The #1 Hidden Tax Real Estate Vendors Pay

If you’re like most real estate companies using Square, PayPal, or Stripe to accept credit cards, you are likely looking for ways to grow your business while also controlling your expenses. Accepting credit cards is one of the top 5 expenses or hidden taxes a real estate coaching, software, or lead generation company has regardless of how they choose to invoice their clients.

Overspending on credit card processing can prevent you from being able to invest in technology that will help you grow your business.

It is especially troublesome if you find yourself needing to process refunds or credits and can’t quickly resolve the issue by phone. This can lead to frustration in the onboarding process and could lead to customer churn.

The Advantages & Disadvantages of Stripe, Square, and PayPal

Square, Stripe, and PayPal are great credit card processing solutions and are routinely chosen by startup companies, often because of their simple integration tools. The advantage of using one of these systems is very straightforward. Their modern sleek interfaces make them easy to use, their streamlined underwriting allows you to launch within minutes, and a flat 2.9% +.30 per transaction makes them easier to understand. This can be great for a new business owner that doesn’t want to take a chance on working with the wrong credit card processor or if they don’t plan on sales exceeding $5,000 per month.

The downsides of working with one of these platforms are glaring for real estate service providers exceeding $5,000 per month in sales. For organizations exceeding $5,000 in sales monthly that focus on providing services to the real estate industry, they will likely overspend to the tune of hundreds, if not thousands, of dollars per month depending on their size. They will pay a premium to accept credit & debit cards while still being at risk of having their funds held if they experience drastic increases in their sales volume. In addition to that, many of these platforms add additional fees that can cause real estate coaches or software providers to pay upwards of 3.5-4% for typing in the credit card number manually on transactions.

A Real Example: eCommerce Merchant Using PaySuite.

We recently set up an eCommerce merchant account for a company that had been terminated by Stripe and wanted to share the results we are helping them get when it comes to controlling their payment processing expenses. As you can see below, this merchant had sales of $35,936.99 with total fees of $865.57. They also paid $41.56 for our payment gateway, so their true total cost of acceptance for the month was $907.13, bringing their effective rate to 2.52%.

 

 

Had this merchant been using Stripe, Square, or PayPal for their online payment processing, they would’ve paid 2.9% +.30 cents per transaction. Let’s dive deeper to see what the outcome would have been. Below you will see the true breakdown of how many transactions they processed for each card type (Visa, MasterCard, American Express, Discover, etc.).

 

 

When we compare this merchant to Stripe, Square, and PayPal pricing we see that they would’ve paid 2.9% on net sales of $35,936.99, which would have cost them $1,042.17. There would have also been a $.30 charge per transaction which would have cost them an additional $99.60, bringing their total cost to $1,141.77, an effective rate of 3.18%!

Using Square, PayPal, or Stripe would’ve cost this merchant an additional .66% or an additional $237.18 per month. The reason these platforms are more expensive for e-commerce merchants is that debit cards often cost the business less than 1%. Per the image above, this merchant accepts more debit cards than American Express credit cards and almost as much as MasterCard credit cards.

Why Debit Cards Are So Much Less Expensive

In the image below you can see the true cost of accepting debit cards and where Square, PayPal, and Stripe profit most on most of their merchants. With most debit cards having a true cost of .0005% and .22 cents per swipe, these providers earn a mark-up of 2.65% + .08 cents when you factor in other costs that must be paid to debit card issuers like Wells Fargo, US Bank, Chase, and other banks and card brands. The total interchange (fees paid to the debit card issuer) for $4,695.49 was only $17.73 or .38%. Even when the fees paid to Visa and the payment processor are factored in, their total costs for accepting Visa debit cards total $26.97 or .0057%. This is where the majority of Square, PayPal, and Stripe users can save a considerable amount of money. Being able to accept debit cards in your business for almost a half of one percent and being able to recapture one-half percent of your sales annually can help you redirect that additional capital to important areas in your business needed to grow.

 

 

Debit cards are inexpensive to process for two main reasons, the first reason is there is no risk in accepting debit cards. If the money is available, the transaction is approved. The other reason is there are no rewards attached to a debit card to incentive consumer use. Because there are no rewards attached, the interchange fees are very low. It is only expensive in an environment where your average sale is less than $15. This is where Square has traditionally lost money on its users which has caused them to add a transaction fee to their new POS solutions.

What You Can Do

Securing the right type of merchant account for your real estate coaching or software company will allow you to streamline your credit card processing costs and will allow you to leverage your profitability to acquire the technology you need to rapidly grow your business.

If you’d like to evaluate whether you’re using the best payment processor for your business, don’t hesitate to contact us!

The Biggest Lie In Payments

As a business owner needing a quality solution to accept credit cards, you are constantly pursued by credit card processing agents telling you to “Go Direct” so you can eliminate all your payment processing headaches. This “pitch” is used by thousands of credit card processing agents across the country even if they don’t work for one of the few actual direct payment processors.

As a digital payments firm that works in partnership with direct processors, we understand why this pitch is bogus!

Credit card processing is nothing like buying furniture or refrigerators. The credit card processing rates are set by the card-issuing banks and the card brands (i.e. Visa, MasterCard, Discover, & American Express, etc.) and are non-negotiable. In fact, these rates equate to as much as 90% of your overall bill in most cases as I mention in our recent article “Where Credit Card Processing Fees Go”.

We’ve come across merchants processing with direct processors that were getting great rates and service, and merchants that were being overcharged and mistreated by their direct processing relationship, so going direct is not the silver bullet.

The reality is, the experience you will have with your merchant service provider along with what you pay is dependent upon how they configure your fee structure, the technology they provide, and their approach to customer service. These vary from company to company and it’s up to you to have an interview process to determine which provider is the best fit for your business.

How We Help

PaySuite is a digital payments firm that helps businesses eliminate the stress related to managing payment processing. We accomplish that by understanding the needs of our clients and implementing payment solutions that help them reduce costs, save time, and increase revenue.

If you’re interested in learning more about how we can help you save time and money, let’s talk.

Do You Accept Debit Cards?

If you’re like most business owners using Square, PayPal, or Stripe to accept credit cards, you are likely looking for ways to grow your business while also controlling your expenses. Accepting credit cards is one of the top 5 expenses a business has regardless of the credit card processor they choose.

Overspending on credit card processing can prevent you from being able to properly invest in technology and marketing solutions that will help you grow your business.

The Advantages & Disadvantages of Stripe, Square, and PayPal

Square, Stripe, and PayPal are great credit card processing solutions. The advantage of using one of these systems is very straightforward. Their modern sleek interfaces make them easy to use, their streamlined underwriting allows you to launch within minutes, and a flat 2.9% +.30 per transaction makes it easier to understand. This can be great for a new business owner that doesn’t to take a chance on working with the wrong credit card processor or if they don’t plan on sales exceeding $5,000 per month.

The downsides of working with one of these platforms are glaring for businesses exceeding $5,000 per month in sales. For businesses exceeding $5,000 in sales monthly, they will likely overspend to the tune of hundreds, if not thousands, of dollars per month depending on their size. They will pay a premium to accept credit & debit cards while still not maintaining control of their customer data or have live customer support.

A Real Example: eCommerce Merchant Using PaySuite

We recently set up an eCommerce merchant account for a local retailer using Shopify and wanted to share the results we are helping them get when it comes to controlling their payment processing expenses. As you can see below, this merchant had sales of $35,936.99 with total fees of $865.57. They also paid $41.56 for Authorize.net, so their true total cost of acceptance for the month was $907.13, bringing their effective rate to 2.52%.

Had this merchant been using Stripe, Square, or PayPal for their online payment processing, they would’ve paid 2.9% +.30 cents per transaction. Let’s dive deeper to see what the outcome would have been. Below you will see the true breakdown of how many transactions they processed for each card type (Visa, MasterCard, American Express, Discover, etc.).

When we compare this merchant to Stripe, Square, and PayPal pricing we see that they would’ve paid 2.9% on net sales of $35,936.99, which would have cost them $1,042.17. There would have also been a $.30 charge per transaction which would have cost them an additional $99.60, bringing their total cost to $1,141.77, an effective rate of 3.18%!

Using Square, PayPal, or Stripe would’ve cost this merchant an additional .66% or an additional $237.18 per month. The reason these platforms are more expensive for e-commerce merchants is that debit cards often cost the business less than 1%. Per the image above, this merchant accepts more debit cards than American Express credit cards and almost as much as MasterCard credit cards.

Why Debit Cards Are So Much Less Expensive

In this article, I talk about the impact of the Durbin Legislation on the cost of accepting debit cards and why businesses haven’t been able to capitalize on this major advantage. In the image below you can see the true cost of accepting debit cards and where Square, PayPal, and Stripe profit most on most of their merchants. With most debit cards having a true cost of .0005% and .22 cents per swipe, these providers earn a mark-up of 2.65% + .08 cents when you factor in other costs that must be paid to debit card issuers like Wells Fargo, US Bank, Chase, and other banks and card brands. The total interchange (fees paid to the debit card issuer) for $4,695.49 was only $17.73 or .38%. Even when the fees paid to Visa and the payment processor are factored in, their total costs for accepting Visa debit cards total $26.97 or .0057%. This is where the majority of Square, PayPal, and Stripe users can save a considerable amount of money. Being able to accept debit cards in your business for almost a half of one percent and being able to recapture one-half percent of your sales annually can help you redirect that additional capital to important areas in your business needed to grow.

Debit cards are inexpensive to process for two main reasons, the first reason is there is no risk in accepting debit cards. If the money is available, the transaction is approved. The other reason is there are no rewards attached to a debit card to incentive consumer use. Because there are no rewards attached, the interchange fees are very low. It is only expensive in an environment where your average sale is less than $15. This is where Square has traditionally lost money on its users which has caused them to add a transaction fee to their new POS solutions. If you recall, they used to charge a flat rate of 2.75% and now charge 2.6% + .10 cents per transaction for swiped and up to 3.5% + .15 for “card-on-file” transactions.

What You Can Do

Securing the right type of merchant account will allow you to streamline your credit card processing costs and will allow you to leverage your profitability to dominate other merchants that are using these payment providers.

The Square, Stripe, and PayPal merchants that are saving serious money on their credit card processing are switching to payment providers that pass through the true lower cost of accepting debit cards to them so they can run a more efficient business.

If you’d like to evaluate whether you’re using the right solution for your business, don’t hesitate to contact us on our website or request a custom quote.

We may be able to recapture a considerable amount of your revenue!

Where Merchant Fees Go

Every day, millions of business owners pay credit card processing fees without knowing where the fees go.

To make matters worse, there are millions of credit card processing agents calling on these business owners every day, promising them reduced credit card processing fees.

In today’s article, I will explain where your credit card processing fees go, so you have more knowledge about choosing your next credit card processor.

Here are a few definitions for the terms used in this brief article:

Card Issuing Bank: Bank that issued the credit/debit card being used to make a purchase. The fees paid to Card Issuing Banks are referred to as Interchange.

Card Brands: Visa, MasterCard, Discover, American Express. The fees paid to Card Brands are referred to as Dues & Assessments.

Payment Processor: The service provider that authorizes and routes funds from the paying customer to the business, while paying the associated fees to Visa, MasterCard, Discover, American
Express, and the Card Issuing Banks. The fees paid to the Payment Processor is referred to as Mark-Up.

WHERE MERCHANT FEES GO

When you sign up for a merchant account to accept credit cards, you are agreeing to pay several financial institutions when the fees are drafted from your bank account. You are paying the Card Issuing Bank, the Card Brands, and the Payment Processor.

The credit card processing fees paid to the Card Issuing Bank are called Interchange and equate to over 80% of your credit card processing fees. These fees are non-negotiable, so no credit card processor can reduce these fees.

The credit card processing fees paid to the Card Brands are called Dues & Assessments and are less than 10% of your fees and are also non-negotiable.

So 90% of the credit card processing fees you pay every month are non-negotiable and are paid to the financial institutions that issue credit & debit cards and the Card Brands like Visa, MasterCard, Discover, and American Express. The only fees that are negotiable are the credit card processing fees paid to the Payment Processor who provided you with the merchant account. Their fees are referred to as Processor Markup.

PROCESSOR MARK-UP

There are only a few payment processing platforms that transfer money in North America for credit card processing. These are companies like FIS, Fiserv, Chase Paymentech, EVO, Elavon, Global Payments, and Clearent. Over 90% of all credit & debit card transactions are processed on these platforms. These organizations profit by charging you a Markup on top of the credit card processing fees you pay to the Card Issuing Banks, and the Card Brands. Sometimes they transparently bill you, other times the fees are hidden among fees paid to Visa, MasterCard, Discover, and American Express.

Here are 38 of the most commonly billed fees:

1. Monthly Support Fee
2. Statement Fee
3. PCI Compliance Fee
4. Transaction Fee
5. Per Item Fee
6. Authorization Fee
7. Next Day Funding Fee
8. Percentage Per Item Fee
9. Customer Support Fee
10. Monthly Maintenance Fee
11. Regulatory Fee
12. Annual Fee
13. Interchange Fee – There are over 400 specific interchange fees.
14. Network Fee
15. Surcharge Fee
16. Back-bill Fee
17. Qualified Fee
18. Mid-Qualified Fee
19. Non-Qualified Fee
20. Keyed Transaction Fee
21. AVS Fee
22. Batch Header Fee
23. Risk Monitoring Fee
24. Early Termination Fee
25. Non-EMV Fee
26. Data Encryption Fee
27. Interchange Clearing Fee
28. Monthly Minimum Fee
29. Voice Authorization Fee
30. Chargeback Fee
31. Application Fee
32. Gateway Fee
33. Retrieval Fee
34. Data Breach Fee
35. Savings Program Fee
36. Equipment Leasing Fee
37. Reporting Fee
38. Compliance Fee

HOW WE HELP

When we work with businesses, we focus on taking the time to understand their industry, business, and how they are currently accepting payments. We then analyze their systems to make sure they are processing on the most efficient payment processing platform for their industry and ensure they are being billed properly by their payment processor. Finally, we help them eliminate any unnecessary Mark-Up fees they pay while providing secure, flexible payment processing solutions.

If you’re thinking about your credit card processing fees and would like some help, let’s talk!

B2B Payments: The Value of Interchange Optimization

According to Forrester Research, B2B eCommerce sales are on the rise due to the rapid advancement of cloud technology, platforms, API’s and integrated ecosystems. Another major contributor, according to The Economist, is that over 30% of decision-makers are millennials, a group that, according to Forbes, requires an omnichannel experience with 87% of them using two to three technical devices daily. These shifts driven by consumer demand and technology are behind Forrester’s forecast that B2B eCommerce transactions will exceed 55% of all B2B transactions by the year 2017.

This shift in how B2B payments are processed will lead to a dramatic increase in B2B payment processing transactions. As this shift happens, it has become critical for entrepreneurs, software providers, and associations to become educated about what benefits are available to their organization as it relates to B2B payment processing while also removing friction from the buyer’s journey.

DECEPTIVE RATE CATEGORIES

B2B companies have consistently been misled to expect credit card fees in the 3-5% range due to the fact that they are accepting credit cards in a “Card Not Present” environment. Payment processors often point the finger at Visa, MasterCard, Discover, and American Express as being the benefactors of these high fees and often use confusing billing statements that hide the true costs that come from these card brands.

Entrepreneurs often enter into B2B payment processing relationships through their banks and are told “we do your processing in-house”, under a white-label payment processing relationship that usually leads to more confusion & deception. They read their monthly statements and see terms like Qualified, Mid-Qualified, Non-Qualified, Standard, or Surcharge, etc., and believe that since they accept most or all of their transactions online or by phone, they must also accept the fact that it is more expensive.

The fact is that many of these terms don’t actually exist on the wholesale rate categories created by Visa, MasterCard, Discover, and American Express. These are deceptive rate categories created by dishonest B2B payment processing companies that allow them to enhance the profitability of each merchant account without having to disclose their profit margin.

VISA B2B, LEVEL II & LEVEL III PROCESSING

What commercial businesses must be knowledgeable about are the benefits that the card brands make available to certain businesses that engage in business-to-business and business-to-government transactions. VISA B2B, Level II, and Level III processing are essentially discounts that businesses qualify for depending on the type of business they are, along with additional payment data provided while processing B2B transactions. These programs can improve the cost of accepting commercial credit & debit cards by as much as 1% in many cases. This allows commercial businesses to accept credit and debit cards in a “Card Not Present” environment while avoiding the excessive surcharging and high fees they typically experience.

HOW TO CASH IN 

To ensure your payments are being processed as efficiently as they can be, here are a few actions to take:

  • Ensure you’re set up on Interchange Plus or Pass-Through Pricing (Fully discloses fees from card brands at cost)
  • Review your statement and make sure there are no terms like Qualified, Mid-Qualified, Non-Qualified.
  • Compare your current statement to a previous statement from the same provider to ensure its consistency.
  • Call your payment processor and find out if you qualify for special rates from the card brands.
  • Request documentation from your payment processor that fully discloses costs from Visa, MasterCard, Discover & American Express.

Cashing in on these benefits will be instrumental in helping B2B organizations control their costs so they can reinvest their profits into building quality purchasing experiences for vendors, suppliers, and customers both online and offline.

Contact us to find out if you’re overpaying for your merchant account or if you’re looking for systems that can help you process payments more efficiently.

How To Find The Best Payments Partner

Every day, there’s a merchant out there in the world doing their best to negotiate for a new payment processing system, and it’s not their fault. Being a business owner is flat out hard, and dealing with all the vendors, employees, and customers while trying to turn a profit is no small feat. When you add the task of trying to understand what they are paying for credit card processing most want to throw in the towel.

When it comes to credit card processing, business owners typically print out their merchant statements and hand them over to a few credit card processing agents, who likely don’t know how to read them, to see how much they can save them. This is the process they use every time they start looking for a new payment processing system and they typically end up with the same results time after time.

This process is broken, and here’s why.

  • Most payment processing agents don’t understand their own proposals.

Payment processing companies don’t train their agents on how the industry works, they teach them how to manipulate and sell. Meeting with any credit card processing rep off the street doesn’t work. A rep that doesn’t understand interchange fees, pricing models, the difference between the different processing platforms, can’t provide you with the guarantees that you want to hear before switching to a new processor. They also can’t guarantee that you’re going to save the money you were hoping to save.

  • It’s difficult to negotiate with limited information.

We always cringe when a business owner tells us they recently renegotiated their rates for their payment processing system. We say that because it’s impossible for a business to negotiate their rates. Visa and MasterCard have been taken to court on several occasions because of this challenge. In current news, Kroger has disabled Visa in a wasted effort to influence Visa to lower their credit card fees.

It’s also challenging because you can only negotiate the fees you know about.

The only portion of your bill that is negotiable is the profit your payment processor earns to provide the service and there can be as many as 40 different fees they add to your statement to ensure they get paid. The reality is, unless you have the time to monitor these different fees, you will likely see your rates go back up a few months after you switch payment processors.

  • Deceptive billing practices and arbitrary rate increases.

The final reason negotiating your merchant services doesn’t work is, payment processors will just adjust your rates after you sign your agreement. This includes the point of sale companies that require you to use their merchant services. These financial institutions know you don’t have time to read your merchant statements and know you need to hear positive commitments before you sign your banking information over to them. They know that once you sign the agreement, especially if it’s tied to a point of sale system, you’re locked in and it’s harder to leave and start over with another payment processing system.

That’s why, within their agreements, are clauses that permit them to add fees to your merchant processing statement without requiring you to sign a new agreement. They just add it to your merchant statement communications and enroll you in the new fees regardless of the impact on your business.

We recently met with a company that is paying $125 per month for PCI compliance and they didn’t even know they’d been paying for it for several months. The sad part about it is, most PCI Compliance fees are only created to generate additional revenue for the payments company. The merchant, if we hadn’t brought it to their attention was going to waste $1500 per year on a fee that doesn’t exist and wasn’t on the agreement they “negotiated” for.

Payment processors, when no one is watching, will do what is best for them and their shareholders. That is why you keep having to switch your payment processing system to get a better deal. Businesses, software companies, and associations that continue to jump from processor to processor chasing the lowest rates are doing it wrong.

It’s counterintuitive to them getting what they really want; a payment system that is streamlined and efficient. It’s one of the reasons we have streamlined our partnerships and migrated closer to the platforms that are innovating new technologies for the future.  Saving money is important, and so is having software that removes inefficiencies in operations, revenue, and security.

What Entrepreneurs, Software Providers, and Associations Should Do

The only way for entrepreneurs, software providers, and associations to protect their business from the deceptive business practices of payment processing companies is to outsource the management of their payment processing system. This enables them to eliminate the challenge of shopping for a new provider or new payment technologies on their own with their own limited time and payment experience.

Partnering with a company like the PaySuite provides entrepreneurs, software providers, and associations with an insider that can help them source the right technology while also protecting their margins from deceptive business practices many continue to experience when dealing with their payment processing system.

If you’re tired of payments draining your internal resources and revenue, we’d love to start the conversation with you.