February 28, 2012 By Solon Zafiropoulos
I was meeting with one of my client’s last week to discuss logistics for the delivery and installation of ATM machines to their new stores. We’ve been servicing their ATM machines now for 3 years, and providing some value added services for them with internet marketing. Business has been very good for them, and they’re expanding by opening up 2 more stores.
I’m not a big fan of persistence when it comes to sales, because I myself don’t like being sold that way. So, every year I follow up by letting them know that we’d like the opportunity to compete for their credit card processing contract.
Well, this past Thursday, they asked me to take a look at their processing statement and see what I could do, because their contract expires in a few months and were also looking for a volume discount. They felt since they were growing from 3 stores to 5, that they deserved a volume discount, which they have every right to expect.
Upon analyzing their statement, I noticed a few things that stood out, and made me wonder why they would even stay with this processor for as many years as they did.
1st: they had my customer on what’s called a Tiered Pricing plan. There are 3 types of processing plans out there. Interchange + Assessments, Tiered, and Rate Transaction Fee & Bill Back. The use of either depends on the volume of sales, ticket, etc. In some cases, tiered works well, other cases Interchange + Assessments works well, and so on. Interchange + Assessments can be confusing if the customer hasn’t been educated on how interchange works. The processor for my client had them on a 6 tiered system, which they basically made up, because there really isn’t such thing as a 6 tiered system! As a matter of fact, any ethical honest processor I know (Few and far in between unfortunately) doesn’t user this type of pricing plan. Many processors out there today are converting their current and new customers over to something called Interchange Plus Assessments Pricing, which is all good, and a cost friendly way of processing payments, but not necessarily the best! The bottom line is the merchant should be given a fair price regardless of the processing plan. Our merchant clients end up saving hundreds of dollars per month, and stay with us for the long term because we put them into a plan that saves them money, but we also provide them with other value added services. It’s not out of the ordinary to get rates as low as .49% and $.11 per bankcard authorization fee, especially for high volume merchants.
2nd: I saw that they were given the same rate for the high volume of transactions they do each month (7,300 Transactions) as other clients I have who may do 1/4 of the volume. Not very fair, let alone ethical. Everyone knows high volume = better rates.
3rd: The new Durbin Amendment just went through last October, which in a nutshell means there’s a cap on the amount of interchange that can be charged for each transaction. I noticed that my customer was being charged 5 times higher than normal – $1.20/Pin based Debit transaction! A more appropriate charge for this should be $.20-.30 per transaction depending on again volume.
When I explained these issues to my customer, he felt betrayed, as he should have. Their processor was taking them for an extra $400/Month per store – over $1250/Month total. This money left on the table could’ve been applied to other business expenses like dumpster, liability insurance, workers comp, etc.
My client called his processor, a big nationwide bank whose name I will not reveal, and asked why his businesses were being raked over the coals? The answer customer service provided him was they were more than willing to reduce the fees. In proper fashion, he didn’t feel they deserved the business anymore, and hung up. His business had 3 merchant accounts with this processor for 7 years! You do the math, and quickly see that he lost $105,000 in that period, enough to buy a condo in Florida! Suffice it to say, he asked me for a proposal, which I beat by $527/Month AND provided him with other value added services he wasn’t getting before. Value added services that helped him increase security, and profits! More on that topic next time.
BOTTOM LINE: Unfortunately, credit card processing is slippery slope, filled with independent sales agents who come to you as a trusted adviser only to take you for a ride. It is paramount that you perform your due diligence online, and research the customer service ratings of the acquiring bank you will be processing with, as well as the local agent who is working with you. Also, be sure to read your contract AND make yourself a copy! When searching for a list of reputable credit card processors, make sure to search for independent agents who work with merchant acquirers like TransFirst, TSYS, RBS WorldPay, First Data and Elavon, as they have the best customer service ratings in the industry, and breadth of resources to support merchant needs. Reputable and honest agents who provide their merchants with solutions to their needs, earn less in commissions, yet make it up in volume, AND rarely lose customers! Because they do whats right for their merchant, and not their pocket! Quality of customer service and pricing go a long way, but it’s the genuine trusted advisers who provide merchants with value added services that truly HELP the business. In the end, that’s what we as small business owners all want, isn’t it? A consultative approach where the merchants needs are being met or exceeded.
I strongly recommend that ALL merchants, both big and small, shop around their credit card processor to be sure they too haven’t been taken for a ride like my merchant client above. There absolutely are honest, ethical agent consultants out there, just as in every other business. You need to take the time out to find them using due diligence. Good luck to your success in reducing your bill, and finding that trusted adviser your business deserves!
This post was provided by Solon Zafiropoulos of Merchant Services America, an independent payment processing firm that assists merchants with credit card processing, gift card, cash advance, payment security, internet marketing, and other value added services. He can be reached at (888) 796-3724. Or, email him at firstname.lastname@example.org.
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