How To Save On Your Merchant Accounts Fees

With debit swipe fee reform now implemented, retailers nationwide are anticipating saving on the interchange portion of their merchant accounts fees.  Preliminary data indicates that millions of dollars in charges may be coming their way.

The Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 went into effect on October 1, 2011. Under it, the Federal Reserve capped the interchange fees banks can charge on debit card transactions at 21 cents, plus 0.05 percent of the transaction. Issuers are also allowed to charge an additional penny per debit transaction to offset their fraud prevention costs. The new average swipe fee for a debit card purchase is 23 cents, compared to the pre-Durbin average of 44 cents.

It’s important to note that the legislation applies only to Visa® and MasterCard® debit cards (not credit cards), and only to banks with more than $10 billion in assets. It caps the interchange fees that the banks charge, but does not apply to third-part processors, who can charge whatever they want to their merchant accounts customers.

“As an industry, we’re really pleased that the new rules have now taken effect,” Connecticut Retail Merchants Association President Timothy Phelan recently told the Hartford Business Journal. “We really won’t know the true benefit until the retailers get their statements.” Phelan added that he expects that merchants, in time, will pass along any savings they receive to their merchant accounts customers.

The business journal reported that Connecticut merchants could expect to save about $260 for every $100,000 in Visa and MasterCard debit charges they process.

In the months leading up to its enactment, the Durbin Amendment prompted an epic battle on Capitol Hill that pit credit card-issuing banks against merchants and their associations. The banks argued that they would lose billions of dollars in revenue from lower fees — income they threatened to recoup by charging debit card customers monthly fees to use their cards. Several major banks, including Bank of America, Wells Fargo and J.P. Morgan Chase, dropped that idea after cardholders rebelled and threatened to close their accounts.

For now, retailers are waiting for their first post-Durbin Amendment merchant accounts statements to arrive to see how they’ve fared under the new rules. If they have questions regarding their savings, they should discuss them with their merchant services provider representative.

Why It Pays To Accept Credit Cards

 

One of the biggest challenges for a small business is competing with larger businesses with greater resources. One proven strategy for leveling the playing field is to accept credit cards. After all, 78 percent of American consumers own a credit card, and 80 percent own a debit card.¹ That’s a huge market that no merchant can afford to ignore — especially small businesses who don’t plan on remaining small for long.

Small businesses that start to accept credit cards benefit in a variety of ways. Most obviously, they immediately become an option for patrons who prefer to pay with plastic. In their eyes, seeing the logos of the major credit cards in a merchant’s shop or on their e-Commerce website means that merchant is in the same league as much larger retailers. Since most small businesses strive to offer the superior customer service that the Big Boys often can’t or won’t, it’s a no brainer that they should expand their payment options to include the debit and credit cards consumers use so frequently.

Secondly, the convenience of credit cards cuts both ways. Consumers appreciate swiping their card and cutting the transaction time to just seconds so they can be on their way. But merchants benefit, too. Shorter transaction times mean they can serve more customers more efficiently. And, at the end of the day, merchants can send all their transactions in one batch to their credit card processor for electronic settlement, knowing that within days the proceeds will land in their account.

Credit card processing with a reputable merchant services provider like Merchant Account® is a very secure operation. State-of-the-art encryption technology keeps cardholder and account information safe, as does our PCI-compliant electronic payment gateway Transaction Express™. Whether a merchant accepts credit cards with a countertop terminal, an online virtual terminal or in the field with our mobile PayFox® service, the transaction is protected from fraudsters and identity thieves.

Merchants who accept credit cards also usually see an increase in sales. The reason is simple: Credit card shoppers tend to spend more than shoppers who pay with cash or a check. Impulse buying and upgrading to a higher level of merchandise are both possible when the shopper taps a line of credit instead of a wallet to pay.

Finally, there are savings to be realized from accepting credit cards. Merchants spend less time making bank runs and processing paper checks. New credit card processing options like wireless and mobile mean that merchants who deliver services or products to customers’ homes or businesses can collect right then and there, foregoing the time-consuming and expensive billing and collection process.

Today’s credit card processing is fast, convenient and safe, and the many options available give merchants the opportunity to work with a merchant services provider to design a package that meets all their requirements. For small business, being able to accept credit cards is the smart way to go and grow.

¹   Source: “The Survey of Consumer Payment Choice,” Federal Reserve Bank of Boston, January 201

Credit Card Processing Rewards

Recently most of the credit card processing news we have been hearing about has focused on the Durbin Amendment and the reduction of debit card fees.  As a result, banks are trying to recover their potential lost revenue by pretty much annihilating all the debit rewards programs which changing the way consumers handle their spending.
Debit card programs were so attractive to consumers at one point that they made more sense to use as opposed to cash.  Points and dollars were adding up so fast creating a too good to be scenario for consumers.  But just as that wave has come and gone, it looks like credit card processing just got a little bit interesting again.  We are seeing credit card programs riding the new wave for spenders.
Not long ago, the only company really focused on credit rewards was Discover which had a generous 2% cash back feature on transactions.  But over the coming months we will hear more and more about other companies following suit and consumers will cash in.  Why?
Finally credit card processing companies are trying to lure in customers with great credit.  Customers like this have great repayment records but still carry balances which translates into revenue for the issuer.  Competition for this breed of client is competitive and banks will have to offer more than just mediocre customer service to look attractive.

Who Benefits From Credit Card Processing Rewards?

This move will also entice consumers to start using credit again.  The debit card programs bit into the market and in many respects retrained spenders to spend with either cash or debit.  Credit transactions were an afterthought because they could not compete with rewards programs nor the frequent discounts offered by merchants on cash transactions.
The new cash back credit cards have evolved a bit and will offer tiered rewards for certain types of spending.  General transactions will have the lowest value while groceries and fuel will each respectively be higher.  Some issuers will offer up to 5% cash back on specialty categories throughout the year in partnership with major retailers.  For example, Spring might be lawn and garden season while Summer might see higher rewards for home improvement spends.
It all sounds like great fun and great deals for savvy consumers and those who literally play their cards right will cash in.  Airline Miles and sign up bonuses will loom large before Christmas in order to get people spending on their new cards in time for the holidays but these offers are not for everyone.

Great Credit Will Get You Credit Card Processing Rewards

Those with bad credit need not apply.  Credit card processing companies are in it for the money and they are willing to part with a little to keep the type of customers they profit most from.  Poor credit not only is risk heavy, but believe it or not, revenue often suffers.  Charge offs and collections eat into the profits of credit card processing companies so they would much rather deal with client who spends often and repays bit by bit but does so on time

Credit Card Fraud

It has long been understood in the credit card processing industry, but not always by those who actually accept credit cards, that security has been rather lax.  Most merchants do not understand how far behind the United States is compared to other countries when it comes to privacy and security.  Keeping up with the crooks is expensive and the industry has resisted necessary steps to protect individuals and their lobbyists in Washington have helped them keep regulations favorable.
Well this might change soon as a result of some recent negative headlines for the credit card processing industry.  Last week there were major arrests in an identity theft ring and government officials are finally calling out the industry.  The Queens, New York D.A. chose to not only blame the criminals in this case but to point out that the credit card industry is partly to blame.  Citing the massive marketing campaigns and limited allocation of funds towards protection, Richard A. Brown wants changes.
Merchants who accept credit cards in Europe know that in order to process the transaction they need not only the card itself, but a personal identification number to be punched into a keypad.  This is similar to what we must do for debit transactions in this country but not for credit.  This simple step would make it much more difficult for fraud to occur because a criminal would have to steal the card and learn the PIN code of the victim.  It sounds easy but the credit card industry here has been slow to make changes saying that it is cost prohibitive.

If You Accept Credit Cards, Watch Out For Credit Card Processing Fraud

The costs are high but in reality it is profit prohibitive to change technology but in the long run everyone would be better off.  Chip technology which actually uses heavy encryption would be a terrific standard for the industry a long with PIN codes for credit transactions but so far it is cheaper to just deal with fraud on a case by case basis than to adopt the changes.  It reminds me of how changes in insurance were not adopted until Hurricane Katrina.
When only one individual is affected by flawed policies nobody cares, but when an entire region of the United States realizes they are victims in one single day, then changes are forced.  It is like that with credit card processing safety and for the first time we have a call to action from a government official whose pockets have not been lined by the banking lobby.
Still reeling from the Durbin Amendment to Dodd Frank which limits fees placed on debit transactions by merchants who accept credit cards, the credit card processing industry will probably try to bury these demands and try to fight this battle later on down the line.

Commercial Mortgage Lenders

The commercial mortgage lending market remains dynamic in 2010 despite the credit crunch and decline in commercial real estate values.  Commercial mortgage lenders have become more conservative across many sectors of the commercial real estate capital markets.  Currently it is a field day for many private party lenders, commonly known in the industry as ‘hard money’ lenders.  Transactions that used to easily qualify for bank and other institutional portfolio loans, today sometimes require an unregulated, hard money lender.  These commercial mortgage lenders are enjoying some of the strongest credit transactions in the history of commercial real estate finance.
Institutional commercial loan lenders have come back strong after approximately two and a half years of near dormancy.  As of April 2010 dozens of new commercial mortgage lenders as well as lenders who had been out of the market have come into the capital markets closing deals.  There have also been a few players re-emerging into the land loan arena.
A strong commercial mortgage lenders such as Financial Compound can be very helpful to borrowers seeking financing, whether its construction or permanent loans, as well as land loans.  A proficient commercial mortgage broker is able to help borrowers, investors, and developers access the real estate capital markets and the commercial mortgage lenders efficiently.  It is the commercial mortgage brokers job to understand the current status of the real estaet capital markets as well as to know the product types and loan structures that each lender offers.  Financial Compound typically speaks to about 500 lenders each week, guaging their interest in our transactions as well as probing them to learn which types of transactions they are looking for.  By conducting on-going and in-depth discussions with such a broad cross section of the commercial real estate finance markets, Financial Compound is a valuable resource for both borrowers and commercial mortgage lenders alike.  Many comomercial mortgage lenders contact Financial Compound to find out what is going on with their competitors and to ask us how to price and structure their loan programs.  Commercial mortgage lenders desirous of lending funds often try to make sure that their programs are competitive, or at least want to understand how they compare to other lenders financing similar transactions.
When borrowers submit loan requests, commercial mortgage lenders typically  like to review historical property operating statements, a rent roll, site plan, and photos, in addition to various other data.  A skillful commercial mortgage broker such as Financial Compound can be a valuable resource to borrowers in preparing the lender submittal.  Financial Compound knows what types of information the commercial mortgage lenders are looking for and can help faciliate the loan request process so that the lender can give a quick and firm decision for the transaction.

Credit Card Processing And Durbin's Amendment

In just over a week the Durbin Amendment goes into affect targeting credit card processing fees.  It has been a long time coming but will it provide the relief that it is intended too?  The common belief is yes but if we dig a little deeper, questions will arise.

The whole thing started as a result of the credit crunch which rocked the economy in 2008.  Last year the Dodd-Frank Act was passed which attempted to reel in financial regulations which Wall Street sorely lacked.  This new Amendment focuses on Credit Card processing fees which of late, have become overly burdensome for small business owners.  The fees they must pay to their merchant account providers is dipping into their profits and must ultimately passed on to consumers.

To make a confusing piece of legislation as simple as possible, let us define a generalization for the entire Dodd-Frank Act as it applies to humans.  It was simply a reaction to the credit crunch of 2008 and contains what is considered to be the most drastic attempt at policing financial regulation ever.  Whether it works or not or is simply nothing more than political posturing is yet to be determined but we will only concern ourselves here with the Durbin Amendment to Dodd-Frank.

This Amendment is focused on credit card processing, mainly debit cards and how big banks have been muscling merchants and forcing them to accept less than competitive merchant services because of their sheer size and power.  Currently, big banks are able to impose penalties on merchants for giving customers incentives to pay by cash or using other payment networks to pay for items.

As consumers we often believe the price of something is what we pay for it but it is a little more complicated than that.  Merchants must pay transaction fees to accept credit cards and these fees dip into their profits when accepting a credit card as opposed to cash.  This is why there are always little signs on the register telling us that we must spend a minimum for a merchant to accept credit cards, or sometimes they tell us that it will be a dollar or so surcharge before they swipe our card.  This money does not go to the merchant, but the merchant services provider.

In a lot of cases a merchant has to declare a minimum or even maximum sale to avoid the pitfalls of they may face from their merchant services provider and the Amendment aims to stop this.  Merchants are even penalized for loyalty programs, accepting checks and processing gift cards so this legislation was needed to provide relief for merchants drowning in fees.

The Durbin Amendment clearly states the maximum a merchant services provider can earn on a transaction and for those keeping score it goes like this.  For a debit card transaction highest interchange fee an issuer can charge 21 cents plus a max of 5 basis points multiplied by the amount of the transaction.  This Amendment also focuses on interchange, which simply put, is the fee a merchant's bank has to pay to its customer's bank to pull the money due from the customer's account. 

The intent of the Durbin Amendment is to bring direct relief to merchants but many critics say the banks will resort of other tactics to make up the lost revenues.  We have already seen the disappearance of debit rewards programs for consumers and the days of free checking accounts are all but gone.  An assortment of new fees we have never even heard of will undoubtedly pop up on or about October 1st so while there are major changes around the bend for credit card processing, ultimately we will have to watch the spending behavior of consumers to gauge its success.

Why You Need A Business Loans Consultant

The Reasons You DO NOT Want to Manage the Business Loan Process on Your Own.

We are often asked, “Why do I need to pay a consultant to assist me in obtaining business loans?  I have perfect credit, can’t I just do it on my own?”  On the surface this statement seems to make perfect sense, however, since the mortgage meltdown and ensuing credit crisis, like Elvis, “sense” has left the bank building.  All the rules have been rewritten on how to obtain business loans and what the banks are looking for and what lending triggers they use to grant a business loan.  Everyday we have new clients that come to us after being turned down by their bank of 20+ years.  This has nothing to do with creditworthiness, but rather, not understanding what programs and lending biases each bank utilizes when underwriting their business loans.  Before you venture down the road of do-it-yourself business loan development and ruin your personal and potentially your business’s credit, please consider the following:

• Lender Selection – In this post subprime lending paradigm, selecting the appropriate lending institution is quite possibly the most important single criteria when beginning the business loan application process.  There are literally hundreds upon hundreds of banks  and credit unions in this country.  Which banks will loan to small businesses with stated income applications? Start-ups?  Do not require collateral?  Have the best interest/promo rate?  The sheer number of banks offering business loans is daunting.  True, each bank will give general guidelines on how they underwrite business loans, however, the actual nitty gritty is proprietary and until an application is submitted, the borrower will never truly know what the bank will do.  Using a trial and error method to figure this out will absolutely ruin your ability to get future credit for yourself and your business.  I can’t count the number of clients that have come to us after trying to obtain business loans on their own.  Unfortunately, at that point their credit has been littered with inquiries and we can only say “sorry, contact us in 6 months and we’ll try again at that point.”  We have developed a systematic business loan application process that includes only the banking partners and programs we know your business can qualify for on the absolute best terms.

• Guideline Changes – Banks’ business loan guidelines and underwriting methodologies are constantly changing.  Strategies to acquire business loans that work today, may not work tomorrow.  This is the very reason Seed Capital has developed the most robust, dynamic lender database in the industry that monitors hundreds of banks and their respective business loan underwriting preferences in real time.  This gives Seed Capital instant access to the what, who and how much a particular bank is lending at any time, allowing our consultants to fashion a lender/business loan application strategy tailored to each our client’s individual needs, credit profile and geography.  This unparalleled understanding of business loan underwriting procedures is the very reason Seed Capital is the only company in the business loan industry that offers an unequivocal performance guarantee.

• Reconsideration Requests – If a bank says no, do you know who to talk to and what to say in order to turn that no into a yes?  Our years of working with business loan underwriters has given us a deep insight into how to use reconsideration requests to get credit approvals.  80% of business loan underwriting is initially done with what is called an automated underwriter (AU) which is a computer program that scrubs the applicant’s credit, considers additional variables such as income and spits out a business loan decision based on that input data.  AU’s are plagued with issues and often decline business loan applications for quirky reasons.  With Seed Capital’s consultation, our clients are able to turn initial business loan declines into approvals roughly 90% of the time.  This is because we are able to analyze the decline reasons, assist the client in formulating a reconsideration request and know exactly which individual in each lending institution they need to speak with in order to get their business loan declines overturned

• Window Dressing – You may think that you have perfect personal credit, however, close to 75% of our clients need some form of “window dressing”.  This is a term we have coined that simply means making minor tweaks to the personal credit report in order to get the most business loan approvals with maximum limits and the lowest rates.  We understand exactly what credit criteria on which the banks base their business loan approvals.  Our consultation can mean the difference in getting a $20,000 business loan on your own, or $150,000 in business loans with our window dressing techniques.

These are just a handful of reasons on why you need an expert to assist you in wading through the intimidating world of business loans.  In the business loans world there is absolutely no substitute for experience and know-how.  Seed Capital will ensure you get the maximum working capital business loan up front and build a perfect business credit rating in just a few short months.  At that point, you will never need to worry about your business’s working capital needs ever again.  GUARANTEED.