012. (That’s the most recent from  MasterCard.)

For the card presented, the interchange fees are the same for both large ticket sales. Large ticket 3 requires $100,000 sale minimum. The sale was between $25,000 an $99,999.99, thus the transaction qualified at the proper category. If the sale was $100,000 or more, then it would not be the lowest qualified interchange category. Since the rate is the same, there is no financial difference, however,  MasterCard could change the rates, so it’s important to always qualify for the right interchange bucket.

I was reading the copy on a popular merchant accounts for lawyers web site and there was so much false information, it’s amazing. Many law firms are fairly new to accepting credit cards, so maybe it’s easier to believe what’s written from a vendor that has an attorney for an owner. Below I clarify information about fees that I found misleading.

What are the costs associated with accepting credit cards? Fees include:

Discount Rate or Sales Discount:  Negotiable. This is the fee the Merchant/Acquiring Bank keeps for profit. For example, you call a credit card processor and open a merchant account. The credit card processing company you deal with charges a discount rate, which is itemized on better prices plans, but buried in other costs on more profitable price plans. How much profit is fair? Every business has overhead and needs to make a profit. What’s fair?  That’s negotiable, though some businesses may have internal rules for their sales force.  The fee can be a combination of a per transaction fee or percentage of transaction, and other itemized fees that include a combination of actual cost plus profit.

Interchange. Non-negotiable, but can be influenced.   Interchange is a fee paid between the merchant’s acquiring bank and the card issuers bank that serves to balance costs in the payments system. The rates depend on the card, the payment method (sometimes) and many other factors. It’s complex and every card has multiple interchange rates associated with them, except regulated debit.

On the best price plans, the merchant will typically have a discount rate and itemized interchange fees. On others, typical of small businesses, they’re combined into a merchant discount fee.

Merchant Discount fee: Negotiable. It is not simply the cost of moving money. It’s interchange plus profits (discount rate) bundled.   Quite simply, it’s easier for the merchant to understand and easier for the salesperson to explain. It’s never the best deal for the merchant, because to keep it simple, everything is rounded up to be sure all costs are covered.

Network Fees: Non-negotiable if on a pass through interchange price plan, which will be indicated on your merchant agreement. Non-negotiable examples include DISCOVER DATA USAGE FEE, MC NETWORK ACCESS AUTH FEE, M/C INTERNET AUTH FEE,MC ACQUIRER AVS BILLING. VI TRANSACTION INTEGRITY FEE,  and many others. These add up up but are still a minor part of what merchants pay overall.

REGULATORY PRODUCT FEE. Non-negotiable. Some processors are now charging this as an annual fee.

Other fees: Sometimes negotiable. These may be hard costs for vendor, as fees can vary by banking relationship, or they may be negotiable. AVS (address verification service, needed for card not present transactions, statement fee, authorization fee.

How do I know if I have a good offer on a merchant account? This is the $10 million dollar question. Here’s my critical requirements checklist for you:

1. Get a virtual terminal (works with swipe and mobile if needed).  Find out how long data can be searched for. They range from 6 months and up. Ideally 7 years access to data to match IRS audit needs.
2. Does it support expenses from operating account and deposits to second account?
3. How will the solution help you manage interchange fees, the largest component of accepting credit cards? This is where most solutions will fail and sales knowledge weaknesses become evident.
4. How will the solution help you reduce the burden of PCI Compliance, mandatory data security standards? (Hint: online pay page, client managed payment method storing and updating, fax authorization forms that replace sensitive payment data with a random alphanumeric ‘token’)
5. check out my videos, including 60 seconds to see if you have a great deal (for existing merchant accounts)

Protect your firm and protect your client relationships. Just because a merchant services provider specializes in legal credit card processing relationships does not mean they have the best solution for you. Without innovation and change, they’re just a company that had a great marketing years ago.

Level 3 credit card processing is explained, including merchant account and payment gateway requirements in this video of a slide presentation. What is it? What are the financial benefits? How can I get level 3 credit card processing for my business to business company?

Plus a brief mention of our technology that creates merchant efficiencies to qualify eligible purchasing, corporate, and business cards for level 3 qualified interchange rates.

To get level 3 processing for your merchant account or for more information about solutions to streamline payment acceptance for your business to business company with card not present customer transactions, contact us.

While individual merchant accounts may have different terms, the answer below is based on credit card processing interchange rates only.  Interchange is the primary component of credit card processing fees. It consists of a percent and a per item fee. Interchange rates are non-negotiable, but they can be influenced.

There is no difference in MOTO or Retail Interchange rates for:

• Regulated debit (about 75% of debit cards on the market. )
• Most or all business, corporate and purchasing cards*

For the rest, it’s a wide variety. 0. 30% estimated average difference in rate based on whether mag stripe is received or not.

Below are related explanatory notes. The question above was posed by a merchant that recently added CenPOS to improve PCI Compliance and reduce costs with their existing wholesale, interchange plus, merchant account.

1. Level 3 data. Neither the gateway nor retail terminal supported level 3 before. With the new terminal ID we requested from your processor, combined with CenPOS, both MOTO and retail can qualify for level 3 interchange rates. A 0.65% drop is typical on MasterCard.
2. The old way transactions were processed, virtually none were able to ‘qualify’ for the best retail or MOTO rate due to a variety of reasons. With CenPOS proprietary optimization technology, the reverse is true.
3. In the virtual terminal, the only time the MOTO check box needs to be selected is if a signature capture device is connected to the computer. The MOTO button disengages the terminal from being prompted for a signature.
4. Confirm level 3 entitlements were turned on properly with the processor.  Level 3 is currently turned on in CenPOS as optional. After running a test transaction ( use any business card), and proper settlement to bank, change from optional to REQUIRED in the administrator panel . Please see this video for more information http://www.youtube.com/watch?v=sfmgQ50X8TQ&list=UUGvmy_5CXVYL1oN5rq-T5_Q&index=2 (my channel is youtube.com/3dmerchant)

* I’m not aware of any business, corporate and purchasing card that requires mag stripe data, and I’d have to pour through tons of documents to find out if there is an exception. However, different information is required to achieve qualified rates for business cards.

MOTO refers to mail order, telephone or fax order. A retail merchant account essentially tells the processor that the merchant mostly has customers that make purchases in person, and the merchant will send magnetic stripe data with the transaction. If there is no mag stripe data, the transaction is non-qualified. For a  MOTO account, the merchant represents that most transactions are card not present. An ecommerce account is necessary if payments are mostly accepted online via a shopping cart.

The Vantiv billing is a bit different than we’ve experienced with other processors, but the end result is the same. Below is an example of the text that appears on a Bank Of America business checking account for a merchant using Vantiv merchant services and CenPOS SaaS payment technology, as offered by your blog author, Christine.  Merchants are billed once per month for all fees, via ACH.

ACH Fees on Bank Of America Statement:

1. On 3/4/2013 we were charged  MTHLY UNBN MERCHANTSERVCS CCD           -$876.66  “123456″*
2. On 3/6/2013 we were charged GEN CENPOS CCD -$—-  “123456″
3. On 3/11/2013 we were charged BILLING MERCH SERVICES CCD  -$255.26 “123456″

Item 1: MTHLY UNBN MERCHANTSERVCS CCD. These are pure interchange fees. Interchange is always a percentage of the transaction plus a per item fee. Interchange comprises the bulk of credit card processing fees. They’re non-negotiable, but they can be influenced, which is a significant factor in merchants choosing CenPOS, an intelligent payment gateway that optimizes transactions for qualified interchange rates.  Interchange rates reflect the cost as determined by card card type and other factors.

Fifth Third Merchant Services changed their name to Vantiv, see prior article for more information. The mailed statement return address is Merchant Services, Cincinatti.

Item 2: GEN CENPOS CCD. Fees match the CenPOS agreement and monthly statement.

Item 3: BILLING MERCH SERVICES CCD. sThese are costs for credit card processing services, in other words, the supplier of your merchant account. This includes accessing networks etc. For this statement, they’re all are dead cost passed through from Vantiv, plus the stated Vantiv fees. The merchant discount, per the agreement, is our profit.

* Each dollar amount has an account number “123456 example” that follows. For security reasons, the account numbers have been omitted from this blog post.

All costs/net sales=effective rate
old effective rate= 4.25% Includes all interchange, merchant fees, etc.
new effective rate = 1.63% Includes all above and CenPOS.
Nice!  While fees vary every month, the effective rate is a good indicator of the health of your credit card processing solution.

1.6% is a below average effective rate for a 100% business to business company with customers using corporate, purchasing, and international cards over 87% of all dollar volume. Additionally, all transactions are card not present.

CenPOS works with your existing processor, and is most effective with merchant accounts set up on wholesale or ‘pass through interchange’ pricing. CenPOS is fast, easy, and requires no capital investment to implement. For CenPOS, or for information about a new merchant account, call Christine at 954-942-0483 or click here for more information.

 
Christine Speedy

Interchange updates are typically twice per year and the Fall release is now in effect. MasterCard debit and prepaid have shared the same interchange rates until now.  They’re now separated. Prepaid rates are up, as is their use by consumers. Prepaid card use rose by about 18 percent in 2011 as consumers dropped traditional banking products such as checking accounts with higher fees, according to a study by Pleasanton, California-based Javelin Strategy & Research, a market-research firm.

Pre-paid cards are costly for consumers to use and now they are getting more costly for merchants to accept. This is in response to lower regulated debit fees, which are capped at .05% and $.20 per transaction.

We maintain links to the most current interchange rates here.

No. This article provides an in-depth review of AVS as it applies to Visa. AVS is an abbreviation for address verification service. Today we review what it is used for and how it impacts merchants for Visa cards. All of the rates shown are true interchange costs as published by Visa. Some industries may have different interchange rates, such as hotels, but the principals are the same.

CARD PRESENT OR RETAIL TRANSACTION

Assumption:  Retail merchant key enters a transaction, with the customer present. Visa requires the zip code to match or full address match. The resulting qualified interchange rates vary depending on the card type:

• CPS/Retail Key Entry, Debit, exempt Visa Check card – 1.65% + $0.15
• CPS/Retail Key Entry, Debit, regulated Visa Check card – 0.05% + $0.21
• CPS/ Retail Key Entered Credit, Visa Signature preferred- 2.10% + $0.10
• CPS/ Retail Key Entered Credit, CPS/Rewards 2- 1.95% + $0.10
• CPS/ Retail Key Entered Credit,Other-  1.80% + $0.10
• Commercial cards- 2.05% + $0.10

What happens if you do not enter the zip code, or it does not match?  Automatic interchange rate downgrade to non-qualified rate EIRF. The transaction will still be approved unless the merchant has special programming to reject it, which is atypical, but the cost will go up.

• Electronic Interchange Reimbursement Fee (EIRF), Debit- exempt Visa Check card -1.75% + $0.20
• Electronic Interchange Reimbursement Fee (EIRF), Debit- regulated Visa Check card-  0.05% + $0.21
• Electronic Interchange Reimbursement Fee (EIRF), Visa Signature preferred- 2.40% + $0.10
• Electronic Interchange Reimbursement Fee (EIRF), most other Visa cards- 2.30% + $0.10
• Commercial Electronic Interchange Reimbursement (EIRF) Fee- 2.75% + $0.10

This article does not cover every possible card option. It’s clear to see from the examples shown that not passing the correct data results in higher interchange fees to merchants from .10% to .65%. This profit does not go to your processor, but rather to the card issuing banks.

What can a merchant do to better manage interchange?

• Ensure point of sale equipment is programmed to prompt for AVS for key entered transactions. This may not be possible with some equipment.
• Train employees to not bypass the prompts for additional information.
• Use technology solutions to manage interchange fees paid. For example, I offer merchants CenPOS SaaS. With this service, employees are automatically prompted for the correct data needed to qualify this and any other transaction. Merchants are given the tools to stop employees from impacting their cost of accepting credit cards, as well as impacting risk of accepting cards.

A future article will address card not present, AVS, and chargeback risk mitigation. Are you confident that your processor or agent is able to help you manage interchange? If not, call now.

Interchange plus or wholesale pricing has the lowest cost potential for merchants. How do you know if you have a good credit card processing price plan? Don’t count on your banker or merchant account agent. Find out for yourself by comparing your merchant statement with the one in this video which shows wholesale interchange plus pricing.

You need the best price plan to have any hope of paying the least amount of fees. The type of price plan is only one element, and is the only one covered in this video. Who qualifies for this pricing? There are no hard and fast rules. It’s entirely up to the person selling you your merchant account or the particular organization they work for.   It’s usually offered to companies with over one million dollars in annual processing. Less than that, the price plan types vary widely.

VIDEO LINK: In 60 seconds, you’ll learn whether you are in the game or not.

Interchange Plus Pricing Video