According to MasterCard’s presentation at the Goldman Sachs US Financial Services Conference on Dec 8, retail sales are showing positive signs – relative to payment cards.  They cited November as the third consecutive month of growth since July, 2008.  They attributed the growth to changes in consumer attitudes.  Consumers are focusing more on quality and value, have more control over finances and have become more frugal, which is a shift back to traditional roots of credit card use.  When the first payment card, Diners Club, was introduced in 1950, members had to pay off their balances each month.  There was no such thing as revolving credit.  Today, consumers are still using credit, but more responsibly. Continue reading "What Card Payment Usage is Telling Us"

All applications for a merchant account go through an underwriting process to gauge the level of risk for that particular business and business type. Some of these processors are directly affiliated with the member bank and in some cases owned by the member bank. All of these processors must be “registered” as an Independent Sales Office (or ISO) with a member or acquiring bank. Member Banks need ISO’s in order to generate and approve as many merchant accounts as possible. The Payment Card Industry strictly monitors activity at all levels in order to provide retailers and their customers the highest level of privacy and security.

The Independent Sales Office, or ISO, is not only focused on generating merchant accounts for the Processor they are registered with, but are responsible for maintaining their relationships with the merchants that are accepting and processing credit cards through them. An ISO can be anywhere is size from a few people to hundreds and can offer everything from merchant accounts and customer service to technical support and credit card terminals.

Continue reading "What is an ISO and How Does it Affect Merchant Accounts?"

One would be hard pressed to find anyone in the United States or around the world that doesn’t have at least one credit card in their wallet. Whether you have one or ten credit cards, chances are you have used it to purchase something recently. I can only speak for myself, but I am still amazed (and sometimes annoyed) when I go to pay for something with my credit card just to be told “We don’t accept credit cards” or “Sorry cash only.” The first words out of my mouth are always “Why don’t you accept credit cards?” and I have noticed time and time again that the reasons these merchants give never make any sense to me.

The majority of merchants seem to have no idea just how beneficial accepting credit cards can be for their business. If they just took a little time to learn how the Payment Card Industry works, I am sure I would hear a lot fewer negative comments. There is a common misperception that accepting credit cards or opening a merchant account is expensive, time consuming and just not really worth it. For every merchant that has turned away a paying customer because they wanted to pay with a credit card I ask, “Can you afford not to take credit cards?” More often than not I find myself spending some time with the merchant to let them know what the benefits to their business could be and also explaining the simple process of getting a merchant account.

Continue reading "Merchant Accounts and the Payment Card Industry (PCI)"

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?"

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"

I would say that the merchant services industry is competitive, and even cut throat in some cases. Many merchants have been taken advantage of by processors’ ads of low teaser rates and costly equipment. I was working on a very large merchant account this past week and felt that the proposal we put together was honest, fair, and was beneficial to the merchant. I got a call from the prospective merchant saying that they had a quote from another processor that doubled their savings. With the small margin in the account, the savings they promised seemed too good to be true. After reviewing the quote I noticed that the processor offered the same rates as I did. So how did they get double the savings?

I then noticed the sales agent wrote, “We will save you X amount of dollars by educating you on how to make your non-qualified EIRF (Electronic Interchange Reimbursement Fee) qualified.” What they did was take the non-qualified transactions and told her they would be qualified, so she would pay less Interchange fees on those transactions.

This situation happens often, and merchants are not always aware of what to look for or who to trust. There is no way this merchant services provider could guarantee what interchange category each card will fall into.

Here are some tips to ensure you are being treated fairly:

Continue reading "Are You Getting Taken Advantage Of By Credit Card Processors?"