Effective November 1st 2011, the MasterCard Processing Integrity fee will increase by $0.01 to an amount of $0.055. Unless your merchant account is on a special type of bundled pricing, all merchants will see this on their November 2011 merchant statement, delivered in early December.

WHAT IS THE FEE FOR? This fee is applied to authorized transactions that are not followed by a matching MasterCard cleared (settled) transaction (or in the case of a canceled transaction, not properly reversed). The fee can be avoided by clearing (settling) your transactions within 120 days. If an authorization is not needed, the authorization must be electronically reversed within 24 hours for face to face authorizations and reversed within 72 hours for Card absent authorizations.

WHO PAYS IT? All merchants pay the fee if triggered by the fee rule.

HOW WILL I KNOW IF I RECEIVE THE CHARGE? All merchants on “interchange pass through” or “interchange plus” pricing will see these charges listed as a separate line item, when the fee applies. If you are not on this type of pricing, then it’s up to the processor how your fees are bundled, though in most cases, I think merchants will see this fee regardless of the type of pricing.

HOW CAN I CANCEL OR REVERSE AN AUTHORIZATION AND AVOID THE FEE? This varies by many factors, including how you are processing.

• Yahoo stores now have a Reverse Authorization button on the Order Details page.
• Authorize.net has issued an API. Shopping cart engines are integrating the API, but it is not yet widespread.
• Check with your processor or POS software provider.

Can you give me an example of when this fee would be applied? An ecommerce store receives an order for an item. The item is backordered and will be back in stock in 3 weeks. The merchant does not want to cancel the order and does nothing. The authorization will be automatically dropped because it exceeds the 7 calendar day maximum. The merchant will also incur the MasterCard Processing Integrity fee.

The fee does NOT apply to:

MCCs 3351-3441 (Car Rental Agencies)
MCCs 3501-3999 (Lodging-Hotels, Motels, Resorts)
MCC 4411 (Cruise Lines)
MCC 7011 (Lodging-Hotels, Motels, Resorts –not elsewhere classified)
MCC 7512 (Car Rental Agencies – not elsewhere classified)

NOTE: The penalty for failure to reverse authorization is $.055 but the merchant per transaction fee is likely even higher. Unfortunately merchants will be hit with two fees in order to reverse an authorization for the benefit of the customer. Here’s a better idea to improve consumer satisfaction. Why not require card issuing banks to fund  consumer accounts faster when merchants issue refunds?  The money comes out of the merchant account per the merchant termsn, usually upon settlement, but the consumer doesn’t see there money usually for 3-5 days, sometimes longer.

At what point does it make financial sense to convert from a Paypal to a regular merchant account? I frequently recommend new small businesses start out with a Paypal account initially. There are factors you need to consider in making this decision, including risk of chargeback and whether you’ll be in front of your customer at the time the payment is needed. Below we examine two  business scenario’s and solutions. Both have customers that pay mostly by check or cash so credit card volume is low.

• A home improvement company meets with customers in person. Multiple salespeople are in the field so traditional wireless devices could be expensive. Some customers make a decision later and fax over their signed contracts.
• A boat towing service company has a fleet of part time captains that respond to emergencies on the water. Most customers pay cash so the credit Traditional wireless devices are impractical due to the number needed and inability to withstand weather elements.

All companies have their service personnel call in the credit card information for an approval over the phone, or they key enter it back in the office later.

Charge slips are impractical and expose the company to risk of a data breach whether through internal or external theft. Paypal is month to month, enabling new businesses to test the waters and build credit card volume before seeking prices from traditional merchant services companies. On the negative side, deposits to your bank account will usually take 3-5 days.  A merchant account will deposit funds to your bank in 1-2 days automatically, and deduct fees once per month.

Paypal is $30 per month plus the table below:

Paypal -month to month, no application fee. Deposits to your Paypal account, then you have to manually transfer it to your bank account which takes 3-5 days. Fees are deducted from every transaction, so you receive net transaction deposit. Some find this to be inconvenient for accounting.

Merchant account- Usually a 3 year agreement, and penalty for early termination and application fee may apply. Deposits to your bank account in 1-2 days and fees are deducted via ACH monthly.

How much will a merchant account cost? All credit card processing fees are based on interchange rates.  There are hundreds of rates. Hardly anyone charges $30/mth, so if your volume is low, be sure to include this when calculating your effective rate.

PAYPAL VS MERCHANT ACCOUNT FEE COMPARISON

The chart below shows examples of multiple scenarios of credit card processing for card not present transactions.  Foreign cards can have a major impact. Paypal charges 1% for foreign bank issued cards and most merchant accounts will pass through the extra fee which varies from .4% to .6% depending on the card brand. The chart assumes NO foreign cards which is a bit unrealistic.

Every situation will vary by number of transactions, types of transactions and actual merchant account fees. For your convenience, you can download the excel spreadsheet above and put in your own numbers. This spreadsheet is offered FREE for your convenience. It may not be used for commercial purposes, nor modified and distributed without express written permission from 3D Merchant Services.

Click to download the xls file Paypal vs merchant account fee calculator .

A review of a new Volusion ad for merchant accounts reveals the truth and hidden information about merchant services. I thought my web store CEOgolfshop.com was highjacked when I went to my admin page and all I saw was an ad for merchant services from Volusion. I hit reload. I checked the URL I was at, and yep, it was my web store. But it was my admin page, not my public home page and they interrupted my ‘home’ page with their ad for a Volusion merchant account.

It’s actually a pretty compelling ad. I’ve used Volusion for several years and if I wasn’t in the merchant services business, I’d definitely call or click through. Since I am in the business, I clicked through and here’s what comes next.

Here’s why I don’t like this advertisement and you shouldn’t be enticed this or any similar ad. We all know there isn’t one low rate for everything, right? They capture a bunch of information about your company, and you have no details at all about the deal. Not only that, but it isn’t any where else on their web site. If you read my web site, you’ll find lots of information about interchange rates, the real truth about the merchant account application and underwriting process and lots of other insights so you can make an informed decision before providing company details.

Beyond my personal annoyance, let’s look under the hood at the offer. What? There is no information?
Fortunately, I’ve already been through the details of their merchant account offer before, so I’m familiar with more than what’s posted here. However, if you look harder, there is more information on the web site, they just don’t provide any links to it from the ad or sign up form. As of this writing, they are using Global Payments Direct, Inc. as their merchant services partner provider. Global Payments Direct is a publicly traded independent services provider GPN :NYSE). Current assets are down, intangible assets are up significantly compared to other years and debt is up 50%. But I digress as all of that is irrelevant.

The retail rates quoted have nothing to do with your Volusion merchant store. Retail rates only apply to card present transactions, and the customer must sign a receipt.

Will you save with a volusion merchant account? There’s no way to tell based on the information provided. You will not be getting 2.17% ecommerce as a flat rate. They do explain on their site there is a $.27 per transaction fee, gateway fee, statement fee, etc all pretty standard stuff. But what you don’t know is, what transactions will qualify for the 2.17% ecommerce rate?

Is that for debit cards? With debit interchange for ecommerce at 1.55% plus $.15 per transaction, that’s 63 basis points profit. Now I don’t know if that’s what they are referring to, but if you have a sizable business, please call me and you’ll save real money! I can’t imagine this being a good deal for anyone but small businesses with under $50,000 per year. What is their rate for rewards cards, which represent usually over 40% of cards presented? If you authorize, but don’t capture on the same day, it’s highly unlikely you’ll ever pay that rate, but will probably pay 20-70 basis points more or .20% to .70% more.

See also my article review of Volusion merchant accounts 101.

In conclusion, you can’t tell from their ad, but in all likelihood their solution is as good as any if you have a very small business with under $5000/mth since it will be easy to implement. However, be sure to read the fine print. Is your business expected to grow? What are the penalties for switching to another provider if you are unhappy with rates later ?

How can non-profits lower credit card processing costs for online donations? Video presentation specifically reviews these costs with real examples so controllers and CFO’s can benchmark their current costs vs actual lowest costs possible. Based on Visa and MasterCard Associations  2009 interchange rates and actual non-profit merchant statement reviews.

Lowering Credit Card Processing Rates for non-profits presentation

Are there special credit card processing rates for non-profits?

Yes, there are special rates for non-profits. Specifically, there are special INTERCHANGE RATES. In order to qualify for them, you must be on a price plan that enables you to take advantage of them. We call this wholesale or interchange plus pricing. Typically we offer this for merchant accounts processing more than $1 M annually. Interchange plus is what large companies such as Home Depot or Barnes and Nobel pay. It always includes a % of the transaction, a per item fee, Visa/MasterCard dues and assessments, and a merchant discount. Over 95% of your costs are in the % of the transaction, so that is the area that must be controlled or MANAGED.

The most meaningful way to lower your costs is to hit levels of interchange with a lower rate. We can get your non-profit into a program where you’ll hit interchange rates lower than what most retail accounts pay, that is a lower % per transaction. Some of your transactions such as visa rewards cards will process at the same as for profit companies. However some transactions will process at a lower rate, usually at 20 basis points or .2% lower than the lowest rate for profit companies.

In my experience, most non-profits have not been offered these special interchange rates. You can save $2000-$10,000 per million dollars in donations just on this one item. National non-profits typically save 25-50% by implementing my recommendations and services. Which is easier? Finding a donor to give you $100,000 + every year, or calling me one time and saving that much on your expenses every year?

Here’s how you can check to see if you are getting the best rates for your non-profit.

First Look at your merchant statement. Go to the section, usually the last page or two, which shows INTERCHANGE COSTS. Do you have this section? If not, you are not on a price plan that lets you participate in the program.

Second. If you have the interchange cost section, you’ll see things like VISA RETAIL DEBIT, COMMERCIAL DATA RATE 2 ETC. Do you have one that says EMERGING MARKETS OR EMG MKT? If you do not see this category on any of your past statements, you are not participating in the program.

Both conditions are required whether you are accepting donations online or swiping cards for event registrations and auctions.
If you answered no to either question, and your non-profit is processing at least $1 million annually, please call and I will help you keep more donor dollars to use for your organization programs.

Would you like a PDF presentation with actual examples of what to look for on your merchant statement? Call the hotline 954-942-0483 and we will send it to you.

What are the best choices for accepting credit cards for online payments for non profit organizations? Google Checkout, Paypal Payments, and traditional merchant accounts cost analysis, plus all in one donation form with integrated payment solutions.

Paypal costs for 501c(3) non-profits

1.9% +$.30 per transaction for organizations with over $100,000 monthly volume
2.2% +$.30 per transaction for organizations with less than $100,000 monthly volume.
3.9% + $0.30 USD Transaction Fees for Cross-Border Payments – United States

Google Checkout costs for 501c(3) non-profits

Google Grants recipients are eligible to process donations for free until 2010 (need to buy Google AdWords)
Others pay these standard fees:

Google checkout vs Paypal for non-profits:

It depends on the size of your organization. If you can only choose one, Paypal would be better due to wider acceptance.

Payment processing costs when included with online donation form generator:

Some web sites specialize in providing an all in one solution for non-profits to collect cash donations, create auction sign ups, or create event registrations.  The theory is you collect more money than you would normally (usually true), so it offsets any higher costs you may pay for the service which ranges from free to $29.95 per month and up plus other fees.

Merchant Services provider costs ie traditional merchant account and internet gateway

These numbers are going to be all over the place. So how can you tell if  you are getting a good deal?
A typical average is 3% effective rate for online credit card processing. This rate varies by target audience and many factors, and can be lower, but generally should not be higher. Non-profit merchant accounts with >3% credit card processing effective rates usually have hidden information, few details, or poor price plan.

View the entire presentation including pros & cons and actual examples of what to look for on your merchant statement. Recommendations are valid whether you have an ecommerce store, online donation form, recurring donor payments, event or one time donation.

Ecommerce Credit Card Processing for non-profits (PDF download)

Visa & MasterCard both announced changes for October 2008, with B2B companies again likely to feel the biggest negative impact.

Interchange Rate Changes

Corporate Card Level II Data Rate + 0.05%
Business Card Level II Data Rate + 0.05%
Purchasing Card Level II Data Rate + 0.05%
Commercial Card Retail – Corporate – 0.10%
Commercial Card Retail – Purchasing + 0.10%
Purchasing Card – Card Not Present + 0.15%
Purchasing Card Electronic +0.20%
Corporate Card Electronic + 0.05%
Corporate Card Standard + 0.25%

See more about Fall 2008 interchange updates here.

Visa and MasterCard recently announced revised interchange adjustments for Fall 2008. Effective October 3, 2008, all qualifying merchants will be subject to the following revisions:
Visa Revisions Effective October 3. 2008
Visa Fuel Merchants Rate Changes - Effective October 3, Visa will institute one consolidated interchange rate affecting all consumer credit products for Merchant Clearing Codes (MCC) 5541 and 5542. This applies to all consumer credit including Rewards, Signature and Signature Preferred.

Visa Automated Fuel Dispenser Partial Authorization (AFD) Requirements – AFD merchant software providers must now support the ability to receive partial authorization approval amounts, in authorization messages, for all Visa transactions. Merchants should be aware that authorization requests failing to meet this criteria will be assessed an additional fee of $0.01 per transaction, which will be passed through to the merchant.

Visa Commercial Rate Modifications - Effective October 3, Visa will introduce new rate changes resulting in potential impact to all merchant segments. Relevant updates include an increase to Commercial Product Level II and Standard transactions, modifications to Commercial Card Retail and Card-Not-Present (CNP) transactions and an increase to Commercial Electronic transactions. There are no changes to Commercial Product Level III transactions to announce at this time.

New Visa Debt Repayment Fee Program – Visa is introducing a new interchange fee and rate program for domestic debt repayment transactions applicable only to collectible consumer debt on auto loans, credit card payments, mortgage payments and student loans. The qualifying rate will be 0.35% + $0.50 and merchant registration is required. Eligible merchants must be prepared to submit the bill payment indicator, bill payment processing code and the existing debt indicator. Acquirers must register eligible merchants with Visa.

New Visa CPS/Debit Tax Payment Fee – Visa will implement a new interchange rate program for Visa consumer debit transactions submitted by acquirers from a participating tax authority or third-party service provider accepting payments on behalf of the tax authority. Merchant registration is required and eligibility standards do apply.

Visa GSA Government to Government (G2G) Modifications – Visa is introducing a new G2G program and revised interchange rates for government merchants accepting government cards. Qualified Merchants will now be eligible for the interchange rate of 1.65% + $0.10. Merchant registration is required to participate in this program.

Visa GSA Purchasing Card/Large Ticket Modifications – Visa will now allow GSA Purchasing Card and GSA Fleet Card transactions accepted at non Travel and Entertainment (T&E) merchant locations to be eligible for Level Ml interchange. Level II and Level III Commercial Data will continue to be required to qualify for this category.

MasterCard Revisions Effective October 3. 2008
MasterCard Revised Standards for Transaction Presentment Time – Effective October 3, MasterCard is reducing the current first presentment time frame of 30 days to a maximum of seven calendar days from the original transaction date.
MasterCard Revised Standards for Quick Payment Service (QPS) Program – MasterCard will require that all transactions, including QPS, be authorized for optimum interchange qualification in order to meet chargeback requirements.

MasterCard Fleet Merchant Data Quality Modifications – MasterCard will implement additional industry interchange data requirements for fuel transactions supporting fuel addendum detail. As a result, relevant data will be subject to Fleet Data Quality Edits and must be present in transactions to avoid downgrades. This pertains to valid values for fleet transactions including Motor Fuel Product Code, Motor Fuel Unit Price, Motor Fuel Unit of Measure, Motor Fuel Quantity, Motor Fuel Sale Amount, and Driver Number/ID Number.

Specific new interchanges rates affecting B2B.

CLICK THESE LINKS TO DOWNLOAD CURRENT  interchange rates:
Visa interchange rates
MasterCard interchange rates