Be Profitable (in Merchant Payment Processing)

I had once worked for the large credit card processors, since 1998. It had allowed me to get a national perspective on the spending in our economy and the first-hand conversations, service requests, and interviews of managers, proprietors, and owners how plastic cash flow works in their businesses.  I’ve had maybe a few thousands of hours of direct experience, either talking to or listening in on real merchants accepting card transaction – figuring out their terminal/gateway/mobile payment acceptance device –  and how to put card account information from digits and dates to real dollars into their bank accounts. From my experience, within the first few days of each month, business owners would call the call center that I worked at and would usually ask the same question, “*This isn’t the rate I signed up for – help me understand these fees, please??!*”

Credit card service is like most financial services industries; it is a commodity and a necessary cost, or evil, of doing business. The ‘best-rate’

is usually the decision driver for most businesses, but it fails to explain the total costs of the various card types. In the exceptional cases of disputes or merchandise returns, the real costs far exceed the rates and per transaction costs in time, research, and possibly overall loss. In a merchant processor’s agreement, these hard costs are spelled out, as well as soft costs like statement, monthly minimum, annual, and membership fees.

I spoke with a woman that owns a small business last week – she sells trophies and marketing merchandise, operating from an office in her home, and keeps her merchandise and production areas in a rented space – she usually does one or two transactions to a total of $2,000 – $4,000 in credit card sales a month. As an example of excessive soft-fees – February 2010 was a slow month and no cards were processed for payment – however the charge to her account was $65 – resulting from a statement, monthly minimum, and a PCI fees. *Seriously*?!!?  Lets assume that the economy doesn’t improve very quickly and she accepts few to no more transactions over the next year, that’s near an $800 dollar expense. If business continued to be slow, I advised her to cancel her service if there was no termination fee; oh yeah, another soft fee.

And its not just the soft fees, it’s the interchange fees and discount rates are the hard fees whose costs are directly proportional to the loss of in merchant profitability.  Today a consumer gets the choice between 0% or the airline rewards cards, yet the merchant gets stuck with the near 2 to 4%, respectively. On that $300 special gift or fancy dinner, the buyer gets the plane ticket and the merchant can get stuck with around $15 in fees.

I’m taking my experiences working for the big companies and now investing it into the small and mid sized businesses that accept payments. My conscious can’t stomach the idea of billions of dollars being paid to the big processors and banks in interchange fees any longer. I’m a now consultant that works to save money, reduce costs, and possibly put a payroll back on a balance sheet somewhere.

Be profitable.

Mike Devine

(blog) http://www.interchangereduction.com/

(twitter) http://twitter.com/IntrchngReductn

(more info) http://www.interchangereduction.com/p/contact.html

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About the Author:

Mike Devine brings 11 years of experiences in the merchant credit card processing industry. Now on a mission to save money, inform businesses, and create a profitable business payment process. Interchange Reduction Service slashes at costs in the dark and murky world of hidden services fees, discount rates, and interchange rates in merchant credit card payments.

Tagged as: interchange rates, merchant services fee, swipe fees