Check Credit Card Processing Rates before Holiday Rush

Earnings during the next 3 weeks will be crucial to the sustainability of many ecommerce merchants. Credit card processing costs over this timeframe will affect profitability, also. This manual is part 1 of a 2-part series wherein I will explain how merchants can review their processing statements ahead of the holiday buying season starts to be certain they are receiving aggressive processing prices.

If you are with the same provider as last year, your rates and fees may have enhanced without your knowledge. Check for the following and correct any problems promptly or it might cost you dearly.

  • Rate or fee creepage.
  • New surcharges and hidden, inflated, or unwarranted fees.
  • American Express OptBlue pricing.

Can you change providers or renegotiate pricing with your present provider? If so, did you confirm that you are really receiving the rates and fees you negotiated? Truth from the payment card company is dreadful. If you did not confirm the new rates and fees, there is a great chance you are not getting them due to application and order-entry mistakes.

If you did not confirm the new rates and fees, there is a great chance you are not getting them due to application and order-entry mistakes.

Did your provider convert your account to the American Express OptBlue program during the prior calendar year? In 2014, American Express introduced a program that ought to significantly reduce most merchants’ American Express processing cost. (I addressed OptBlue last year at a 3-part series. ) Unfortunately, many providers have used the program to enhance their profits as opposed to helping their merchant customers.

If you are a merchant with the same provider who did not renegotiate pricing in the preceding year, take some time to make sure you didn’t get an unwarranted cost development.

Legitimated Fee Increases?

The card companies — Visa, MasterCard, American Express, Discover — increased particular prices from September 2014 to September 2015. The most notable change was that the Visa credit card rating fee increase from 0.11 percent to 0.13 percent and MasterCard evaluation fee increase for transactions below $1,000 from 0.11 percent to 0.12 percent.

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Visa and MasterCard also increased their prices on international cards — 0.40 percent to 0.60 percent for MasterCard and 0.40 percent to 0.80 percent for Visa. Some Discover interchange prices were increased on debit cards. The most significant gains were for certain Visa corporate and purchasing cards which increased from 0.10 percent to 0.40 percent.

Having said this, if you do not accept a high percentage of international cards and Visa corporate and purchasing cards, then the increase in your effective rate from 2014 to 2015 will most likely be greater than 0.03 percent. Any expansion over this is likely because of your provider, assuming that your typical card and ticket mix has not changed.

Calculating Rate Increases

To learn whether you’ve received unwarranted rates climbs, first retrieve your statements for July and August 2014 and for July and August 2015. Then review these measures.

  • Compute the effective rate for all four months. To do so, divide the processing cost for this month from the processing quantity. Say you processed $50,000.00 in July 2014 and the processing cost was $1,125.00. Your successful rate was $1,125.00/$50,000.00 = 2.25 percent. Conduct the exact same calculation for the other months to discover whether your effective has gone up considerably.

Note that the processing cost on page 1 of some provider statements is the cost for the last month. So make certain you are using the cost for the ideal month. In addition, remove any American Express processing quantity and cost before determining your effective rate in case that you got a separate American Express statement this past year or did not accept American Express at and accept this, so the processing information is now on your Visa-MasterCard statement.

  • When the effective rate has not changed significantly, then your provider has not significantly changed your prices. This does not necessarily imply that your account is priced competitively. It only means that the provider hasn’t increased prices and fees during the previous year.
  • If, on the other hand, there was a significant growth, decide what provider prices and fees are different or introduced during the preceding calendar year. Call your provider’s customer service representative with your current statement in hand and ask precisely what charges and rates have increased during the past year. If he can not disclose any, ask him to identify the provider’s mark-up over interchange and pass-through fees on your most recent statement so you might note them. It will almost certainly include a percentage and a per-item fee — for example 0.10 percent + $0.10 — based on several different regions of the statement.
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Further, have the broker identify all AVS fees, gateway per-transaction fees, V/MC evaluation and access fees (also called APF and NABU fees ), the MC license fee, along with all monthly fees (as an example, statement fees, PCI fees, service, and gateway fees). Now review this information with the information on your 2014 statement.

  • If you can not recognize any rate or fee increase, start searching for surcharges. To do so, find the list of detailed interchange prices on the announcement. Again, the customer service person can help. Identify the interchange rates labeled EIRF and STD (i.e., standard) for Visa credit cards and work out the interchange rate charged. The rate should be 2.30 percent + $0.10 for EIRF and 2.95 percent + $0.10 for STD.

By means of example, if you had 25 EIRF transactions totaling $2,500.00, the interchange cost should be 2.30 percent x $2,500.00 = $57.50 + 25 x $0.10 = $2.50 for a total of $60.00. In the event that you were charged more than the perfect interchange rate, then the provider is surcharging the rate.

Notice that if the statement does not detail the individual interchange rates, the provider should change your statement arrangement to do so. If your supplier can’t offer a detailed statement, change providers.

Responding to Rate Increases

The moment you find the gains, determine if you have to renegotiate or find a new provider. There are more than 1,000 merchant account providers in the U.S. that seek your own organization. Hundreds of them can probably decrease your cost. Why would you have to remain with an organization that’s secretly increasing your prices and fees or adding surcharges without your knowledge?

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In part 2 of this show, I will address why merchants do not frequently receive their paychecks prices and charges along with why merchants must examine their American Express rates.

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