There are three parties involved in every credit/debit card transaction: the processor (Integrity Payments), the Issuing Bank (whoever provided the credit/debit card – Chase, Bank of America, Capital One, XYZ Credit Union, etc), and the Association (Visa, MasterCard, etc). The interchange fees go to the issuing bank, the access and association fees go to the Associations, and the processor gets the small percentage left over.
WHO PAYS THE REWARDS ON THE CREDIT CARDS?
Rewards cards have a higher interchange fee than a standard consumer credit card. These fees are paid to the Issuing Bank by the merchant. There isn’t much a business owner can do to mitigate this except to build it in as part of the price to do business.
WHY DO MY RATES INCREASE?
Just like with any business, acquiring costs may fluctuate twice a year. The Associations look at interchange rates annually in April and October. There are many factors included in a rate, including the risk to process that card, does it offer a rewards program, the chargeback liability, payment default percentage, etc. When this happens, some processing companies take this as an opportunity to increase “their fees” as well. At Peel Payments, our clients are the most important asset, we will not add a marked up percentage when passing thru an increase imposed by the Association or Issuing Bank. You can take that to the bank!
HOW WILL THE EVOLUTION OF EMV CARDS IMPACT MY BUSINESS?
On October 1, 2015, merchants processing face-to-face transactions need to have the ability to process EMV transactions on an “EMV certified” solution. This will reduce the liability a merchant has on fraudulent transactions. Make sure when upgrading to a new piece of hardware, you confirm that the solution is EMV CERTIFIED and not just EMV ready. There is a large misconception in the market today on how this will impact your business. Ask the question…
WHAT’S THE BENEFIT FOR MY BUSINESS TO ACCEPT APPLE PAY?
There are three simple answers to this question. First, Apple Pay is a very quick transaction. If you want to decrease the wait times in your lines, offer Apple Pay as a payment option. Second, Apple Pay reduces the likelihood of a chargeback, similar to a pin-debit transaction. Most theft on an Apple Pay transaction comes when a card is loaded to a phone and not at the point-of-sale. Third, gain a competitive advantage over your competitors who have not caught up with the times.
WILL ACCEPTING PIN-DEBIT REDUCE MY MERCHANT FEES?
This all depends on your average ticket and the breakdown of regulated verse non-regulated debit cards you process in a given month. It’s very important that your payment advisor does his or her due diligence in understanding your card breakdowns prior to offering you a “pin-debit rate” or telling you that accepting pin-debit will lower your credit card fees. This is why you should not consider a universal rate program because it doesn’t take the specifics of your business into consideration. Ask for the breakdown.
HOW DO I REDUCE THE LIKELIHOOD OF CHARGEBACKS?
There is no safeguard for a chargeback, but there are things you can to do reduce the likelihood of it happening to you. First, always make sure the name on the card matches the customers ID. Second, make sure you have a return policy/sales policy visible at the place of purchase and on the receipt or invoice. Third, respond quickly to chargeback inquiries with all the supporting documentation. Fourth, make sure you get a signature on the sales receipt (unless it’s under the Association limit). Pin-debit transactions are not subject to a chargeback.
WHY DO MY CREDIT CARD FEES FLUCTUATE EACH MONTH?
Rates fluctuate because there are different costs associated with each card type. Therefore, unless you have the same customers come in your store every month and use the same credit/debit card for purchase of goods, for the same amount, your rates will fluctuate. However, your effective rate (total fees divided by total processing volume) should have a low variance month-after-month. If you see a spike one way or another, you should call your provider and ask why, or just call Integrity.
DO INTERCHANGE FEES ALWAYS INCREASE?
No. Just as there is the possibility of price increase twice a year, there are also price reductions. The impact of these increases/savings many times depends on your average ticket and how you process transactions. There are best practices you can implement to help mitigate your processing costs. For instance, if an employee swipes a card and it doesn’t read the card the first time thru, did you know that you pay a higher cost on that transaction? Train your employees and educate them on how this impacts your business. Call Integrity for other ways to process your credit cards more efficiently.
IS AMERICAN EXPRESS MORE EXPENSIVE THAN OTHER CARD TYPES?
While this used to be the case, it’s not necessarily true anymore. American Express transactions can rival the cost of most rewards cards you process. You should also receive all four of the major card brands on one statement and in one deposit to your financial institution. If this isn’t the case, call Integrity.
Contact Justin Smith at 214-546-0983 for a consult!