Facing the Credit Card Dragon

If you are growing or expect to grow and still use a dial-up terminal to process your credit card payments, keep reading. If your sales are rapidly growing, keep reading. If you are opening a new store, keep reading. If you are considering laying off staff to cut costs, keep reading.

This article could save you thousands of dollars, improve your customer service, and maybe even increase sales.

“Snake oil,” you say! And for good reason. Quicker than you can say, “Professor Marvel,” you’re besieged by offers from banks with stellar reputations, dinnertime telemarketers, Costco advertisements, and even your UPS carrier.

Most are reselling the service in exchange for referral fees on behalf of a relatively small number of huge companies, such as First Data Corp. and Nova Information Systems.

As recently as 2005, Chase Merchant Services, Paymentech, Wells Fargo, SunTrust and PNC were all competing to acquire merchants. According to the Federal Reserve Bank of Atlanta, they also were all partnering with the same processing company: First Data Corp. Even the Fed calls this web of relationships “messy.”

This has resulted in alliances that are nearly as difficult to decipher as a monthly statement. The topic makes many retailers downright “frangry” -frustrated and angry.

LOW-HANGING FRUIT FOR GOOD TIMES AND BAD
If your business is growing, or you expect it to grow, you should shop  rates at least once a year, according to Gary Waters, owner of R-Tech, an Atlanta-based company that specializes in installing point-of-sale (POS) software and systems. The bigger you get, the better bargain you can negotiate.

“If you look at your statement once a year, you can go back to your processor and ask for some sort of relief from rising fees,” advises Waters. He estimates as many as half of all independently owned specialty retailers still use dial-up terminals. Many could lower their rates and speed up their check-out lines by switching to Internet-based processing.

In Louisiana, Massey’s Professional Outfitters switched to Internet-based processing last year to speed up check-out lines, improve customer retention, and pave the way for growth, notes owner Mike Massey. Running credit card purchases was taking as long as a minute on the chain’s dial-up terminals, so Massey’s took advantage of a special program offered through Outdoor Industry Association to switch to Chase Paymentech. In the end, Massey invested $10,000 to upgrade his POS system.

“We felt as though we got our money back in six months with accelerated approvals during Christmas time,” Massey says. “If you’ve got a customer standing in line huffing and puffing, that’s the worst possible scenario for a retailer.”

The Internet and competition are driving down costs. Today, some processors even offer free gift card programs to woo merchants. That alone can justify upgrading your payment approval system, notes Massey, citing studies that indicate consumers, on average, redeem only about 70 percent of a gift card’s value.

RELATIONSHIP MATTERS AS MUCH AS RATES
Smart retailers look at both rates and relationships when considering a different processor. Retailers’ biggest complaints about credit card processing, it turns out, revolve around poor customer service, not high fees.

In general, larger companies are faster at handling chargebacks and refunds, reports Lori Herrera, OIA’s COO. Poor service can result in customers waiting for days to receive a credit, or weeks to resolve a disputed transaction, she says.

That’s been the experience of Joan Keller, who has spent the last 35 years running Le Travel Store in San Diego with her husband, Bill.

Keller says, “I’ve had situations where I had the processor debit me, saying it was a chargeback. When I would try to pursue it with them, it would be very difficult to talk to anyone. The savings were really not worth all the difficulty of changing over.”

ANSWERS TO PREPARE, QUESTIONS TO ASK

Regardless of whether you choose to work through your bank, a POS consultant, or directly with the processor, there are three things you need to know when shopping for a vendor:

1.    Know your existing rate. Experts recommend dividing the total fees you paid in the last year by the total number of transactions you ran.

2.    Know where you sell. Because of a higher risk of fraud, vendors charge higher rates to process on-line, telephone and mail order purchases.

3.    Know current settlement time. Larger companies typically settle a transaction within 24 hours.

Also be prepared to ask some questions of your own, including:

1.    Are you compatible with your current POS system?

2.    What’s your level of customer service? Does the vendor have a 24/7 call center? Will you have 24/7 online access to your statements?

3.    Can you provide a sample statement? Is it harder or easier to understand than what you get now?

4.    What resources can the company provide to help train your staff to keep costs down? A good company will provide advice on how to avoid extra fees, and the optimal way to collect information on phone orders, for example.

As always, when negotiating, size matters.

With a little knowledge and some negotiation, you might be able to shave a few points off the merchant discount rate, or the percentage of each transaction you pay to the credit card processing company.

One option is OIA’s deal with Chase Paymentech to offer processing rates as low as 1.95 percent for credit cards and 1.70 percent for check cards and debit cards. For details, see outdoorindustry.org/member.cost.html.

About The Author

Facing the Credit Card Dragon

By Charlie Lunan


If you are growing or expect to grow and still use a dial-up terminal to process your credit card payments, keep reading. If your sales are rapidly growing, keep reading. If you are opening a new store, keep reading. If you are considering laying off staff to cut costs, keep reading.


This article could save you thousands of dollars, improve your customer service, and maybe even increase sales.


“Snake oil,” you say! And for good reason. Quicker than you can say, “Professor Marvel,” you’re besieged by offers from banks with stellar reputations, dinnertime telemarketers, Costco advertisements, and even your UPS carrier.


Most are reselling the service in exchange for referral fees on behalf of a relatively small number of huge companies, such as First Data Corp. and Nova Information Systems.


As recently as 2005, Chase Merchant Services, Paymentech, Wells Fargo, SunTrust and PNC were all competing to acquire merchants. According to the Federal Reserve Bank of Atlanta, they also were all partnering with the same processing company: First Data Corp. Even the Fed calls this web of relationships “messy.”


This has resulted in alliances that are nearly as difficult to decipher as a monthly statement. The topic makes many retailers downright “frangry” -frustrated and angry.


LOW-HANGING FRUIT FOR GOOD TIMES AND BAD


If your business is growing, or you expect it to grow, you should shop  rates at least once a year, according to Gary Waters, owner of R-Tech, an Atlanta-based company that specializes in installing point-of-sale (POS) software and systems. The bigger you get, the better bargain you can negotiate.


“If you look at your statement once a year, you can go back to your processor and ask for some sort of relief from rising fees,” advises Waters. He estimates as many as half of all independently owned specialty retailers still use dial-up terminals. Many could lower their rates and speed up their check-out lines by switching to Internet-based processing.


In Louisiana, Massey’s Professional Outfitters switched to Internet-based processing last year to speed up check-out lines, improve customer retention, and pave the way for growth, notes owner Mike Massey. Running credit card purchases was taking as long as a minute on the chain’s dial-up terminals, so Massey’s took advantage of a special program offered through Outdoor Industry Association to switch to Chase Paymentech. In the end, Massey invested $10,000 to upgrade his POS system.


“We felt as though we got our money back in six months with accelerated approvals during Christmas time,” Massey says. “If you’ve got a customer standing in line huffing and puffing, that’s the worst possible scenario for a retailer.”


The Internet and competition are driving down costs. Today, some processors even offer free gift card programs to woo merchants. That alone can justify upgrading your payment approval system, notes Massey, citing studies that indicate consumers, on average, redeem only about 70 percent of a gift card’s value.


RELATIONSHIP MATTERS AS MUCH AS RATES


Smart retailers look at both rates and relationships when considering a different processor. Retailers’ biggest complaints about credit card processing, it turns out, revolve around poor customer service, not high fees.


In general, larger companies are faster at handling chargebacks and refunds, reports Lori Herrera, OIA’s COO. Poor service can result in customers waiting for days to receive a credit, or weeks to resolve a disputed transaction, she says.


That’s been the experience of Joan Keller, who has spent the last 35 years running Le Travel Store in San Diego with her husband, Bill.


Keller says, “I’ve had situations where I had the processor debit me, saying it was a chargeback. When I would try to pursue it with them, it would be very difficult to talk to anyone. The savings were really not worth all the difficulty of changing over.”


ANSWERS TO PREPARE, QUESTIONS TO ASK


Regardless of whether you choose to work through your bank, a POS consultant, or directly with the processor, there are three things you need to know when shopping for a vendor:
1. Know your existing rate. Experts recommend dividing the total fees you paid in the last year by the total number of transactions you ran.
2. Know where you sell. Because of a higher risk of fraud, vendors charge higher rates to process on-line, telephone and mail order purchases.
3. Know current settlement time. Larger companies typically settle a transaction within 24 hours.


Also be prepared to ask some questions of your own, including:
1. Are you compatible with your current POS system?
2. What’s your level of customer service? Does the vendor have a 24/7 call center? Will you have 24/7 online access to your statements?
3. Can you provide a sample statement? Is it harder or easier to understand than what you get now?
4. What resources can the company provide to help train your staff to keep costs down? A good company will provide advice on how to avoid extra fees, and the optimal way to collect information on phone orders, for example.


As always, when negotiating, size matters.


With a little knowledge and some negotiation, you might be able to shave a few points off the merchant discount rate, or the percentage of each transaction you pay to the credit card processing company.


One option is OIA’s deal with Chase Paymentech to offer processing rates as low as 1.95 percent for credit cards and 1.70 percent for check cards and debit cards. For details, see outdoorindustry.org/member.cost.html.

About The Author

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