At the recent PAII New England Conference we met Cheryl Heldt from International Payment Solutions. She had recently written an article entitled; ‘Eight Mistakes Innkeepers Make – On Their Credit Card Processing’. I would like to pass on some helpful information from this article as well as a few helpful tips from another CC processing specialist. Read on, the following information may just save you some money. And we’d all like to save money and have more cash, except for that snotty (yet cute) baby in the high chair in that frequently aired commercial starring Jimmy Fallon.
The B&B Team has had a relationship with Tom Weiskotton of TrustOne for many years. Tom has been in the credit card processing business for 16+ years and specializes in the lodging business. Quoting Tom; “While the credit card processing business is a simple concept, the devil is in the details.” The B&B Team believes in options. There are options for innkeepers when it comes to selecting your CC processor. Let’s take a look at some of those devilish details.
Local Banks – “In the past, your local bank was the only place to get started with processing. They were your friends, and you were assured of getting a good deal because banks handled the processing in-house. This is no longer the case. Most banks have now farmed out that portion of their services to another company. Yes, you can still sign up for processing, but now there is an added middle man who handles the actual processing, and who also gets a slice of the pie. What this means is that your cost is increased. Your bank may be your friend, but they are no longer able to give you the best deal possible.” Cheryl Heldt
Termination Fees – “The first thing you need to watch out for is termination fees. Our position is that if it cost you to get out of a contract, you’ve got a problem. For example, your sales rep quotes you an irresistible rate! Wonderful! But in six months down the road, that rate disappears, or worse, it never appeared in the first place. You call the company and what do they say? You can leave but it’ll cost you $500 or more! Never sign a contract that includes a termination or lost profit penalty.” Cheryl Heldt
Monthly Minimums – “The company may expect to make a certain amount of money from you no matter what the season you’re in. Even if you didn’t have guests in February, you still have to pay a minimum of $25 or more because the company expects to make a profit from you on or off season. Avoid contracts with monthly minimums.” Cheryl Heldt
Rates – This is where we get down to the real nitty gritty. “All companies have the same basic cost in offering credit card processing. This cost is Interchange, Dues and Assessments. Pricing begins with Interchange. The difference between the rates you pay and Interchange is profit for the provider of your services. And those providers have great flexibility in how they set your rates. For example, if you’re on a retail pan (where you see Qualified, Mid-Qualified and Non-Qualified rates) they can decide which cards fall into what category. So how do you know where you stand? First, you need to know what you are paying. To find your effective rate, take the amount of dollars collected (i.e. $233.48 divided by $7,485.58 = 3.1%). This is your effective rate. (And this is an example of extremely high rate). So now, if somebody comes along and offers you a 1.59%, it sounds good, right? Not likely. You need to know what else to ask. Your first question is where will the Rewards and WordCards fall? If they say 1.59%, does that mean an additional 1.59% or total of 3.18%? Because the cost (Interchange) of most Rewards cards starts at 1.75% and goes higher. As you see there are a lot of pitfalls and unanswered questions.” Cheryl Heldt
PCI Compliance – “The Industry moved to prevent CC breaches and the answer was PCI Compliance. At minimum, every merchant has to submit a survey (SAQ) which answers basic questions about how they are taking credit cards. Most of you are using terminals through a phone line. Since no information is stored or retained in your terminal, you are not breach able and therefore PCI Compliant. If you are processing through the Internet, then you must submit to quarterly scans of your IP address to insure safety of your site. Another thing you must not do is store your client’s CC information on your computer.” Cheryl Heldt
“A system called EMV, (Euro-pay, MasterCard, Visa), will use new technology to further encrypt credit card information in an attempt to lessen the responsibility of losses due to fraud. This system, once active, will place the responsibility for losses on the “weakest link” in the processing system. That could mean the merchant could be responsible if he/she is not up to date on their processing system. It could also mean new fees. There is a misconception that PCI Compliance Fees are “mandatory” in the industry. Not true. They are only mandatory for the individual processor charging them…there are processors that do NOT charge PCI fees! Will there be new fees associated with the EMV program? There may be but I can almost guarantee that many processors will use this as an opportunity to increase their profit at the merchant’s expense! Trust your rep…and if you can’t…find a new one!” Tom Weiskotten
Terminal Upgrades – “We’ve found that a lot of you are getting calls from your sales rep saying that you have to upgrade your terminal because of PCI Compliance. Most times this isn’t true. You may need to have your Pin Pad re-encrypted, or if your terminal is very old, it may not contain enough memory to hold new programming. These are reasons you may have to upgrade, NOT PCI Compliance.” Cheryl Heldt
Leases – “Never, ever, ever, ever, under any circumstances lease a CC terminal or other equipment. You will end up paying thousands of dollars for a piece of equipment that you can buy outright for a few hundred dollars. I can’t emphasize this enough.” Cheryl Heldt
“I strongly urge anyone in the business to make sure they have trust in their merchant processing rep because there are some things coming down the pike that could open up many merchants to purchasing/leasing un-needed equipment and/or excessive fees.” Tom Weiskotten
Factoring – “This is probably a word you aren’t familiar with, but some of you may be doing it! The only cards that can pass through your terminal are for purchases from your business. You cannot run a card for your neighbor for their business. If found out, you and your neighbor could be banned from taking cards ever again.” Cheryl Heldt
Just like The B&B Team, Tom and Cheryl believe in educating their customers so they can make the best possible decisions for their business. They are there for you and will answer your questions personally. They want to help you understand the process of processing in laymen’s terms. Hope these explanations have helped and may result in reducing your costs.