Small Business Owners Lobby to Cut Credit Card Processing Fees
November 12, 2008 by Matthew Hunt · Leave a Comment
This is an article written in New York Times Small Business section and address US merchant account concerns address ever increasing credit card processing fees, but I think it is an article that speaks also to Canadian small business owners.
The article is called: Small-Business Owners Lobby to Cut Credit Card Fees and it is well worth the read. Some of the highlights and quotes from this article that I thought could spark some real conversations among Merchants are:
“In 2007, merchants paid $61.56 billion in electronic payment fees, up from $48.58 billion in 2005, according to the Nilson Report, a payment systems industry newsletter. The report estimated that lenders took in 82.5 percent of those dollars.”
These are the US numbers and assume as being the US northern neighbor that we are most likely not that far behind in our electronic payment fees.
“What merchants are getting for their money is convenience, risk management and guaranteed payment,” said Denise Dunckel, a spokeswoman for Visa Inc.
What do you think of this above statement made by the Visa representative?
“Merchants derive significant gain from the electronic payments system, which has evolved new features such as rewards programs,” said Trish Wexler, spokeswoman for the Electronic Payments Coalition, an advocacy group in Washington. “Ultimately, merchants benefit from rewards programs because people buy more when they use cards. Higher fees for rewards cards are justified because merchants and consumers both share in their expense — but merchants want to pass their fair share to consumers, who’d be hit with higher credit costs and reduced rewards if the merchants succeed.”
I am sure this above statement would get a ton of Merchant’s blood boiling, but I don’t want to speak for merchants – what do you think?
Kenneth J. Clayton, director of card policy for the American Bankers Association in Washington, called the bill “a dramatic proposal by big retailers to use political muscle to lower their costs.” Smaller retailers, he said, “are being put up as poster children to show how challenging it is for them. But behind the scenes are big-box stores that see an opportunity to lower their costs of participating in the electronic payments system that benefits them greatly.”
This is interesting, is this “movement” really just a big conspiracy for greedy large corporations to increase their bottom lines and increase share holder profits?
Just some food for thought. Regardless of the outcome, our current society in Canada and the US are greatly tied to using plastic and credit card processing is not going anywhere. This I am assuming will continue to be an ongoing battle between Merchants, Visa, MasterCard, and the Credit Card Processing Companies.
Canadian Merchant Accounts – Stop Sticking It To Us
October 28, 2008 by Matthew Hunt · Leave a Comment
The word on the street is that more and more Merchants are finding the cost of using credit card processing services to be getting too expensive. This year credit card companies have had two adjustments, one in April by Visa and one recently in Oct 1st, 2008 by MasterCard. These adjustments have created (for most merchants) a three-tiered rate charges. These rates are usually called “Qualified“, “Mid-Qualified“, and “Non-Qualified“. Now each merchant account provider deals with the interchange adjustments differently.
This has caused a real upheaval with many Canadian Merchants and their relative associations that they turn to help them negotiate lower cost merchant account fees. Derek Nighbor, senior vice-president of national affairs for the Toronto-based Retail Council of Canada (RCC) is leading a coalition group called “Stop Sticking It To Us” that is challenging the rate hikes with Canadian Merchant Account services.
The coalition includes 16 groups, including the Canadian Convenience Stores Association, the Canadian Jewellers Association, the Hotel Association of Canada and the British Columbia Restaurant and Foodservices Association.
CFIB president Catherine Swift sent out a letter to their members in Sept 2008 explain how the credit card companies want to enter the debit market up here in Canada, which would could potential drive up costs by 10,000%. An example of how a current transaction fee on debit can be as low as 9 cents, but if we followed the US debit fee structure which is based on a discount rate + plus a transaction fee and now merchants had to pay an average of 0.9% on all debit sales volumes, that same $1000 transaction would now cost the merchant $9, as opposed to today’s current fee of 9 cents. That is a pretty huge increase – could you imagine taxes going up by 1000% over night, or you gas prices…? The world would turn upside down.
These changes are real and are happening. We found another article titled “Merchants miffed by credit card fees” written by Steve Proctor that again is discussing the merchant account hikes with local business owners in Halifax. These hikes are coast to coast across Canada.
One of the biggest problems to these rate hikes is the lack of transparency. Just see what Alan a commenter on Colin’s Blog post titled, “Interchange and how it is the next new problem for consumers in Canada” has to say.
We understand that many merchants are perplexed by these changes and hope to help alleviate the burden of confusion caused by all the different levels of interchange. A good resource many of our clients have found insightful to understanding how Canadian Merchant Accounts work is by reading our FREE guide called The Critical Payment Processing Guide for Canadians.
We think it is very important that merchants ban together to keep rates and fees down. These hikes during any time can be hard to deal with, but during these economic times it can be devastating.
The bottom line is most merchants have just witnessed a 20% hike in their fees with this year’s interchange adjustments. It is essential now to know how your credit card company handles their “Qualified“, “Mid’s“, and “Non-Qualified” transactions. Then you can look at how your business processes transactions and find a company that best suits your individual business needs. The good news is, there are now many other private label merchant account companies in Canada that are looking to compete with the big five banks and now may be a good time to get a comparison quote done to make sure you are securing the most competitive rates.
The Critical Canadian Merchant Services Guide – Part 7
September 26, 2008 by Matthew Hunt · Leave a Comment
Become a seasoned Pro at understanding how credit card processing fees work through real life case studies.
Case Study One:
Company A:
- Debit Transaction at 0.12 cents
- 576 Debit Transactions that month
- Total Monthly Debit Business Volume: $13,876.00
- Average Ticket: $23.56
- 0.12 cents x 576 = $69.12 in monthly Debit Fees
Company B:
- Debit Transaction at 0.05 cents + 0.0025%
- 576 Debit Transactions that month
- Total Monthly Debit Business Volume: $13,876.00
- Average Ticket: 23.56
- 0.05 cents x 576 = $28.80
- $13,876.00 x 0.0025% = $46.94
- $28.80 + 46.94 = $75.74 in monthly Debit Fees
You can see that Example 1 is cheaper by $6.62 even though it may initially look like Example Two would have been less expensive. Typically, it is always better to have a flat Debit Fee only on your Debit Merchant Account.
The only time the lower Debit Fee + % works in your favor on Debit Merchant Accounts is if you have very high Debit transactions with a very low average Debit ticket price.
Case Study Two
Company A:
- Credit Card Discount Rate: 2.65%
- No Transaction Fee: 0.00
- 327 Transactions
- $18,267.00 in Credit Card Sales that month
- Average Ticket Price: $55.86
- 2.65% X $18,267.00 = $484.07 in Credit Card Processing Fees that month
Company B:
- Credit Card Discount Rate: 1.89%
- Transaction Fee: 0.10 cents
- 327 Transactions
- $18,267.00 in Credit Card Sales that month
- Average Ticket Price: $55.86
- 327 Transactions X 0.10 cents = $32.70
- 1.89% X $18,267.00 = $345.24
- $32.70 + $345.24 = $377.94 in Credit Card Processing Fees that month
It is obvious in this Example that example two is the better Merchant Account to go with, even though you are paying a transaction fee on top of your Discount Rate for credit card transactions.
Click here for 3 Insider Money Saving Tips for Merchant Accounts
