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The Truth Behind Merchant Accounts Rates
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The Truth Behind Merchant Accounts Rates

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Here is a presentation I created for a potential client that was promised a discount below cost - 1.19%. How can this be? Watch to find out.

Here is a presentation I created for a potential client that was promised a discount below cost - 1.19%. How can this be? Watch to find out.

Published in: Business, Economy & Finance

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  • 1. Merchant Account Rate Reality Robb Lejuwaan - US Merchant Services
  • 2. Presentation Outline
    • Where do merchant account rates come from?
    • How is a merchant account rate built?
    • Rate cost examples
    • How were you offered a rate below cost?
    • A look at my price model
    • Who is US Merchant Services?
  • 3. Where do the rates come from?
    • They come direct from Visa and MasterCard
  • 4. Where do the rates come from?
    • They come direct from Visa and MasterCard
    • The official name for these rates is INTERCHANGE
  • 5. Where do the rates come from?
    • They come direct from Visa and MasterCard
    • The official name for these rates is INTERCHANGE
    • Here are links to the web sites with this information:
    • Visa Interchange Guide
    • MasterCard Interchange Guide
  • 6. Key Point
    • ALL MERCHANT ACCOUNT PROVIDERS
    • HAVE THE SAME COST
    • FROM VISA AND MASTERCARD
  • 7. Key Point
    • ALL MERCHANT ACCOUNT PROVIDERS
    • HAVE THE SAME COST
    • FROM VISA AND MASTERCARD
    • THERE IS NO SUCH THING AS A
    • “ Wholesale Rate”
  • 8. How a rate is built
    • Example #1
    • Transaction Type: Card Swiped
    • Normal Visa Consumer Card: 1.5400% + $.10
    • Visa Acquiring Fee: .0925%
    • Cost for this transaction: 1.6325% + $.10
    • Normal MC Consumer Card: 1.5800% + $.10
    • MC Acquiring Fee: .0950%
    • Cost for this transaction: 1.6750% + $.10
    • These are considered to be the BASE RATES
  • 9. How a rate is built
    • Example #2
    • Transaction Type: Visa Rewards Card Swiped
    • Visa base rate: 1.6325% + $.10
    • Rewards 1 Surcharge: .11%
    • Cost for this transaction: 1.7425% + $.10
  • 10. How a rate is built
    • Example #3
    • Transaction Type: Visa Commercial Card Swiped
    • Visa base rate: 1.6325% + $.10
    • Commercial Card Surcharge: .66%
    • Cost for this transaction: 2.2925% + $.10
  • 11. How a rate is built
    • Example #3
    • Transaction Type: MC World Key Entered
    • MC base rate: 1.675% + $.10
    • Commercial Card Surcharge: .47%
    • Cost for this transaction: 2.145% + $.10
  • 12. But, you have a 1.19% rate!
    • Currently, you have a rate that is
    • .4425% - 1.15%
    • lower than cost?
    • How is this possible?
  • 13. But, you have a 1.19% rate!
    • Currently, you have a rate that is
    • .4425% - 1.15%
    • lower than cost?
    • How is this possible?
  • 14. How do you have a 1.19% rate?
    • If you would have paid that rate in August of 2007
    • The merchant account provider would have lost $179.42
    • on your account!
  • 15. How do you have a 1.19% rate?
    • I call this type of rate a “Hollywood rate,”
    • it has a great looking facade
    • but with out all the makeup it is scary!
  • 16. How do you have a 1.19% rate?
    • I call this type of rate a “Hollywood rate,”
    • it has a great looking facade
    • but with out all the makeup it is scary!
    • Here is how it works…
  • 17. How do you have a 1.19% rate?
    • The 1.19% rate is for swiped, regular,
    • consumer card transactions
    • Then there is a another rate for “mid-qualified” transactions, maybe 3.25%
    • Card transactions such a swiped rewards cards and keyed in regular consumer cards
    • fit into this category.
  • 18. How do you have a 1.19% rate?
    • Then there is a another rate for “non-qualified” transactions, maybe 4.25%
    • Card transactions such a corporate cards and Visa EIRF fall into this category
  • 19. How do you have a 1.19% rate?
    • Let’s see the numbers on this comparing the 1.19% rate to 1.95% using your July Merchant account statement…
  • 20. July 2007 Category 1.19% 1.95% Qualified $146.66 $240.33 (1.19% vs. 1.95%) Mid-Qualified $244.26 $155.40 (3.25% vs. 2.06%-2.10%) Non-Qualified $267.13 $161.37 (4.25% vs. 2.61%) Totals $658.05 $557.10
  • 21. So the 1.19% rate does not lower costs It causes them to go up $100.95!
  • 22. $100.95 Loss? How can this be?
  • 23. It is very simple They make all their profit by padding the surcharges from Visa and MasterCard We, on the other hand, offer “ straight pass through” which means we pass through the surcharges from Visa and MasterCard at cost, without any padding.
  • 24. So even when our base rate is .76% higher than our competition our fees are still considerably lower Their “mid-qualified fees are 1.15% higher and Their “non-qualified” fees are 1.64% higher than our rates
  • 25.
    • Merchant account providers
    • have conditioned merchants
    • to focus on the base discount rate…
    • … when there actually two price points to focus on:
    • Base rate
    • Surcharges Fees
  • 26. So What Is Our Offer?
    • Base Rate – 1.95%
    • Surcharges – at cost from Visa and MC
    • Here are some surcharge examples:
    • Visa swiped rewards - 1.95% +.11% = 2.06%
    • Visa card not present - 1.95% +.31% = 2.26%
    • MC Comm. Face to Face - 1.95% +.47% = 2.41%
    • Visa debit card swiped - 1.95% +(.51%) = 1.44%
    • MC debit card swiped - 1.95% +(.53%) = 1.42%
  • 27. Who Is US Merchant Services?
    • US Merchant Services is a Registered Member Service Provider for MasterCard International and a Registered Independent Sales Organization for Visa USA through Fifth Third Bank.
    • 14 Years in business.
    • BBB member with a “AAA” rating.
    • $1.8 Billion in annualized volume (new business) in 2006.
    • Reprogram 200-250 merchants per month.
    • 5 th 3rd Bank – 145 years old; over 1100 locations.
    • T-SYS – The original Visanet, created by Visa. Now owned by Total Systems, is the largest single payment platform in the world.
  • 28. Who Is US Merchant Services?
    • US Merchant Services provides the following processing solutions:
    • Prioritized 24/7 Customer Service.
    • No Hidden Fees.
    • Full Visa/MasterCard Check Card Rebates.
    • A Straight Pass-Through from Visa/MasterCard on Surcharges and Interchange Reductions.
    • Premiere 24/7 On-Line Reporting.
    • Discount Charged Monthly, Not Daily.
    • No Switching Costs.
    • Full Disclosure of all Processing Fees.
    • Easy to Understand Monthly Statements.
    • An Account Executive Permanently Assigned to you.
  • 29. Want More Information?
    • This was a presentation created for a specific client that had been offered a rate of 1.19 %. If you have “mid-qualified” and “non-qualified” fees on your merchant account and you want to get rid of your hidden fees please click the link below and fill out the form.
    • Get a Straight Pass Through merchant account