Credit Card Processing 101: Who Gets the Rewards?
International Payment Solutions, LLC has always strived to educate merchants. The first thing that we teach you is that ALL credit card processing companies have the same cost (interchange) that is dictated by Visa/MasterCard. The only difference in processors is integrity, profit margin and customer service.
Interchange is a 22 page document that has pricing based on the type of card and the way you take that card. Types of cards range from debit/check cards, consumer cards, rewards cards, world cards, and corporate cards to name only a few. To only disclose one rate within a pricing structure is deceptive and the primary reason most merchants are being overcharged. The most significant difference between International Payment Solutions, LLC and 90% of processing companies are the rewards cards from Visa and world cards from MasterCard. Rewards/WorldCards are the ones your patients use to get bonus miles and cash back. They represent 40% of all credit cards. We do not separate them and charge higher pricing, while they do. With the exception of corporate cards, International Payment Solutions, LLC charges you based on the way you TAKE the card, either swiped or keyed.
There is a company advertising a 1.59% + .25¢ rate, but after seeing their statement it turns out that only two consumer cards will qualify for the 1.59%. Most others are between 3.50% - 5%. These companies often have a termination fee of $350 or more along with a Loss Profit Clause. A Loss Profit Clause is just that, they can charge you for how much money they were making monthly and multiply that by the number of months left on your contract. We had one potential client whose processor was going to charge him $4500 to leave. There is no termination fee or Loss Profit Clause with International Payment Solutions, LLC.
Ways to tell whether or not you are getting overcharged on your credit card processing.
· Is there a separate category for Rewards or World cards?
· Have you seen your Mid-Qualified and/or Non-Qualified totals rise significantly?
· Do you have a rate without a transaction fee?
· Are you going through your local bank?
· Have you been told that you have to “upgrade” your current equipment?
· When you called to negotiate rates, did your bank say you’re already getting a great deal?
· Do you have a contract that requires you to pay a termination fee to leave? This is a way for the bank to start you out with a great rate, and then raise your rates throughout the contract, making it too costly to leave.
· Does your statement indicate fees but does not include the dollar amount of the transactions that correspond to those fees? If so, this is a way to hide what rate you’re paying on keyed and corporate cards.
We offer a price match guarantee which states that as long as you are our client we will match any legitimate offer you may receive. The key is a legitimate and fully disclosed quote.
International Payment Solutions, LLC has always done spreadsheet comparisons where every rate and fee is not only disclosed but explained. The single biggest reason why most merchants are being overcharged on their credit card processing is that they let someone throw a number at them without an explanation. This isn’t always just simple math. Ninety percent of merchants have no idea how to read their statements. Of the 10% that do, most don’t understand the terminology or pricing structures that their bank is using. Our policy requires a statement be faxed for review as opposed to just throwing numbers at you. This is why our national average is a 21% reduction in cost and we have had merchants where we have cut their cost by over 90%. How would you like to never have to switch your processing again and receive honest and wholesale pricing? This is our promise to you and we hope you would give us a chance to earn your business.
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Credit Card Processing 102: You Do the Math!
Leo Townsend owner of International Payment Solutions, LLC, has been educating merchants for the last six years about credit card processing. Credit Card Processing 101 has been a huge assistance in the education of merchants about true costs. Credit Card Processing 102 will show you how the math really works and to be able to recognize obviously misleading quotes.
Credit card processing costs are dictated by Visa/MasterCard but controlled by the profit margin requirements of each processing company. Each card type is assigned a price based on the risk associated with the card type. The manipulation of the card types is how processors can increase their profit.
The lowest risk card is a check/debit card. The risk is obviously low because the money is drawn directly from the customers’ checking account. The cost for these types of cards is approximately 1 1/8% plus a .16¢ transaction fee. This is how companies are able to quote a 1.29%. The only cards that will fall in to that 1.29% are the check/debit cards. The lowest cost credit card is a Visa Consumer Card at 1.63% plus a 10¢ transaction fee and the MasterCard WorldCards are at 1.83% with a transaction fee of 10¢. If you think you are getting a 1.29% on all your transactions do you think the bank is going to take that big of a loss? You must ask yourself what is your real cost. The best way to ascertain what your real costs are is to divide your total fees in to your total processing volume which will determine your effective rate. We see merchants’ statements where the only rate shown is 1.49% but their effective rate is over 3%. What happened to the 1.49%?
Does your current processor take their fee on each transaction every day, or do they take it all at the end of the month? If they take it each day you are on daily settlement. So you must add the fees they have already taken to the fees they take at the end of the month to get a true effective rate. If you are taking thousands of dollars in processing but only see approximately 1% in fees on your monthly statement you are probably on daily settlement. This is an accounting nightmare and one of the main reasons merchants don’t really know their true effective rate!
The biggest difference between International Payment Solutions and other processors is the separation of Rewards & World Cards. These are the cards your customers use to get bonus miles and money back and are over 40% of all credit cards in use today. Over 90% of processing companies separate these cards without informing you during the sales process. IPS does NOT separate these cards out. No one is immune to taking these cards and we have seen merchants paying over 6% for these cards but never realized it. This is why International Payment Solutions requires a statement be faxed for review so that we may assist you in understanding what you are currently being charged and show you where you can save money on your credit card processing. Leo Townsend talks to CFOs of major corporations that do not know how to read their statement. In fact, most merchants don’t and many don’t even look at it.
Our policy requires a statement be faxed for review as opposed to just throwing numbers at you. This is why our national average is a 21% reduction in cost and we have had merchants where we have cut their cost by over 90%. How would you like to never have to switch your processing again and receive honest and wholesale pricing? This is our promise to you and we hope you would give us a chance to earn your business
Credit Card Processing Costs: Don’t Be Prey
International Payment Solutions, LLC is a registered independent sales organization and merchant service provider. It is their goal to provide merchants, big and small, with excellent customer service and cost effective pricing. President, Leo Townsend, has been writing articles educating dentists for almost a decade. International Payment Solutions more than likely has a client in your area. “We work to educate merchants and understand their needs to make sure they are making a sound business decision based on fact not fiction when it comes to their credit card processing. Most merchants are told the same lies, by so many different salesmen that they believe it to be the truth. Most processing salesmen have not been in the industry long enough and have been told these same lies and don’t know the truth themselves,” says Leo Townsend.
If you’re like most merchants you have received a call from someone claiming that your existing credit card terminal is not PCI compliant. In fact, most terminals are compliant. While many merchants are being charged to show their PCI compliance, International Payment Solutions has reviewed the security standards to determine what is actually required of merchants to be compliant. For those merchants using a stand-alone terminal and not accepting information over the internet nor storing information on their computer system, there should not be a cost to prove your compliance. Card issuers put up a website, www.pcisecuritystandards.org, for the public to be able to review the regulations and provide access to the paperwork to prove compliance at no cost. Some processing banks, merchant service providers and sales offices may use this regulation as a way to confuse, confound and generate revenue with no real added bonus to their merchants. Just more money in their pockets. Some companies are telling merchants that they must have breach insurance to protect themselves. Your business insurance may already cover this. Check with your insurance agent before paying for something you may already have.
Credit Card Processing Facts
- Don’t be fooled by Flat Rate advertisements. Flat rate’s mean you’re paying keyed rates for swiped cards. Most dentists swipe 90% or more of their cards. Let IPS show you how bad these programs really are.
- Most terminals ARE PCI compliant!! If you are told you have to upgrade your terminal to be compliant, know it is a sales ploy.
- There is no Visa™/MasterCard™ medical industry program.
- Most merchants are paying much higher rates for Rewards cards. What are you paying?
Visa™, MasterCard™ and Discover™ recently announced adjustments to their rate structure. How has this affected you? Notification must be provided at least 30 days in advance of any change. Be sure to review your statements monthly to prevent any surprises.
The biggest threat to an unscrupulous sales person is an educated merchant. Take the time to educate yourself. International Payment Solutions is happy to help. IPS provides no cost, no obligation analysis of your current processing statements. IPS provides honest and reliable support before, during and after the transition. Call Elizabeth McMillin, Corporate Sales Manager, at 866-522-1169 now for more information or fax your current processing statement to 815-273-2133 for a free analysis today.
TERMINATION FEES & CONTRACT RENEWALS
So, you’ve been with your current credit card processing company for the last year or three and you’ve now decided to go with another company (hopefully us!). You actually found your contract or you called and found out that your contract is up in six months.
I can’t tell you how many times I’ve talked with a merchant who says call me in October when my contract is up. Is it really? Here’s what you don’t know:
Most contracts have a built-in extension of one year or more. If you don’t give your processor formal notice within a limited time period, your contract will automatically renew! And believe me, that renewal window is relatively small.
So you need to know now where you stand! Make it a priority to find out what kind of notice is required and in what time period it needs to be given. A lot of processors are now requiring from 30 to 120 days’ written notice! Otherwise, when I call you in October (when you thought your contract was up) you might have already been renewed and you didn’t know it!
Now, when you add that to the probability that your contract has a penalty for early termination, guess what? That means you’re stuck in that contract with a company you aren’t happy with for another 1 or 2 or more years!
So here’s what you do: Call your processing company right now. Ask these questions:
1. If I were to cancel my contract, are there any fees or penalties? And you keep asking that question until there are no more fees.
2. If there are termination fees, you ask, when can I leave without penalty?
3. Followed by, what type of notice of cancellation notice do you require and by when? At this point, they should tell you, we need written notice by mail or fax (or whatever) 30 (or 60 or 90 or 120) days prior to _____.
Then what do you do? You write that date on your calendar in big red letters! And you send that letter, especially if you know you’re switching! Save yourself some money and headaches down the road.
So, if you’re considering a change to us, now or in the future, follow this simple advice: Find out now where you stand. Keep clear notes of the dates and who gave you that information!
And one other small piece of advice: don’t call your rep to ask these questions. If you’re close to your renewal date, he most likely won’t return your call until after you’ve been renewed. Call the number on the face of your statement! And don’t let them call you back! If necessary, ask for a supervisor to get your answer that day. If they are stalling, you are probably close to your renewal date.
At International Payment Solutions, we never charge early termination fees. It’s our way of backing up our promises to you! So if you’re considering a change to us, now or in the future, follow this simple advice: Find out now what your terms are so you can be prepared in the future!
____________________________________________________________________________________WHAT THE “DURBIN AMENDMENT” MEANS TO YOUR CREDIT CARD PROCESSING COSTS!
I’m sure you’ve been hearing about “The Durbin Amendment” which passed in conjunction with the “Dodd-Frank Wall Street Reform Act”. Some of you have probably already received phone calls from salesmen soliciting your credit card business because of the Amendment. This Amendment is why banks, like Bank of America, are adding the $5 monthly debit card usage fee.
What this mean to you as a merchant depends on your processor. Every processing bank has the same initial cost. It’s called interchange, dues and assessments. The new interchange rates for most debit cards have been drastically reduced at the bank level effective October 1, 2011; essentially from .95% and 22 cents down to .05% and 21 cents per transaction. But here’s the caveat: that rate does not include dues and assessments, and any mark up your bank is charging you. This means even though the cost of that debit card has been greatly reduced (meaning the issuing bank gets paid less), your processor doesn’t have to pass those savings along to you! Instead, his profit potentially just got bigger! Especially if you’re on a tiered pricing structure! This would be pricing that has Qualified, MidQualified and NonQualified rates. All the Amendment did was reduce the amount paid to the issuing banks. It did not limit or restrict the mark-up for the processor who sells processing services to you. He gets to pay the bank less, but he isn’t required to pass that savings on to you, the merchant. But if you’re on interchange pricing, you should see the benefit of this legislation.
There are some actual rate increases due to take effect in October 2011. They apply to some very specific cards, including certain prepaid debit and corporate cards. In reality, this should have little impact on most merchants. But if you happen to take one of the affected cards, you will see a significant increase! And some processors may take this opportunity to do a blanket rate increase. Especially if you are on a tiered program.
The most important thing a merchant can do is read any notices that appear on your monthly statements. Your processor is required to tell you about any increase or change in your rate structure.
If you are presently shopping for a new processor, please be aware of termination fees. It has been our finding that over 90% of companies are now charging termination fees. Rarely do the salesmen mention that you probably already have a termination fee and you’re signing a new contract with another one.
It is the policy of International Payment Solutions to prepare spreadsheet comparisons where every rate and fee is not only disclosed but explained. The single biggest reason why most merchants are being overcharged on their credit card processing is that someone threw a number at them without an explanation. Over the past 10 years, IPS has achieved a national average of 21% in cost reduction and has had merchants where IPS cut their cost by over 90%. How would you like to never have to switch your processing again while receiving honest and wholesale pricing? This is International Payment Solutions’ promise to you.
Please call Leo Townsend, president of International Payment Solutions, LLC at 866-522-1169 or fax your statement directly to Leo at 815-273-2133.
Exempt Banks from the Durbin Amendment
Non Exempt Banks from the Durbin Amendment