Insist on an Interchange pass through pricing structure
Avoid paying non-qualified surcharges and fees. The definition of the term "non-qualified" will vary by provider as will the surcharge fees. Tiered pricing plans typically downgrade many common card types like reward cards, business cards, corporate cards, and transactions where the card is not present. To take advantage of lower incentive Interchange rates available for your industry, you must insist on a merchant Interchange rate quote. For example, effective October 2010, Visa will extend its Small Ticket Interchange on transactions less than $15 to most merchants. If you are NOT on a direct Interchange pass through plan by then you will not be able to take advantage of this industry pricing change.
Accept Debit Only
Merchants may opt out of accepting higher priced Credit card types. Some of the lowest Real Rates are from merchants who exclusively accept debit transactions. There are two types of debit transactions: signature debit (think Visa check cards) and PIN debit. Accepting signature debit is like accepting a credit card, simply swipe or key-enter the card number, but at the lower debit Interchange rates. Accepting PIN debit traditionally requires a face-to-face transaction using an encrypted PIN pad and your customers will need to enter their four-digit secret PIN number. However, Visa announced that signature debit and their Interlink PIN debit rates will be priced the same starting April 2010. Given the recent run up in PIN debit rates and now with the PIN debit market share leader, Visa, announcing the convergence of signature and PIN debit rates, merchants may want to think twice about investing in and maintaining encrypted PIN pads. Signature debit may accomplish your desire results with less effort. In addition, effective July 2010, Visa will expand its No Signature Required (NSR) program on transactions <$25 to most merchants… thus eliminating the need for a “signature” on most signature debit transactions and increasing check out speed.
Understand billing terminology
For example, are you being billed a fee per authorization attempt or per settled transaction? Paying only for settled transactions is better than being billed on a per authorization basis. Reduce or eliminate monthly statement fees, monthly service fees, monthly minimum fees, daily batch closing fees, compliance fees, terminal support fees, non-bankcard authorization fees, address verification service (AVS) fees, retrieval fees, voice authorization fees and others.
Make sure your merchant category code (MCC) is properly selected
Your MCC is passed with each transaction you submit under your merchant account. Your MCC governs chargeback dispute rules and the Interchange rate qualifications. Each industry has different base Interchange rates. Quick Service Restaurants are different from Hotels that are different from Grocery stores. In addition, where incentive Interchange rates are available, they are tied to specific MCCs. For example, Visa B2B rates are available to 35 select business-to-business merchant categories. Merchants operating different business units from the same physical location should establish multiple merchant accounts. For example, a Hotel, with a restaurant and gift shop.
Select the Right Payment Technology
Work with a professional payment advisor that can help you select the best payment solution for your business. For example, many small volume merchants don’t need to purchase bankcard terminals or activate virtual terminal software. They can simply use any touch tone phone to dial an 800 number and follow the voice prompts. Or a restaurant may benefit from accepting PIN debit at the table using a WiFi terminal. Or a retailer could eliminate a phone line by choosing to use an Ethernet terminal. A business selling to the government will require a Level 3 compliant payment solution to get the best merchant rates. Using old outdated payment applications can lead to higher Real Rates due to unnecessary downgrades or in worst cases, card data security breaches.
Bundle transactions when possible
Considering that authorization and transaction fees can have a major impact on your Real Rate, where possible, combine multiple transactions together. For example, if you have a restaurant, don’t close the bar tab before seating your guest, transfer it to the table for a single larger transaction at checkout.
Take advantage of Credit Voucher Interchange
To lower your Real Rate, you must move to an Interchange billing plan where credit voucher Interchange is returned when you issue refunds to cardholders. From our daily analysis of merchant statements, the most common situation is no Interchange is returned on cardholder credits. And in some instances, merchants are even charged the discount rate a second time to process the credit amount. Read The Essential Merchant Guide to Card Payment Refunds.
Compare your Real Rate with other businesses and take action if you find your costs are too high
If you haven't reviewed your pricing recently or perhaps since first establishing your merchant account, now is the time to identify possible saving! In fact, normal changes such as an increase in the average transaction (simple inflation) or increase in sales volume may allow you to negotiate lower processing costs.
If you are in a contract, don't let that stop you from shopping. Evaluate the savings you would receive from obtaining a lower real rate to the cost of your contract early termination fee. Don’t terminate one long term, unfavorable contract for another; this time insist on a month-to-month agreement.
Read the merchant account contract fine print
Most importantly, when negotiating, don't neglect to read the fine print of the contract terms and weed out the most unfavorable. If you don't start with the contract terms, you could find yourself with a vanishing introductory rate and locked into a long-term contract.
Take these simple steps to protect your business:
- Recognize that there will be contract fine print governing the operation of your merchant account.
- Obtain a copy of the legal Terms & Conditions before signing the application.
- Read all numbered headings and make sure you have a full copy, not a summary.
- Pay close attention to the term and termination section and the formula for calculating the cancellation penalty.
- Does the contract state that rates and fees can go up for any reason, at any time?
- Who is 'party' to the agreement and who has authority to legally waive contract terms and fees.
Shop smart….Only you can stop corruptive business practices.
Understand that the purchasing decisions you make shape the market by rewarding both good and bad business practices. Stop awarding your business to providers who refuse to offer quality service on a month-to-month basis.
Best Practices when shopping for a new merchant account provider:
- Insist on an Interchange pricing structure.
- Demand a true month-to-month term and refuse to enter into contracts that state a cancellation penalty.
- Avoid proprietary technology designed to trap you into higher costs.
- Read testimonials and value professional account management.