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.

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.

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

Matthews & Fields Lumber Company, established in 1896, selected the CenPOS payment processing platform after an exhaustive search and analysis of technology and credit card processing solutions. Like others in the industy, Matthews & Fields has a large base of customers on account, as well as walk-in traffic. CenPOS solves one of the most fundamental problems with wholesale companies- interchange qualification.

Interchange is the largest component of all merchants credit card processing fees. A common problems for wholesale companies like Matthews & Fields is that phone orders and retail orders have different requirements to qualify for the best interchange rates and the rules are complex. CenPOS technology automatically optimizes every type of transaction for the best qualified rate, including routing transactions with the appropriate RETAIL  or MOTO (card not present) indicator within a single merchant account.

About CenPOS: “Creating efficiencies through payment innovation”
CenPOS is an intelligent payment processing network that streamlines the payment experience for businesses and consumers by using state-of-the-art technology to replace inefficient, outdated payment systems. CenPOS offers many benefits to merchants who want to influence credit card processing fees and mitigate risk of internal and external fraud. CenPOS is processor neutral and compatible with most major credit card processing companies.

Blog Media contact: Christine Speedy 954-942-0483

WHERE TO BUY

• CenPOS is sold through limited authorized resellers and agents.
• Keep your existing merchant account.
• Contact Christine for CenPOS for your business and for reseller opportunities.

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.

The Omni 3750 is a multi-merchant capable machine, often used by businesses that had one account for retail and one for MOTO. Before jumping into the next dial up or even IP multimerchant terminal, it’s time to review the related credit card processing landscape. The primary purpose of separate retail and MOTO merchant accounts has been to help larger merchants qualify for lower interchange levels for each type of transaction. This method has historically been particularly important for wholesale suppliers in the construction industry that have a storefront, plus a base of commercial accounts, most of whom do not pay at the store. Without two merchant accounts, the cost of card not present transactions cost up to 1.05% extra on a retail account.

INTERCHANGE QUALIFICATION CHALLENGE: Proper presentment of transactions regardless of method of entry (key entered or swipe) or card type (different requirements for data to submit). Proper presentment is getting more complex as regulations are changing more rapidly in the past and the card networks & card issuing banks are creating new rules making it harder to qualify for the best rate for any given card type. For example, our internal spring bulletin explaining fee changes was 32 pages long versus a more typical 2-3 pages.

ADDITIONAL CONCERN: New Fixed Acquirer Network Fee (FANF). Visa’s Card Present Fee is fixed based on the number of locations. For Card Not Present (CNP), the fee is based on monthly sales volume, and is much higher than card present. Each merchant account is counted as a location. EMV (contactless) is mandated for all merchants by 2015; Visa is offering incentives to merchants who implement beginning in the 3rd quarter of 2012.

ANALYSIS: It is my firm belief that it will be impossible for merchants as described above to continue to qualify for the best interchange rates with standard dial up terminals because of the continual need to identify needs, update programming and train employees. A manual process just won’t work. As an interchange expert, even I can’t keep up with the rules to manually oversee merchant accounts without an automated system.  A host based solution is the only viable long term solution for merchants who want to control fees.

SOLUTIONS:

If you want to stick with a multi-merchant terminal:

• FD300 TI (PCI) Dual Com, First Data only, $499
• FD300 Wifi (PCI), First Data only, $695
• Other brands may be available, check manufacturer web sites for current models.

For a host based solution:

• CenPOS virtual terminal with automated switching. With a single merchant account, CenPOS will identify the card issuing bank, requirements needed to qualify you for the lowest interchange for that card, and automatically present properly as retail or card present with all the right data. Benefits:

1. Interchange optimized, employee mistakes eliminated
2. Single merchant account- potentially reduce statement fees, regulatory fees, PCI compliance fees, and higher CNP FANF fees
3. Always current with latest federal and state regulations

Limitations:  As of this writing, EMV is not yet approved on CenPOS, but is anticipated by July 1 when Visa’s incentives begin; hardware manufactures are still working out reliability issues with some new models.  In the interim, merchants may wish to use inexpensive secure card readers for low transaction environments, or older model signature capture units that will have to be replaced at a later date.

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.

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.