Credit Card Processing Review
Choose the Best Credit Card Processor
Best solution (fee-wise) is debit cards whose fees were lowered by the Durbin Amendment (if your processor chose to return these to you). Second is to swipe the card or use AVS (address verification system) extra info can save you another .5%. I also tried the card resellers and that turned out to be a poor choice compared to cost + pricing. These folks rope you in with a low rate then use the twice annual card fee increases to "hide" added charges (which are really hard to spot). Other games (as you noted) are equipment leasing, monthly reporting fees, monthly security fees, PCI-DSS fees (card fraud), all of which are hooey! I've been impressed by the site merchantbillofrights.com that clearly spells out these market tricks.
Also, there are few processors that actually protect merchants from liability in the event of card fraud. Of particular concern should be the readers that install in a phone or tablet. If the smart device has a virus and gets hold of your transaction data, the card rate will be nothing more than a distant memory compared to the pain of a breach. There is only one company that I know who guarantees protection and reimbursement when using their secure hardware - look up E3 Encryption for further info.
Hope this helps - and remember, eat out often and reward your wait staff!
What to Expect From Your Credit Card Processor
The best pricing you can possibly hope to get is interchange + pricing. Interchange charts are easily available, Payment Transaction Systems Atlanta GA provides interchange charts free of charge. Usually 7 to 10 cents and 7 to 10 basis points is the best possible pricing scenario for almost all businesses. Understand, the processor must remit interchange to the Card Association. The processor must drive, settle and authorize the transaction, and attempt to make the account profitable. The margins are paper thin in this industry, and there are many who will "tease" with opening low rates, then once under contract, "bump" your fees up in price. Here's the Key!!! SERVICE. If you have a restaurant or store with a line out the door, and your credit card service is inoperative, are you on hold for 45 minutes? Listening to voice activated response? Telling your problem over again to another person, who doesn't care or understand? Price is important, but partnering with a company that is dedicated to service IS EQUALLY IMPORTANT. Always a live person to speak with, great service, honest people who do what they say. No false promises very valuable.
Let's start with your case, large amount of card-not-present transactions and a high volume / high ticket amount. You described a high risk merchant account right there. I don't know what kind of company gave you 0.1% interchange-plus pricing, they will practically make no money on you and take a big liability, but for your purposes, it is great! It just proves how competitive this industry has become. In case some of you may not know how interchange plus account work.
“The acquiring bank can levy a reserve account and change the deal any time it wishes.” That is true to all merchant services companies. They are allowed to hold the funds in case they suspect fraudulent activity, that is a very important step in protecting identity, prevent identity theft and prevent fraud in general.
Merchant Maverick and TopCreditCardProcessors are both paid advertising services and do not reflect any real merchant reviews.
Most companies do not have permission to process AMEX as it is a closed network. The way it works is that the merchant has to open their own account with AMEX and that way the merchant services companies do not make any markup on AMEX, they just charge the transaction fee, if any.
Google any company you consider doing business with, with the word "complaint" after their company name.
Never sign a termed contract with a cancellation fee. Make sure you know where that is, on the agreement, before you sign anything..
Banks do not give lower rates.
Interchange Plus, Pass-thru, True cost plus, wholesale plus, are most likely the only pricing method you want to consider.
Industry type does not always mean a reserve.
Check the BBB. How many complaints, and how they were resolved.
Merchant Maverick is one of the best sources for reviews out there.
Readers might be interested to know that different credit cards are charged at different rates. My processor (Intuit) notes that NQUAL cards (cards that have rewards) are charged at a MUCH higher rate (.03990) Instead of the .02330 that I was quoted. Since ALL of my accounts use the reward cards I am paying too much. However, a call to the provider (Intuit) DID result in the lowering of that rate to .03770 which is better but not great.
A merchant actually doesn't need the PIN number to get the 'regulated debit' interchange of .05% + .22 per transaction. Many companies are saying this to try to sell PIN pads that merchants do not need. Even on a phone order or an Ecommerce transaction (where it is impossible to enter a PIN) you receive the regulated debit interchange of .05% + .22. As long as you have an honest processor, of course.
I was encouraged however, to see that someone finally brought up "B2B qualifications" and the 100+ basis points it can save a B2B merchant like Paul Downs. This is why we set him up with a "Level III" processing solution to replace his cc terminal. Level III reduces the Purchasing card Interchange by .70 basis points and enables Paul to receive the special Large Ticket rate as well - which reduces the true cost of PCard Interchange from 2.65 + .10 to 1.45 + 35 - for the larger volume transactions.
Not all businesses can and or should accept pin based debit. The Durbin amendment was a waste of time and re done. Interchange fees needs to be reigned in, however, the fees are put forth by the Visa and MasterCard associations, private entities.
It works out that some businesses with small average tickets (under $25.00) ends up spending more money accepting pin based debit vs accepting the transaction as a credit card.
It really comes down to rewards. AMEX charges merchants the highest interchange and therefore has the most funds to pass back to consumers in the form of rewards. I have an AMEX card and I use it to pay as much of my monthly expenses as possible and then pay the balance each month. This is strictly due to the high amount of rewards I receive back. My rewards on my normal yearly spending get me about 35 K Delta Sky Miles, Free Baggage & a 1 once year companion ticket. Not too shabby for just putting groceries, gas and household items on it.
Any time I see a business that takes Amex, I ask if they give a cash discount. If they don't, then I'm a one time customer, because I object to effectively paying a surcharge so high fee card customers can get cash back benefits. Let the Amex card holders, or their employers pay the high prices at high overhead businesses, and the rest of us can get fair priced food at a low overhead, efficiently run business.
I can see how it would be easy to assume that a business would mark up prices to cover additional costs (from say, AmEx), but what if that were not true? Here's my thinking: If paying by AmEx is what works in a customer's world, fine. I will make less (or no) money on those few sales, but the word-of-mouth (and subsequent sales) generated by those sales far outweighs the loss. (Yes, I think pretty highly of my products)
In the past year, I processed zero AmEx transactions, so since this method of payment is so extremely rare in my world, why not keep the markup low, and the customers happy? I realize that this may sound ridiculous to some, but it works for me.
All I'm saying is that I would hate to loose you as a customer based on a false assumption.
Disclaimer: This is another viable resource to consider. Comparison sites, while some do a good job of educating the merchant, often are paid through affiliate partnerships.
The payment processing industry is extremely complex and merchants seldom have time to fully gain an understanding of the numerous service offerings, let alone ways to process cards effectively.
This leads to one area you didn't touch on – for plans other than a single flat rate, merchants can further reduce processing expenses by making sure they capture the appropriate card data to qualify for the lowest interchange or tiered rate. Even if you have a highly competitive processing plan (the company that offered you interchange plus 10 basis points), you can work to reduce the interchange rate by providing additional levels of card data. This could result in a difference of 100+ basis points on a single transaction!
With so many options to consider in payment processing, it’s helpful to have someone who’s working for you, and not the providers. In the end, it comes down to honesty and transparency - who do you trust with this service?