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As if there is not enough controversy over Interchange Rates charged to merchants, we now have to deal with consumer credit card interest rates increasing drastically without notice. Some consumer spending experts say this may hinder spending even more this holiday season. What is our government doing to fix the issue?

Federal regulators jumped into action and passed laws to protect consumers from increased interest rates on existing account balances. Government rules seem to run at a snail’s pace as these laws will not take effect until July 1^st 2010; that’s a lot of money in the banks’ pockets in the interim. Millions of card holders will get raked over the coals, paying high fees on previously made purchases until these laws kick in.

Credit card companies will still be able to raise rates on new credit cards, future purchases or cash advances. Finally, the Federal Reserve and National Credit Union Administration are cracking down on arbitrary hikes in interest rates. It would seem that we  have learned a lot from subprime lending. These rules will also stop the issuing of credit cards to people that all ready have a large amount of debt, and who were previously getting approved by banks for high interest rate cards.

Some of the new rules include:

Continue reading "Rate Gauging on Consumer Credit Cards Gets the Boot"

It is projected by many economists that the downturn in our nation’s financial status is only going to get worse in 2009. A few business owners and entrepreneurs have been turning the financial crisis into big profits and some say they are preying on instability. Mortgage company owners have opened mortgage restructuring companies, and debt consolidation business opportunities are booming.

Many merchant services providers have begun offering card processing for high risk business types. Some of such business types require additional information to get approved and can also be associated with higher rates. If you are looking to get card processing for a high risk business you are in luck and now have many choices. Some of the criteria to get a high risk account approved are as follows:

Continue reading "Profits from High Risk Businesses May Not Last Long"

It has been projected that this holiday shopping season will hit retailers hard. With the economy on tumbling blocks and the unemployment rate on the rise, many are saving their pennies for a rainy day. Historically, Black Friday is the biggest shopping day of the year, followed by Cyber Monday for all of us online shoppers.

Retailers had to resort to drastic sales and discounts to draw shoppers in. Although the sales receipts and purchases were reported to be high, the profits were low. ComScore, an Internet research company, reported Sunday that online spending was up a modest 2 percent for the combined Thanksgiving Day and Friday, compared with the same period last year. Karen MacDonald, a spokeswoman at Taubman Centers Inc., which operates 24 malls in 11 states, said that based on a sampling of malls, Friday’s business was anywhere from unchanged to up mid-single digits. Saturday’s sales were unchanged to down slightly.

Large retailers such as Wal-Mart estimate that November sales fell .01 percent at its US stores. Wal-Mart says this is the company’s first monthly same-store sales decline since April 1996. Although the stores had big crowds, people were not spending.

Overall spending by large retailers, such as Best Buy and Macy’s, was reported to be down by 50% over last year and is considered to be the largest drop in over a decade. Ultimately, the credit card companies will be taking the biggest hit. Many shoppers are resorting to paying with cash, check or debit card. Both Visa and MasterCard rely heavily on credit card sales vs. debit card sales. There is no telling what percentage of the credit card sales will simply become debit card sales or just cash.

Over the past couple of weeks I have run into many merchants that feel ripped off by their merchant sales representative. Time and time again I hear “I just didn’t know what to ask for.” Like with any other purchase for your business, it is important to learn about your product.

Here is a list of common terms you should know when talking to credit card processing companies:

• Qualified Rate – This is typically the rate you are quoted when you sign up for a merchant account. This rate only applies to swiped regular retail cards. Be sure to ask what your Mid-Qualified and non-Qualified rate will be.
• You may also be charged an Authorization fee. This is the amount charged to a merchant account each time communication happens between the software or point of sale terminal and the authorizing network. Make sure you are not charged an additional transaction fee because the two are the same.
• Your sales agent may refer to Basis Points. Basis points are the percentage that you are charged on a credit card transaction. One basis point is equal to 1/100th of 1 percent. Thus a rate of 1.85% is equivalent to 185 basis points. For some merchants, a basis point mark above Interchange is advantageous. Continue reading "Terms to Know When Shopping for a Merchant Account"

It is amazing to me how many different sized businesses still do not accept credit cards as a form of payment, and do not know about other value added products. Many business owners I have talked to that do not accept credit cards at their business seem to have the same two objections. The first reason is that the fees are too expensive, causing it to not be cost effective for them. The second reason is that no one has ever asked them to pay with a card. Although we may find the later objection odd in today’s world, where everyone seems to pay with a credit card, it is frequent in the landscaping, IT, delivery, home based businesses and many more.

Credit card acceptance has been said to add many different benefits to a business. Most business owners report large increases in profits when they begin accepting credit cards. Credit cards allow customers to make a purchase, despite a shortage of cash.

Services businesses, such as IT professionals, will see a large decrease in the number of past due accounts. It is also historically true that people will even spend more because they don’t have to part with cash. It is less expensive for you to accept a $50.00 payment by credit card, than the costs of labor, supplies and postage required to mail an invoice.

Continue reading "How Can Accepting Credit Cards Benefit A Business?"

The credit card companies have been hard at work coming up with programs to entice consumers to spend more and travel more this holiday season. With the uncertain economy, shoppers are holding on to every penny and looking for the best deal possible. It’s no wonder that the credit card companies and banks have begun to turn to value-added solutions, and laying the marketing on pretty thick.

MasterCard has teamed up with American Airlines to launch “Travel Concierge Sweepstakes.”  Visiting their site during the sweepstakes and using the concierge to book airfare, hotels and car rentals gives customers multiple chances to win several different prizes. You can earn $50,000 in MasterCard gift cards or $25,000 in American Airlines gift cards as well as many other great prizes.

Continue reading "What Will The Credit Card Companies Do To Spark Spending?"

Banks are becoming more leery to issuing credit cards. The alternative is to issue debit cards so that there are no default payments. Although this is good in the short term, they also eliminate a huge stream of income by not being able to collect interest.

Many people are trying to avoid using credit cards by turning to debit cards instead.  Some banks have turned to prepaid programs tapping into the unbanked markets – the millions of people who don’t have a bank or credit card account – and some employers are turning to employee payroll debit cards. Employees have their paychecks deposited onto a card which they use for all their purchases to try to avoid debt. According to The Nilson Report, debit purchases are expected to climb 13% in 2008, to $1.2 trillion. According to Visa, debit spending could surpass credit this year.

Continue reading "Are Debit Cards Outweighing Credit Cards?"

Thus far, it seemed the credit card processing industry was impervious to market conditions. But it seems that streak has come to an end when it comes to credit card giant American Express. American Express announced today that it will lay off 7,000 workers, or 10% of their headcount. American Express is also putting a freeze on management salary increases, and have cut their entertainment expenses.

Income has dropped 8.7%, the biggest drop since 1947, and Americans have slowed down spending on everything from cars to appliances. American Express typically charges absorbent fees to merchants to begin with – in some cases double and triple that of Discover, Visa, or MasterCard. So how can they be in trouble?

Continue reading "American Express Is Hit Hard By the Economy"

In previous posts I have written about HR 5546 which will allow merchants to negotiate their Interchange Rates directly with Visa and MasterCard. As I have been following the developments, it seems as if the National Retail Federation is making the card processing companies out to be deceitful. In many articles the NRF has referred to Interchange fees as “hidden costs,” and also as being the cause of consumers paying more for goods. Interchange is public record.

HR 5546 is also known as the Credit Card Fair Fee Act of 2008. This bill would require Visa and MasterCard to negotiate with merchants and reach an agreement on credit card terms and conditions. If an agreement is not reached, both sides will be required to submit their final offers to binding arbitration by a three-judge panel appointed by the Department of Justice and Federal Trade Commission.

Before a bill is passed it has to go through several phases:

Continue reading "Will Merchants Be Able To Negotiate Interchange?"

Visa has always been on the cusp of technology and is always looking for new and innovative ways to expand their sphere of influence. Visa is launching four new programs that allow payments and services via mobile devices. Two such programs are being launched in Brazil and Korea, and the other two will be in the United States.

Previously, I have talked about Google’s Android platform working with Visa on a service that sends you an alert if any payments have been made on your Visa card. This is great in helping to protect against fraud, and will also help in locating ATMs, but I don’t consider this to be a new technology.

In 2007, Visa partnered with Qualcomm, a wireless chip developer, to create technologies that allow consumers to make credit card transactions with a cell phone and a reading device. This would add another way for wireless carriers to make additional revenue by being paid a percentage of the transaction.

Continue reading "Visa Inc. Pushes For Mobile Technology"