Things Card Processing Companies Do That Make People Hate Them, Episode 219

About a month ago I took over the credit card processing for a printer in a little town in Missouri. He was under contract with his previous processor, but a quick look through his paperwork revealed an early termination fee (ETF) addendum, a form that said there was no ETF if he stopped processing with them during the term of the agreement.

After I had him up and running with new equipment and was sure everything was working properly I had him sign a termination of processing form and fax it to the old company.

He emailed me shortly after- customer service from the old processor had called and told him he was going to get charged a $700 ETF. I told my guy not to fret, and to tell them he had a signed ETF addendum. Customer Service asked him to fax that in. 

He did, and Got a new email from the old company- they were accepting the ETF addendum- BUT- they had already sent the ACH for the $700, so they would have to credit that back. No problem, said my patient new customer. 

Three days went by with no $700 returned so my customer called his old processor's customer service line again to inquire why. He was told that he would have to get a copy of his bank statement showing where the $700 cam out. He faxed his bank statement and is expecting to get his $700 back by the end of the week.

Two things about this drive me crazy. The first is sending in a copy of the addendum. Do you mean to tell me, huge and impersonal credit card processing company, that you don't have the ETF addendum, that YOU designed and YOU sent out a part of the paperwork to be done at signing; that you don't already have that in the customer's file? I'm calling BS on that move. 

But what's even worse is the request for a bank statement showing where the $700 ETF was ACH'ed from the the customer's account. YOU ACH'ED IT!! The processing company knows full and well that the funds came out of the account- they took it out!

This is a good example of a terrible processing company practise- if they can come up with enough hoops for a customer to jump through when the customer is trying to terminate the relationship, maybe the customer will give up and stay with the status quo. And it works, often enough for some companies to keep doing it.

Two Numbers That Bankrupt Locally Owned Businesses Every Day

A lot of small businesses fail because their owners never figure out the importance of knowing their cost per customer and their value per customer.

Let's look at a hypothetical business owner who decides to promote her retail business via direct mail. She sends out 10,000 postcards at a cost of $3,000, and gets a response rate of .5%, bringing 50 new customers into her shop.In this case the cost per customer is $60 ($3,000 / 50 customers = $60). She's very happy with the response, and writes a marketing plan that includes a new 10,000 mail drop every month. She figures with 50 new customers a month, after a year her little shop will be bursting at the seams.

But...Because she doesn't have a POS system in place, she has no way of tracking what each customer spends. If she did, she would know that most of her customers come in once a month and spend $20.00. She has a good product and is able to run a 20% profit margin, giving her a customer value of $48 per year. (twenty per cent of $20 is $4, times 12 months is $48).

And on it goes, month after month; our business woman spending $60 to earn $48. As things get tighter and the bills pile up, may be one month she even decides to triple her postcard drop, in a desperate attempt to bust out of her downward spiral- but instead of helping, that just sends her to bankruptcy even quicker.

This same scenario is occurring in countless businesses all across the country. Right now. And its unnecessary. Know your cost per customer. Know your value for customer. Make sure the value is higher than the cost. A POS system can tell you both figures at the press of a button.

Five Common Point of Sale System Mistakes

There are five common mistakes I see business owners make when it comes to their point of sale (POS) systems. Whether it be a tablet POS, a touch screen system, a Windows type software system or any other form of POS technology, these are mistakes that can be avoided.

1- Trying to solve an operational problem with technology. Technology is a great resource, but its not necessarily a great problem solver. A lot of POS salesmen will come into your business and promise that their technology will make all your problems go away, and that simply isn't true. A POS system is a tool to increase the efficiency of your existing processes. If your business is losing money, you have to find the root causes of  why you're losing money- don't look at a PO system as a magic wand that's going to solve all your problems.

2- Not considering future changes. EMV chip cards are the way of the future in the card payment industry. A tablet POS system I like is Global Bay by Verifone. Verifone makes EMV ready PIN pads that can plug right into the Global Bay tablet. A business owner that makes a POS system purchase without considering the future is going to be looking at purchasing a brand new system or an expensive up-fit next year when the changeover to EMV ready technology rolls out. Any sort of payment technology decision made now should be made with EMV cards in mind. 

3- Not considering integration with current systems. Bob down at Bob's Diner is all excited about his shiny new touchscreen POS system. One of his biggest reasons for getting a POS system was the ability integrate his email list into the POS system. Unfortunately he has just discovered that his email list is on Mail Chimp...and Mail Chimp doesn't integrate with his new system. Always make sure beforehand that all of your existing systems are going to be able to be integrated with your new POS system.

4- Not getting very much from the system. I was just looking through the ITunes app store. There are at least 100 different apps that turn your IPad into a POS system. But what do they offer in terms of support, coaching and training? Do they provide advanced training on how to use the system? Do you have to pay for technical support? Is technical support even provided? These are important questions that you need to find the answers to if you are going to get the most out of your new technology.

5- Not having a POS system at all. In today's economy a retailer or restaurant owner that is still using a cash register and ink and paper isn't doing all she can to make her business successful. There is really no excuse for not having a POS system. For a little more than $1000 we can offer you a complete tablet system that keeps your book, does your inventory, does your menus, tracks employee hours and does your payroll and more. For a little more than $3000 we can offer a touchscreen POS that  provides you the same systems and benefits that your Big Box competitors pay hundreds of thousands of dollars for. We do the installation, provide you with upfront training and all the ongoing training you need, and free technical support for four years. It's time to put away the cash register and compete on the same level with the national chain store down the street. 

Three Simple Steps to Save $1000 on Your Credit Card Processing

Your merchant services account representative should be concerned with the success of your company. If he's not, or you haven't seen him since the day you signed your paperwork, find one who is- they can make a big difference in your bottom line. Here are three simple ways you an shave $1000 a year off of your processing costs.

1. Stop trying to figure out your processing statement on your own; instead, learn your 'effective rate'.

You can study the myriad of rates and fees on your statement, and spend hours trying to learn the terminology and suss out the difference between 'commercial level II' and 'CPS-Commerce Preferred Retail'.

Or you can learn to calculate the most important number in a processing account, the one that tells you your real cost for accepting credit cards- the effective rate. 

To figure your effective rate, simple divide the amount you paid your processor by the dollar volume that you processed. Be sure you are accounting for all of our costs- if you pay an annual feel or annual PCI fee (you shouldn't be paying either, but that's for later) divide those fees by 12 and add that to your amount paid. If you are leasing or renting your terminal (shouldn't be doing either) or paid a lump sum up front for it (shouldn't do that), include that amount as well.

For example, let's say in December you processed $10,000, and it cost you $380. You lease your terminal for $49 a month, so add that in- $380 + $49 = $429. You then divide total payout, $429, by your amount processed, $10,000 and come up with an effective rate of 4.29. Another way to look at it is for every $100 you ran through your credit card terminal, it cost you $4.29 to do so.

If you are an average small business processing between $5,000 and $25,000 a month with an average ticket between $20 and $100 dollars you should be paying an effective rate of 2.0% to 2.5%. Anything higher than 2.5 means there is probably room for savings.

Let's go back to our example business owner who was paying 4.29% on $10,000 monthly volume. He switches to a processor watching out for the business owner's interests and his new rates and fees equal an effective rate of 2.5. He'll finding he's paying $179 less a month, saving his business $2148 a year.

2. Identify fees that you shouldn't be paying.

Most business owners look at the list of fees on their credit card statement and assume they are just the price of  accepting credit cards. Not so. 

One of the most insidious fees in the payment industry right now are the ones related to the PCI program. In order to be PCI compliant a business owner is required to complete a self assessment questionnaire. It takes about ten minutes, and can be done for free on the PCI DSS website. Most processors charge an annual PCI fee that ranges from $50 to several hundred dollars. Some charge non-compliance fees of $15 to $50 a month every month a merchant hasn't completed the assessment. The worst charge the annual fee, the non-compliance fee, and automatically enroll you in 'breach protection' coverage that they charge you $15 or more a month for.

If you question your processor about these fees they will tell you they are mandatory and every company charges them. It's not mandatory, and though most processors charge these fees, a few don't. If you can't find one, contact me.

Other fees you shouldn't be paying are set-up and application fees, annual fees, 'preferred customer' or 'customer club' fees (this is where they charge you $8 to $15 a month for terminal paper and advanced reporting. A good representative will supply you with free paper and answer any reporting questions for you), and customer service fees.

I know of a processing company that charges a $195 application fee, a $95 annual fee, $75 annual PCI fee, and $11.95 monthly club fee. Over the life of their mandatory three year contract it drains $1135 out of their customers- all of it unnecessary. 

And of course, you should never pay for your terminal. No lump sum up front. No monthly rental. And by all means, no four or five year lease. You should get a free terminal in exchange for letting a company handle your processing. And by free, I mean absolutely free- not free except for a $69 set up fee, or $39 for shipping. 

3. Don't get locked into a long term contract

The worst position a business owner can find himself in in terms of his credit card processing is to know he's over-paying a processor and could reduce his costs with a different company, but unable to switch without being hit with a big early termination penalty. Its time contracts for credit card processing went the way of the dodo bird.You should only work with a processor that offers month to month agreements with no early termination fee.

There you have it- three methods any business owner can use to save $1000 off his processing costs. If you have any questions just contact me, and I'll be happy to help.

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25 Most Common Internet Passwords

When Adobe revealed in October that a jaw-dropping 38 million Internet passwords had been nabbed and posted on the 'net for hackers to make use of it caused headaches in the IT departments of companies across the web.

If there was a silver lining to that debacle it was that when companies  combed through the passwords in order to warn their customers they found an astonishing number of people use the same simple, easy to guess passwords.

From the records SpiderLabs and BBC News were able to the 25 most common passwords in the hacker's hands. If you see a password of yours on this list, time to change it.

• 123456
• 123456789
• password
• admin
• 12345678
• qwerty
• 1234567
• 111111
• photoshop
• 123123
• 1234567890
• 000000
• abc123
• 1234
• adobe1
• macromedia
• azerty
• iloveyou
• aaaaaa
• 654321

• 
  

IRS Postpones Backup Withholding For Credit Card Accounts to 2014

Yesterday afternoon in a welcome bit of news the IRS announced that they are delaying the requirement to begin backup withholding for merchant service providers until 2014.

Backup withholding is a penalty the IRS submits to merchants that have an or  incorrect TAX Identification Numbers (TIN) on file with their credit card processor. If the TIN on file with the processor didn't match what was on file at the IRS the processing company would be ordered to withhold 28 percent of the merchant's credit card volume. This would continue until the merchant filed a return that the IRS judged to have a TIN that matched what was on file at the processors.

The postponement is terrific news for merchants and their payment card processors. The policy has already created a blizzard of new paperwork for the processing companies. And with withholding scheduled to begin in a few months the inevitable results were going to be: merchants furious with their processing companies, even though the processors hands were tied in the matter; and further hardship on businesses already struggling to keep their doors open. We should all breath a sigh of relief that's been postponed.

However, it's critical that merchants not overreact  become lax with respect to filing correct TINs. The IRS delayed backup withholding for one year but it is still going to come next year. And the match on file next year will be based on the 1099 that is filed in January 2014- only a few months away.

Touchscreen POS System With Free Technical Support For Less Than $3200

Are you a retailer or restaurant owner who has seen the benefits of a  touch screen Point Of Sale (POS) system but been deterred from purchasing one by the near-five figure price tag on most systems on the market? If so, your time has come!

CCSalesPro and HioPos have teamed up to offer a custom touch screen POS system for under $3200, printer, software and cash drawer included. If a business owner desires a heavy duty cash drawer or a bar code scanner they are available for a few hundred dollars more. Other options like a kitchen printer and digital scale are available.

There are no hidden fees and no monthly expenses. The purchase price includes installation and training. In addition, technical support is provided at no cost for four years. If a restaurant provides a menu, or a retailer provides an Excel spreadsheet detailing her product line, they will upload those into your new system for you at no charge.

Running your business on a shoestring budget? Choose to lease your new system for around $100 a month for 48 months.

Feel free to contact me for details or with any questions.