San Francisco - Nov. 19, 2009 “Visa appreciates Congress’ desire to better understand the electronic payments industry and welcomes the release of this second Government Accountability Office (GAO) study on interchange and the electronic payments industry. We are pleased that for the second time in two years, the GAO has seen no need to call for Congressional intervention to regulate interchange.

“Not surprisingly, the GAO reached many of the same conclusions found in its previous report, including:

• Merchants benefit from electronic payments through increased sales, faster checkout times, as well as greater convenience.
• Consumers benefit from the convenience of electronic payments over cash and checks, providing improved theft and loss prevention, and easy record keeping.
• Interchange is important to community banks and credit unions, providing them with the ability to offer card programs and benefits on par with major financial institutions.

“We are encouraged that the GAO report examines consumer impacts and confirms that there is little evidence merchants would pass any potential savings from lower interchange on to consumers.

“We believe the study would have benefited from a more comprehensive analysis of debit given the fact that debit cards account for approximately 70% of Visa transactions in the United States and are among the fastest growing payment products.

“It’s unfortunate that the report doesn’t highlight that Visa’s average interchange rates in the United States have remained generally flat for the last ten years and, more broadly, merchant discount rates overall have declined in the last four years, according to the Nilson report.

“We believe it is important for U.S. policymakers to read this report to better understand how vital interchange is to keeping the electronic payments system reliable, convenient and secure for all participants.  We also hope these findings provide some balance to the efforts by some large retailers and their trade associations who are trying to get Congress to help them increase their profits at the expense of consumers.

“For over 50 years, retailers have received tremendous value from accepting electronic payments, including guaranteed payment, potential for increased sales, faster checkout times, as well as greater convenience and security - all at a fair price.  For these benefits, Visa’s interchange rates average 1.62 percent for each transaction and has remained generally steady for a decade.”

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Visa recently announced several new fees impacting merchant credit card processing costs. Merchants working with us will get these announcements on their statements, in addition to any other contacts, and all costs will be passed through.

Visa Acquires Processing Fee (APF) Visa is rolling out a fee of $0.0195 on all Visa branded authorizations acquired in the US regardless of where the issuer/cardholder is located. This fee will be effective July 1, 2009. This follows a MasterCard Network Access and Brand Usage Fee (NABU) of $.0185 for all U.S. issued transactions settled with MasterCard, announced in April 2009.

Visa Zero Floor Limit Fee - (clearing without authorization) This fee is applied for any clearing transaction submitted that cannot be matched to previously approved or partially-approved authorization transactions. The new fee will be $0.10 and is effective July 1, 2009.

Visa Misuse of Authorization Fee (authorization without clearing). Beginning July, 2009, Visa will apply the announced fee of $0.045 to authorizations that are not followed by a matching clearing transaction (or in the case of a cancelled or timed out authorization, not properly reversed).

International Service Assessment Fee Effective April 4, 2009 Visa implemented the International Service Assessment (ISA) fee of 0.40% (40 basis points) on all international (non U.S. card) transactions processed by a U.S. merchant. This fee is similar to MasterCard’s existing U.S. Cross Border Assessment Fee which is 0.30%.

Editors comments: these fees are not on the general interchange schedule that most people look at, however, the clever naming does not change the fact that these are costs that will be passed on to the merchants. If you have a small average ticket, a couple of pennies could increase your effective rate about .20%. If you have a lot of dollar transactions that are not reversed, such as when setting up a free online trial account, then the $.045 could also become quite costly. Your software program may not have a solution to cancel the authorizations, but hopefully this is being addressed by the major software providers.

What are the cheapest rates for credit card processing for Real Estate companies? 1.1% plus $0 per transaction fee is the lowest MasterCard interchange rate as of April 2009. The rate is the same for consumer debit and credit cards for real estate transactions, sales or rentals. You can qualify for this interchange rate by having a renter sign up for recurring billing to their credit card online.

It’s important to understand that 95% of your fees are in interchange. Therefore in order to have the lowest costs, you need to qualify for the lowest interchange rates. Every transaction for your real estate company that qualified at 1.10% could just as easily qualify at 2.04%. How does this happen? There are three main reasons:

1. Lack of education: The current MasterCard interchange rate guide is over 110 pages. There are endless rules for different cards, different industries, and if someone made a mistake- whether the salesperson or someone further down the line, who will recognize that one has been made? Not the merchant. And in many cases, not the salesperson. Many processors just avoid the whole issue by giving sales reps a few different price plans that don’t require them to have the in-depth knowledge to help you qualify for the lowest rates.

2. Wrong price plan- the lowest rates are reserved for larger volume firms. But some payment processors don’t offer these price plans regardless of how big you are. Or, if you’ve been with your processor a long time, they haven’t lowered their profit margin, even though the industry is much more competitive than years ago.

3. Lack of interchange management- no one is watching your back. if you get a great price plan, but you aren’t qualifying for the lowest interchange levels, you’re paying more than you need to. A qualified professional understands what levels of interchange YOUR BUSINESS qualifies for, and reviews your transactions to make sure you hit them.

As with all processing, a merchants actual fees include:
- an percentage per transaction
- a per item fee (in this example, $0)
- a merchant discount
- Visa/MasterCard dues and assessments

Additional fees typically include:
- merchant monthly statement fee
- network or batch/settlement per transaction fee
- AVS address verification per item fee

Real estate companies tend to have larger transactions than many other types of merchants. With the increased preference for credit cards over checks, this can be a hit on the bottom line, with the wrong pricing plan.
credit card fees/ CREDIT CARD CHARGES = effective rate
What’s your effective rate? It’s probably safe to estimate that it should be less than 2%. . It could be much lower, depending on the mix of credit card types presented. The interchange rate used in this example is for consumer credit or consumer debit cards. Rewards cards, corporate cards and other types will qualify for different interchange rates.