The 10 Lies Entrepreneurs Must Know About Payments

As an entrepreneur, software developer, or accountant you understand that the payment processing industry is essentially mandatory for you to engage with to accept payments in your business so you can efficiently get paid from your customers. For decades, it has also probably felt like lies and deceit are mandatory too. It isn’t. There are ways for you to avoid being taken advantage of by payment processing companies and it starts with knowing what the lies are, so you don’t fall for them and sign the wrong contract. The following lies are 10 of the most popular lies being told in 2023:

 

We Eliminate The Middleman

 

There are 12-15 payment processing platforms in the United States that authorize and settle daily transactions and deposit them into the business bank account. Fiserv, WorldPay, Elavon, and Global Payments are a few of the most notable payment providers that are considered ‘direct processors’. There are over 2k registered resellers of these platforms called Independent Sales Organizations. Regardless of who you are processing with, eighty to ninety percent of your costs are controlled by Visa, MasterCard, Discover, and American Express. This portion of your costs is called Interchange, Dues, and Assessments. The payment processing platform you’re using has no impact on these fees and is the same if you’re using a direct processor or an independent sales organization. The only impact on cost beyond that has to do with your provider’s markup. When I worked for a direct processor, I thought all ISOs had to mark up the fees from the direct processor and pass it on to the customer. I was wrong. As I met with prospective clients, I came across plenty of customers using a ‘middleman’ that were processing at costs we couldn’t beat or come close to matching.

 

You Can Process Payments For Free

 

The hottest craze in the payments industry has been merchant processing providers telling business owners they can process payments for free. Nothing could be further from the truth and, if done improperly, can lead to business owners paying thousands of dollars in fees. Payment processors promote these programs, not because they are better for your business, but because instead of charging you 2.5% to process payments, they get to charge your customer 4% and make a lot more money on your account. In my opinion, if the customer is going to pay more anyway, you might as well increase your prices and keep the additional profit you’re giving away to the payment processor and avoid having to pay Visa a $5k or $25k fine for improperly adding fees at the checkout.

 

It’s Illegal To Store Credit Card Information

 

I’m not sure where this started, but I’ve heard business owners say it’s illegal to process a credit card over the phone or to store the information. This in some cases has to do with PCI Compliance and probably had to do with some merchant processing company trying to find leverage to get a merchant to switch or to discredit their existing provider. PCI Compliance has to do with how you handle and store the credit card information you handle over the phone, on your website, or within your business environment. You can store credit card information securely using a secure website provided by most payment providers. It’s, of course, always best to make sure you don’t write down information on paper or in an Excel spreadsheet that’s unencrypted. If you need recommendations on how to store information securely, without being charged significant fees to do so, feel free to schedule a call with us.

 

We Get Better Rates From Visa + MasterCard

 

Visa, MasterCard, Discover, and American Express partner with banks to distribute their credit and debit card programs. This is when they determine what fees will be associated with those programs. No payment processor is involved in setting these fees so if you hear a processor elude to them having a special relationship somewhere, they are lying.

 

American Express Costs More Than Visa + MasterCard

 

American Express changed their billing model to match Visa’s over 5 years ago making them more competitive and affordable for businesses doing less than 1m in annual sales with them. This in combination with American Express cardholders spending more per transaction, makes accepting this form of payment a great decision for your business. If you find that your payment processor is charging you significantly more for American Express, you may not be on the American Express OptBlue program and will need to ask your provider about updating your pricing.

 

Debit Cards Cost The Same As Credit Cards To Process Payments

 

In 2010, the Durbin legislation was passed placing a cap on debit card fees. This cap was applied to all transactions involving debit cards that were issued by major banks like US Bank, Wells Fargo, Citizens Bank, Bank of America, Key Bank, or any other bank with more than $10b in assets. These banks are considered ‘regulated’ and the fee associated with these debit cards is .0005% and .22 cents per transaction. This fee is the same whether it is processed in person, online, or via the phone or invoice and represents a significant reduction in costs for businesses accepting debit cards in their business.

 

Typing In Credit Cards Is Always More Expensive

 

Many businesses using companies like Stripe, PayPal, and Square have become accustomed to paying three to four percent for typing in a credit or debit card to process it and this is because these providers charge more for typing in payment information. In some cases, Visa & MasterCard charge more for transactions that are processed without the physical card being present, but it isn’t always the case. When set up properly, a business can still expect to pay rates as low as 2.5%-3% for credit card transactions and less when processing debit cards. The key in all scenarios is choosing the right payment provider and getting the most transparent pricing, which is called interchange plus.

 

Signing A Contract Will Save You Money

 

Contracts do not save you money. There is no stipulation in Visa or MasterCard’s pricing matrix that indicates a merchant will save money on payment processing if they sign a contract with the merchant service provider. Point-of-sale, software, and merchant services companies often require merchants to sign a contract with hefty termination penalties so they can recoup the cost of hardware and so they can increase the profitability of the accounts that they onboard. This has nothing to do with the true cost of processing payments in your business and you should have an advisor familiar with payment companies and their agreements before you sign any long-term contract with a company that has access to your bank account. We’ve seen companies levy termination fees as high as $20k per location for local small businesses, which is harmful to their cash flow and capital reserves.

 

Rates Are Going Up Because Of The Economy

 

Payment processing companies can be notorious for increasing rates and blaming it on Visa, MasterCard, Discover, or American Express. The same has happened with the volatility in the economy. Payment processing companies are blaming rate increases on market conditions, when in fact, there is no material reason for a payment processor to double the markup on their accounts other than the routine desire to increase their profitability. Visa postponed many of their rate increases during the pandemic and payment processors still handed down unreasonable fee hikes. If you’re tired of having to deal with rate increases on your own, schedule a call with us to see if your provider is being honest with you about the rate increases. We can tell you whether it is a legitimate fee increase from Visa or MasterCard, or if it is just a profit grab.

 

It Costs More Because It’s Integrated

 

Integrated payments is the process of a software company embedding payment processing into their software so you as a customer have one solution to run your business. We are a huge advocate of using an integrated system as it can streamline your operations and help you run a better business. We aren’t a huge advocate of you having to pay 2x as much to process payments for your business just because it’s integrated though, especially if you’re paying a monthly software fee. This isn’t always your software company’s fault as payment processing companies take advantage of software companies too. Software companies are experts in building, hopefully, great software. They aren’t experts in evaluating processor fees or hard costs charged by Visa, MasterCard, Discover, and American Express. They sometimes partner with the wrong payment processor to offer payments and it results in them charging more for payments just to justify the cost of doing the integration.

As a business owner, it’s important for you to know that it shouldn’t cost you more to process payments within your software as there is no true hard cost that makes it so. This is a profit center for payment processors and software companies and the costs should be reasonable while also being easy to justify, especially if there are tools being provided that help you grow your revenue and serve customers at a greater level.

 

How To Avoid The Lies

 

The best way to avoid these lies and control your costs tied to accepting credit cards is to work with an honest provider that is dedicated to doing what’s right for entrepreneurs. Since 2006, PaySuite has been focused on helping entrepreneurs manage the costs and services related to accepting credit and debit card payments in person, online, or within their software. Whether you are a startup, a seasoned entrepreneur, or a software company wanting an honest solution to handling payment processing, we’d love to serve you. If you have any specific questions about handling payment processing in your business or software, feel free to schedule a call with us.

We look forward to learning more about you and your business!

Why Every Entrepreneur Should Have A Payment Consultant

In 2016, I resigned from the 5th largest payment processor in the country. I left the industry without any intention of ever operating in sales or in the payment processing industry. The primary reason for me leaving the job that I had was because of a disagreement I had with my employer on how it handled the acquisition of a point-of-sale company and the service that wasn’t being provided to an entrepreneur that I was introduced to that wanted my help. When I think about the last 9 years I’ve been involved in the payments industry as an employee for one of the largest platforms in the world and as a consultant to hundreds of entrepreneurs, the one thing I think about is how complex the industry is and continues to be. This is the primary reason I believe every business owner should have a payments consultant, not just another sales agent or merchant services broker.

 

Why A Consultant, Not A Broker

 

When I talk with some people about my company PaySuite, they often compare us to independent insurance agents or multi-line insurance brokerages. I’ve always seen our role very differently from a broker and this is primarily because of the length we go to help our clients be successful beyond just providing them with a merchant account. In our view, while we provide many of our clients with a direct relationship with providers that allow us to set and manage the pricing and support for merchant services, we believe that we have a fiduciary responsibility to recommend the right products and services our clients need and this includes recommending providers like Stripe, PayPal, and Square or others in scenarios where it is in the best interest of the entrepreneurs we are serving. My view of being a merchant services broker is one of recommending only products and services that one is being compensated for even if they aren’t better for the entrepreneur. Not all brokers operate from this premise, but in my experience of being in the payment processing industry for almost a decade, not many payment processing professionals walk away from opportunities to make a sale when it isn’t in the business owner’s best interest.

 

The Benefit Of Having A Payment Consultant

 

The primary benefits of having a payments consultant or of having a payment consulting firm have to do with their understanding of the payments industry and the various methods of application that is relevant to your industry, and that they are committed to helping you do what is best for your business, not themselves or their employer. When you begin your search for a merchant services account, which is generally triggered by starting a new business or solving a problem with your existing provider, you will typically sign up for one online or you will talk with an employee that is hired to sell you a merchant account, whether their employer is the best for you or not. That’s what my role was when I worked for the 5th largest processor in the country, they never encouraged me to recommend other systems or providers that were possibly better for the merchant I was sitting in front of. In fact, the primary conversation I had with my sales leaders had to do with me being fired if I didn’t hit my quota.

Having the right payment consultant for your business will result in a number of improvements within your business operations in ways that far exceed just the fees you pay for merchant services. The right consultant will have the acumen to not only understand the different payment methods that can accelerate your cash flow and profit, but can help you accelerate your revenue by helping you innovate your products and services. This is the major difference between having a sales agent, a broker, and a payments consultant. It’s common for you to have very limited contact with a sales agent or broker beyond the sale as you generally get transitioned to the customer service number for the payment processor without much advocacy. With a payment consultant, you can have a relationship that can step in and help you as an entrepreneur to ensure your company’s mission and vision are aligned with your sales and revenue targets and the technology you need to get paid from your customers. Having a payments consultant, with the business acumen relevant to your industry and a set of values that puts you first, can position your company to maximize profitability, optimize employee productivity, and supercharge your business operations.

 

Our Mission

 

Our mission is to help entrepreneurs build better lives and businesses. If you’re an entrepreneur that wants to have a relationship that is dedicated to your personal and professional success, we’d love to serve you. If I can answer any questions about payments, technology, or growing your revenue, don’t hesitate to reach out.

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!