3 Profit Boosters for Lumber, Building Materials, Distribution Companies

Lumber, building materials, and distribution companies increase profits and cash flow almost instantly with these credit card processing and accounts receivable tips.

  1. Use a credit card processing solution that supports level III processing for retail. Prior to the October 2015 EMV liability shift, there were more companies that offered this, but today, to my knowledge, we offer the only solution that has both US EMV and level 3 retail certification.
    level 3 processing interchange rate

    Sample interchange rates for the same credit card transaction; Failing to qualify for level III is costly.

    Benefit: Potential 1% or more profit margin increase.  TIP: No countertop credit card terminal supports level 3 due to the data that must be sent with transactions; no bank currently offers a level 3 retail solution with US EMV. A cloud-based payment gateway is required.

  2. Ensure key entered transactions are sent for authorization with the MOTO (mail order, telephone order) transaction type indicator. If not, the transaction will default to the highest ‘non-qualified’ interchange rate possible for the card type, and in the event of a dispute, merchant must be able to produce a signed receipt.  TIP: Never key enter on a countertop terminal since it is set up for RETAIL. VX520 emv NFC verifone terminalThe best solution manages proper presentment for processing automatically so employees don’t need to understand the nuances of the best way to process any transaction to qualify for lower rates or mitigate risk.
  3. Enable online payments, with level III credit card processing. By empowering customers to pay 24/7, they’ll pay faster to clear up credit lines to buy more. Also, with cardholder authentication, payment can sometimes be guaranteed against fraud and qualify for even lower interchange rates due to lower risk; key entered transactions carry more risk and while risk can be mitigated, payment is not guaranteed. Accepting alternative methods like ACH, wire, and Paypal will also reduce friction, increase efficiency and increase cash flow.

Paypal Rates Increase October 2015

Effective October 1, 2015, Paypal will remove the tiered merchant rates for US domestic and international Purchase Payments. The changes don’t apply to PayPal Payments Pro users and Virtual Terminal. PayPal Payments Standard and PayPal Express Checkout users will have a rate hike.

The new rate will be the standard rate of 2.9% + $0.30 USD for domestic transactions and 3.9% + fixed fee** for international transactions.  Card-processing rates on PayPal Payments Pro and Virtual Terminal are not changing.

Paypal rates October 1, 2015:

Standard 2.9% + $0.30
Mobile In-Store Payments rate 2.7% + $0.30
Nonprofit rate 2.2% + $0.30

Paypal international rates October 1, 2015:

Standard 3.9% + fixed fee
Mobile In-Store Payments rate 3.7%  + fixed fee**
Nonprofit rate  (under $100k/mth) 3.2% + fixed fee**
Nonprofit rate  (over $100k/mth) 2.9% + fixed fee**

Paypal current tiered rates:

PayPal Rates:
Domestic Purchase Payments transactions in U.S. Dollars
Prior month’s sales volume    Fee per transaction
$0 to $3,000    2.9% + $0.30
$3,000.01 to $10,000    2.5% + $0.30
$10,000.01 or greater    2.2% + $0.30

International Purchase Payments transactions
Prior month’s sales volume    Fee per transaction
$0 to $3,000    3.9% + fixed fee**
$3,000.01 to $10,000    3.5% + fixed fee**
$10,000.01 or greater    3.2% + fixed fee**

*Sections 8.2 (b) and 8.4 (c) of the PayPal User Agreement
**Section 8.4 (d) of the PayPal User Agreement. Click here to see Paypal International Fixed fees vary by country.

Paypal Pro fees:

These are the fees posted on Paypal web site now.

  • $30 monthly fee
  • 2.9% + $0.30 per transaction
  • 3.1% + $0.30 per domestic transaction; additional 1% for cross-border transactions

Paypal Pricing for Add-On Services

Recurring Payments: $30 monthly
Advanced Fraud Management Filters: $20 monthly + $0.05* per transaction
Account Monitoring: $29.95 setup + $19.95 monthly

Paypal Additional Fees

  • International Sales: The pricing table above applies to domestic payments in US dollars. There’s an additional 2.5% charge for any currency conversion and a 1% charge to receive payments from another country
  • Chargeback Fee: $20
  • Uncaptured Authorization: after a successful authorization, you’ll be charged if you do not complete the sale using PayPal Payments Pro: $0.30 per uncaptured authorization
  • Card Verification Transactions: used to verify that a cardholder’s account is in good standing without processing a purchase transaction: $0.30 per submission
  • Refund Fee: Fixed fee portion of the original transaction fee (for example, the refund fee is $0.30 for domestic payments)
  • American Express® card usage fees: 3.5% per transaction on PayPal Payments Pro, PayPal Payments Advanced and Virtual Terminal

Click here for the official Paypal rates and fees.


Small business merchant service rates telemarketing scam

A telemarketer called from “Express Processing Payments”, with the pitch, “Have you heard about new regulated rates that Visa and Mastercard introduced for small businesses only?” And further, “…reduce your rates 20-50%.” Let’s dispel this claim right now. There’s no such thing.

The only ‘recent’ government regulation regarding rates, are those from the Durbin Amendment, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In August 2011, I reported on the proliferation of robo calls that followed the federal legislation for debit card transactions:

Under the final rule, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction will be the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction. This provision regarding debit card interchange fees is effective on October 1, 2011.

What does this mean to merchants?

  1. The maximum the issuer (if they meet regulated size) can receive is .05% plus $.21 plus $.01 if qualified.
  2. What merchants pay are determined by the salesperson selling them.
  3. Visa debit interchange rate for CPS Retail was 0.80% + $0.25 per transaction prior to the new legislation. If a small business received a 50% reduction in debit fees, the average small business processor still increases their profits significantly.

Video: Interchange rates impacted by people & payment gateway

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Merchant payment gateway choice impacts merchant fees. Managing credit card interchange rate qualification is critical to profits.

Transcript: Rising merchant fees impacting profits? Meet Joe, a CFO. The problem is rate qualifications. The system is too complex.

interchange rules

It’s impossible follow the rules without an automated system.

Employees can influence costs.

interchange rate qualification

The same transaction can process at different rates, depending on which rules you follow.

Until now. Introducing 3D Merchant Services. Cloud payment solutions that work with YOUR financial partners. Here’s how the payment gateway works. Patented solution determines the best way to process. You pay less. Users are required to follow rules. Competitors say it can’t be done. The proof is measureable. It’s quick and easy to use.  Efficient, secure, processor neutral, Level III processing, YES.

Call 3D Merchant Services 954-942-0483 for a demo and free trial.

Author: Christine Speedy. “Managing interchange rate qualification is virtually impossible without a technology solution.  The right payment gateway selection is critical to merchant success and managing fees with any merchant account.”

Expanded information about this subject: Problems with other payment gateways:

Retail swipe

Bob swipes the card on Virtual Terminal A, enters the amount and submits. ALERT: enter sales tax. (type in or enter to skip). If the extra info is entered, the transaction qualifies for Commercial Data Rate II 2.10%, if skipped, it’s 2.65%. (Most virtual terminals CANNOT support level III on swiped transactions.)

Bob swipes the card on Virtual Terminal B, enters the amount and submits. ALERT: Submit level 3 data. (This data has been prefilled with the transaction information and additional data stored in a template.) One click later and the transaction qualifies for Commercial Data Rate III or Large Ticket if a qualified large sale amount.

Moto (mail order / telephone order

Bob key enters a transaction on Virtual Terminal A and submits. After the sale is completed, an ALERT appears. You can lower your rate if you complete the next two steps. Do you think Bob ever skips the next steps because he’s busy or interrupted? You bet.

Bob swipes the card on Virtual Terminal B, enters the amount and submits. ALERT: Submit level 3 data. One click later and the transaction qualifies for Commercial Data Rate III or Large Ticket if a qualified large sale amount.

These are some simple examples. But there are many more complex rules for all sorts of different card types and transaction types. Most virtual terminals have no intelligence to help merchants with interchange rate qualification. Merchant account payment processor reports have also improved with reports for ‘non-qualified’ transactions. They’re not entirely accurate. For example, commercial data rate II is a qualified rate. However, commercial data rate III is better. Will any report tell you if there were transactions that could have processed at an even lower rate? While several of the big ones have improved, they’re still a long way from automating interchange optimization.

If you want peace of mind, instead of pouring over reports, an automated solution for interchange management is critical.

Credit card processing effective rate calculator

Use this tool to calculate your merchant account effective rate. Credit card processing effective rates are critical for peer and industry benchmarking, especially merchants with pass through interchange or interchange plus pricing.

Sorry, the calculator is temporarily down!


  • If your business is cyclical, choose a high volume month
  • Subtract any unusual fees. For example, if you have an annual PCI Compliance fee on the statement examined, deduct from fees paid.
  • If American Express revenues are on the merchant statement, but fees are paid separately from your merchant account (common), enter net American Express revenues.
  • If Discover or other card brand fees are on the merchant statement, but fees are paid separately from your merchant account (common), add it to the American Express revenues. (The field name is not important, just that it will be subtracted for analysis.)
net sales submitted

Example step 1, Page 3 of merchant statement with pass through interchange pricing.

pass through interchange pricing

Example Step 2, 2nd to last section of merchant statement with pass through interchange pricing.

Step 3: Resulting effective rate:

effective rate example resultsQ&A:

What is the effective rate for my industry?

Annual revenues impact the effective rate because there’s a baseline profit any acquirer wants to make in order to support your business. My expertise is in omnichannel (mixed card present and card not present) companies with $1M plus annual processing, particularly automotive parts, building materials, and industrial supplies. 100% of them should have less than 3% effective rate. For those with larger retail component, it might be in the range of 1.3-1.5% and for building materials with strong mix of card not present, it’s might be 2.2-2.5%.

Why is my effective rate higher than another similar company, if we both have the same discount rate? Effective rates can be influenced by systems and people. For example, split testing within the same company has shown significant result variances with different payment gateways. Effective rates are a marker of processing efficiency; merchants using automated interchange management systems generally have the lowest effective rates.

Resources: Not sure where to find the numbers to plug in? Watch these videos for First Data, Paymentech and Paypal Pro.

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What’s your effective rate? Industry? (retail, B2B). Is your rate for retail swipe, phone/ecommerce, or both?