Top Mistakes Practices Make Using Visa/MasterCard

1. NEVER Go Through Your Bank.
   – Banks make a 20-25% profit.

   Although you may have been with your bank for years, it doesn’t mean they’re going to give you great rates. Banks know that people who walk in and ask for credit card processing did not go anywhere else first. Small to medium sized banks will generally outsource their processing to an independent sales organization and will have little to no control over the rates. Larger banks will handle their own processing and will charge whatever they want. This is a huge revenue source for banks; their average profit margin is about 20-25%.

2.   “Rate Game” – Lowest Rate Always Wins…Right?
   – “Low discount rate” and “less expensive” are not the same thing.

   For many Merchants, selecting a credit card processor is easy. Just call every processor in the yellow pages. Whoever quotes the lowest rate wins. Right? WRONG!!!

   Strange as it may sound, “low discount rate” and “less expensive” are not only NOT the same, but are in fact usually exact opposites, at least in the Credit Card Processing business. How can this be? Because there are many things you should compare between competing credit card processing proposals besides just the rate.

   If you don’t know the answers to ALL of these questions, then you have no idea if the credit card processing program you are considering is well priced or not:

   • What is the QUALIFIED discount percentage?
   • What are the MID-QUAL and NON-QUAL discount percentages?
   • What percentage will you pay for Rewards cards?
   • What discount percentages will you pay for FOREIGN and BUSINESS cards?
   • What rates will you pay for SIGNATURE and ON-LINE DEBIT transactions?
   • What criteria does your processor use to distinguish one Interchange qualification from another? In other words, one processor could consider a particular transaction as Qualified, while another may downgrade it to mid-qualified and charge the merchant a higher fee. This is very common and something the Merchant should be aware of.
   • What other hidden or extra fees might be charged?
   • What kind of fee guarantees, if any, does the processor offer?
   • How long is the term of the contract?
   • What are the termination procedures and early termination fees?
   • Is the program DAILY DISCOUNTING or MONTHLY DISCOUNTING?
   • Is the program GROSS PROCESSING or NET PROCESSING?

3. Overpaying For Equipment
   – Credit Card Equipment comes in many forms: Terminals, Printers, Pin Pads, Software, Check Readers, and Scanners. Only purchase what you need.

   Credit card processing equipment includes terminals, printers, pin pads, software, check readers and scanners. What kind of business you are as well as how you will conduct business determines what kind and what combination of equipment will best suit your business.

   Don’t necessarily buy whatever the salesperson offers you. Ask questions! Buy what YOU need, not what the salesperson wants to sell you. Learn more about the things you need to know when obtaining credit card machines.

   LEASE, RENT or PURCHASE?

   There is a world of difference between leasing and renting. Make sure you understand the differences before you sign the lease.

   Is the device CERTIFIED?

   There are dozens of credit card terminal models and manufacturers out there. Not all are certified on every network. So if you make the mistake of getting hardware that is not certified on the network you are processing over, you have no assurance everything will go smoothly. More importantly, when you run into a problem after business hours, on weekends, or during the busy season, the 24/7 network help desk will be unable to help you out, thus effectively putting the Merchant out of business until the manufacturer’s 9 to 5 Monday through Friday support people return to their desks. For this reason, obtaining non-certified hardware can be a very costly error.

   Is the processing device PROPRIETARY or GENERIC?

   Proprietary hardware is a dirty little industry trick played by a few disreputable credit card services providers. Proprietary terminals are rigged to make sure the unsuspecting owner never switches processors even if he wants to, since it’s either impossible or outrageously expensive to re-program on any other processing network. It also ensures that the sales rep gets another machine sale if the merchant ever sells his business, since the new owner can’t re-program the proprietary device. My recommendation is to stick with the mainstream names in the credit card terminal industry, Verifone and Hypercom, to avoid getting stuck with useless proprietary hardware.

   Should I consider NEW or USED/REFURBISHED processing devices?

   There is money to be saved with used, preferably refurnished, credit card processing machinery provided it is reasonably state-of-the-art. The caveat here is that out-of-date equipment may not support security compliant software which, depending on your processing habits, will result in certain transactions downgrading to higher rates.

   Other land mines include buying broken or on-the-verge-of dying hardware, and purchasing stolen terminals; this includes rented and leased hardware that was supposed to be returned to the lessor or rentor but wasn’t. If the network matches up the serial number on the ‘hot’ list, they rightfully will refuse to program it and the buyer will be the proud owner of a very expensive paperweight. Cases such as this are not uncommon on eBay and other similar sources, so your best bet is to deal new or used only from reputable well known sources.

   Should I consider PERIPHERAL devices such as pin pads, check readers and so on? If so, what about compatibility issues?

   Before you decide on a particular credit card terminal, you need to carefully consider whether your business will benefit from the addition of peripheral equipment that connects to your terminal such as pin pads for debit processing, imagers or scanners for check guarantee or conversion, and so on. This is because there are compatibility issues between individual separate peripherals and you could easily find out the terminal you own doesn’t support the add-on equipment you need in the future.

   Where are the best prices on processing equipment found? From the processor or from another source?

   Purchasing credit card processing terminals wholesale, or at least less than full retail, is the way to go for obvious reasons. This is not possible when you deal with a middleman in the pricing equation such as your processor or bank because they pay wholesale and therefore must extract a mark-up out of your pocket in order to realize a profit.

   Fortunately, there are many wholesale sources for excellent processing machines out there, including wireless credit card acceptance equipment if you know where to look. There is also a vast supply of perfectly good used or refurbished hardware on the market if you know where to find it. Don’t expect your processor or bank to cut their own throats by helping you pinpoint these bargains. They are in the business of MAKING a profit for themselves, not giving it away to others.

4.  FREE Equipment Scams…………..
   – Higher fees and hidden charges usually take care of the equipment costs.

   Let’s get the obvious over with right away. Deep down, we all know that nobody really gives away anything for free, that magical word that copywriters and salespeople love so much. Yet, human nature being what it is, we can’t seem to ignore a perceived bargain, and salespeople, including credit card merchant service sales reps know it.So these days, every processor has gotten on the free equipment bandwagon, hoping free credit card machines will attract new Merchants.Before you are enticed by similar deal, do your research first!

5. Incomplete Processing Packages
   – Finding out about fees and contractual obligations after you have signed.

   When a merchant who shops for credit card processing services strictly on the basis of price alone — the cheapest rates, the cheapest credit card terminal or printer, the cheapest lease payment — he almost always finds out, after the contract is signed and it’s too late to do anything about it of course, that the way the processor was able to sell his service for less was by cutting a corner or two and leaving out important and possibly essential services. In the long run, these omissions cost the merchant dearly in terms of lost business and profit.

   • Overcharge on Signature Debit. Did you know Signature Debit cards (aka Check Cards) should cost the Merchant less processing cost than a regular credit card? That’s because Interchange, the processor wholesale cost, for Signature Debit is much lower than for straight credit. But lots of processors don’t pass the savings on to their Merchants and just pocket the change for themselves.
   • Overcharge on Downgrades. We’ve discussed at length about how Interchange downgrades certain types of transactions, resulting in higher percentage fees for the Merchant. But not all processors religiously interpret Interchange accurately for the benefit of the Merchant. Interchange only applies to the surcharge levied by the Card Associations to the processor, not to the merchant; the processor is free to pass this surcharge onto the Merchant as he or she sees fit. So what processor ‘A’ might call ‘Mid-Qualified’, processor ‘B’ might elect to bill the Merchant at the higher ‘Non-Qual’ level and pocket a few extra dollars.
   • Merchant Club fees. Some processors assess “Merchant Club” fees to Merchants, anywhere from $9.95 to $16.95 per month. This ‘club’ entitles the Merchant to free credit card supplies such as paper rolls, ribbons, and so forth. This may be a good deal for very large volume Merchants, but it is a terrible deal for most. Do the math: If your business uses maybe $40 worth of credit card supplies annually, spending anywhere from $120 to $200 annually for $40 worth of ‘free’ supplies is a pretty poor deal.
   • Nickel & Diming You To Death. Some processors charge for things that shouldn’t be charged for at all. Examples might be setup kits, data compliance surveys mandated by Visa and MC, periodic software upgrade fees, help desk fees…the imagination runs no limit. No legitimate processor would charge for any of these items.