Why is it Important to Pay Attention to Your Merchant Statement?
Posted on July 1, 2019
Credit card merchant statements are really pretty boring. They don’t provide much useful or interesting information that might help you run your business. It’s not like you can refuse to let your customers pay with credit cards – so why spend time reviewing your statements?
The answer is – because you can probably save hundreds if not thousands of dollars every year by making sure your processor is honest and transparent regarding the fees they charge. And it all starts with your merchant statement.
The good ones are short, simple and make it easy for you to reconcile your credit card sales with your deposits and understand the fees you pay. The bad ones have pretty graphs and pages and pages of information that doesn’t make a lot of sense and seem designed to make it hard for you to determine your actual costs for card processing. This also makes it tough to compare the rates from one processor to another on an “apples to apples” basis.
Luckily, there is a simple calculation you can do that cuts through all the clutter and info-junk that many merchant statements have. It’s called the “net effective rate” and it creates a level playing field for comparing processors. All you have to do is take the total of all the fees charged by your processor, which is a combination of the fees charged by the credit card companies and the fees your processor charges and then divide it by your total credit card volume from the same statement. The result is your net effective rate.
Net effective rates will be different from merchant to merchant, depending on their industry (restaurant vs. grocery store, for example), their average sale amount, overall charge volume and if their customers use of debit cards or cards with rewards. But generally, your rate should be somewhere between 2% for high volume retailers and 3.5% for lower volume retailers.
Once you’ve used the information on your merchant statement to calculate your net effective rate, you’ll be armed with the tool you need to determine if your processor is being fair and honest with you, or if you need to replace them with another vendor which will deliver a lower net effective rate.
Our Merchant-Members usually reduce their net effective rates by about 30% when the switch to Main Street Payments. On the average, we saved them about $ 340 per month, or more than $ 4,000 per year. And these savings went straight to their bottom-line profits.
Eight ways to tell if your credit card processor is charging you too much.
Posted on June 24, 2019
If any of these common credit card processor tricks sound familiar, you can save money every month by changing to an honest, transparent processor.
1. Misleading Merchant Statements – It’s pretty common for processors to produce monthly merchant statements that could win awards for “best fiction.” They purposely make it almost impossible for merchants to determine what their actual fees are or compare their rates with other processor’s fees. If your statement doesn’t make it clear how much your total monthly fees are, it’s because your processor doesn’t want you to know your true processing costs – that would make it too easy for you to compare apples to apples and shop for better rates.
2. Blended Rates – If your processor charges you one discount rate for all your transactions, you are paying too much. It’s called a “blended rate” and it sure sounds simple and easy.
But since the credit card companies charge very different fees for each type of card your customers use; a blended rate will cost you. Your processor should pass through the actual costs from the credit card companies so you can benefit whenever your customer uses a card with lower fees.
3. Mid and Non-Qualified Rates – If these words are on your merchant statement, you are paying too much for processing. These are similar to blended rates, but worse – they are made-up categories some processors use to take advantage of merchants. Instead of passing through the actual costs from the credit card companies, they artificially group your transactions with rates they decide to charge you – they have nothing to do with what the credit card companies actually charge.
4. Annual Fees – A sneaky way for your processor to make more money at your expense, since most people notice monthly fees but don’t always pay attention to an annual fee.
5. Early Termination Fee – This is an even sneakier way for your processor to make more money at your expense. Many processors have an “ETF” clause in their contracts, allowing them to charge you hundreds of dollars if you cancel the contract. How much sense does that make? Your processor raises your pricing or cuts back on their support to the point you want to switch to an honest, transparent processor who treats you with respect and offers great pricing…but your current processor holds you hostage with the threat of a large fee if you cancel your contract with them?
6. Predatory PCI Fees – Lots of processors say PCI fees for retailers are “mandated by the industry” but this isn’t true. Compliance with PCI rules is an industry requirement, but charging fees are not. If your processor makes you pay PCI fees instead of helping you to avoid them, you should switch to an honest, transparent processor.
7. Batch Fees –These are usually only $ .05 per day, so many retailers don’t even notice them. But they are examples of fees charged by many processors that are just made-up – there isn’t a cost to the processor when a merchant submits their batch, so why does the merchant have to pay a fee? It’s simply another way for the processor to make more money.
If you have batch fees on your merchant statement, be sure to look more closely, as there are probably other made-up fees, such as Regulatory Compliance, Security, Audit, Reporting or Technology fees. These are types of fees some processors charge to improve their profitability while damaging yours.
8. Expensive Credit Card Terminals – If a processor encourages you to lease or pay installments for a new credit card terminal, you should run away. Most terminals are less than $ 200 to purchase and last for many years. Leases or installment programs are just another way for processors to make more money at your expense.
Three Ways You Tell if a Credit Card Processor’s Sales Rep is Not Being Honest with You
Posted on June 10, 2019
Some processor’s sales reps really are more focused on their customer’s profitability rather than their own. There’s just not enough of them with a commitment to providing great support and service to their clients while also reducing their credit card processing costs.
So, to help you the next time a processor’s sales rep walks into your business and starts their pitch, here are a few “tips and tells” that they are probably the wrong card processor for your business.
1. They ask you to show them your current merchant statement before they quote their fees. This is the same as a new supplier saying “let me see what your current vendor is charging and I’ll beat their price” instead of “this is my lowest price, no matter what you are currently paying.”
If a card processing sales rep won’t give you a quote with all the fees they charge in writing before you show them your merchant statement, show them the door.
2. They claim their rates are a good deal and simple to understand because they are “blended” or “tiered” or based on “qualified rates.” These are code words which mean they are adding additional fees on top of what the credit card companies charge for processing – increasing the processor’s profitability while reducing yours.
The only honest and transparent pricing structure is for the processor to pass through exactly the fees credit card companies charge and clearly identify their own fees.
3. Their contract has monthly minimums, fees that don’t make sense (and the rep can’t explain) or an early termination fee. These are all red flags! You shouldn’t have to pay a penalty just because more of your customers happened to pay by cash or check during the month. And any fee with words like “regulatory, security, audit, technology or reporting” are just made up in order to improve the processor’s profits – at your expense.
An early termination fee is probably the worst kind of fee. If the processor’s service and support is terrible, or they raise your fees every year – but they make you pay them hundreds of dollars to cancel your contract and switch to a better vendor? How does that make any sense?
Three Easy Tips to Selecting the Best Credit Card Processor for Your Business
Posted on June 3, 2019
Finding a fair, honest and transparent credit card processor shouldn’t be so hard to do. They all promise the same services – fast, reliable card processing, the ability to accept all the major credit cards, great customer service and low processing rates. Determining the best vendor should be easy, right?
Unfortunately, it’s not that simple. Many card processors work very hard to make the industry seem complex and difficult to understand – almost as if there is some sort of magic involved with processing credit cards.
Then they make it worse by charging fees for things that don’t make sense, hiding their fees by adding them to what the card companies actually charge and then making sure their merchant statements are so complex it becomes difficult to compare rates from different processors on an “apples to apples” basis. This helps them to maximize their profitability while reducing yours.
So how can a retailer make sure their credit card processor is the best choice for their business? Here are three easy tips:
1. Ask them to explain their pricing model. If they want to look at your current merchant statement so they can “optimize their pricing for you,” hang up the phone. If their response has words like “tiered” or “bundled,” they are not a good choice. Actually, if they say anything other than “we pass through the fees charged by the card companies and our fees are clearly identified,” they aren’t a good choice.
2. Ask them what makes them different from other processors. The only right answer is simply “our goal is to save you money.” If they go into a long, boring speech about how their company is the industry leader, has the most innovative solutions and is committed to compliance with industry policies…well, they didn’t mention anything that will help you save money.
3. Ask them to explain their company’s long-term plans regarding their clients. You’ll probably hear some corporate-speak like “to maximize our client’s success through empowering our employees and delivering state-of-the-art business solutions.” The best processors will say something more like “our goal is to increase our Merchant-Member’s profitability by lowering their card processing costs.”