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.

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The Truth Behind Merchant Accounts Rates

  1. 1. Merchant Account Rate Reality Robb Lejuwaan - US Merchant Services
  2. 2. Presentation Outline <ul><li>Where do merchant account rates come from? </li></ul><ul><li>How is a merchant account rate built? </li></ul><ul><li>Rate cost examples </li></ul><ul><li>How were you offered a rate below cost? </li></ul><ul><li>A look at my price model </li></ul><ul><li>Who is US Merchant Services? </li></ul>
  3. 3. Where do the rates come from? <ul><li>They come direct from Visa and MasterCard </li></ul>
  4. 4. Where do the rates come from? <ul><li>They come direct from Visa and MasterCard </li></ul><ul><li>The official name for these rates is INTERCHANGE </li></ul>
  5. 5. Where do the rates come from? <ul><li>They come direct from Visa and MasterCard </li></ul><ul><li>The official name for these rates is INTERCHANGE </li></ul><ul><li>Here are links to the web sites with this information: </li></ul><ul><li>Visa Interchange Guide </li></ul><ul><li>MasterCard Interchange Guide </li></ul>
  6. 6. Key Point <ul><li>ALL MERCHANT ACCOUNT PROVIDERS </li></ul><ul><li>HAVE THE SAME COST </li></ul><ul><li>FROM VISA AND MASTERCARD </li></ul>
  7. 7. Key Point <ul><li>ALL MERCHANT ACCOUNT PROVIDERS </li></ul><ul><li>HAVE THE SAME COST </li></ul><ul><li>FROM VISA AND MASTERCARD </li></ul><ul><li>THERE IS NO SUCH THING AS A </li></ul><ul><li>“ Wholesale Rate” </li></ul>
  8. 8. How a rate is built <ul><li>Example #1 </li></ul><ul><li>Transaction Type: Card Swiped </li></ul><ul><li>Normal Visa Consumer Card: 1.5400% + $.10 </li></ul><ul><li>Visa Acquiring Fee: .0925% </li></ul><ul><li>Cost for this transaction: 1.6325% + $.10 </li></ul><ul><li>Normal MC Consumer Card: 1.5800% + $.10 </li></ul><ul><li>MC Acquiring Fee: .0950% </li></ul><ul><li>Cost for this transaction: 1.6750% + $.10 </li></ul><ul><li>These are considered to be the BASE RATES </li></ul>
  9. 9. How a rate is built <ul><li>Example #2 </li></ul><ul><li>Transaction Type: Visa Rewards Card Swiped </li></ul><ul><li>Visa base rate: 1.6325% + $.10 </li></ul><ul><li>Rewards 1 Surcharge: .11% </li></ul><ul><li>Cost for this transaction: 1.7425% + $.10 </li></ul>
  10. 10. How a rate is built <ul><li>Example #3 </li></ul><ul><li>Transaction Type: Visa Commercial Card Swiped </li></ul><ul><li>Visa base rate: 1.6325% + $.10 </li></ul><ul><li>Commercial Card Surcharge: .66% </li></ul><ul><li>Cost for this transaction: 2.2925% + $.10 </li></ul>
  11. 11. How a rate is built <ul><li>Example #3 </li></ul><ul><li>Transaction Type: MC World Key Entered </li></ul><ul><li>MC base rate: 1.675% + $.10 </li></ul><ul><li>Commercial Card Surcharge: .47% </li></ul><ul><li>Cost for this transaction: 2.145% + $.10 </li></ul>
  12. 12. But, you have a 1.19% rate! <ul><li>Currently, you have a rate that is </li></ul><ul><li>.4425% - 1.15% </li></ul><ul><li>lower than cost? </li></ul><ul><li>How is this possible? </li></ul>
  13. 13. But, you have a 1.19% rate! <ul><li>Currently, you have a rate that is </li></ul><ul><li>.4425% - 1.15% </li></ul><ul><li>lower than cost? </li></ul><ul><li>How is this possible? </li></ul>
  14. 14. How do you have a 1.19% rate? <ul><li>If you would have paid that rate in August of 2007 </li></ul><ul><li>The merchant account provider would have lost $179.42 </li></ul><ul><li>on your account! </li></ul>
  15. 15. How do you have a 1.19% rate? <ul><li>I call this type of rate a “Hollywood rate,” </li></ul><ul><li>it has a great looking facade </li></ul><ul><li>but with out all the makeup it is scary! </li></ul>
  16. 16. How do you have a 1.19% rate? <ul><li>I call this type of rate a “Hollywood rate,” </li></ul><ul><li>it has a great looking facade </li></ul><ul><li>but with out all the makeup it is scary! </li></ul><ul><li>Here is how it works… </li></ul>
  17. 17. How do you have a 1.19% rate? <ul><li>The 1.19% rate is for swiped, regular, </li></ul><ul><li>consumer card transactions </li></ul><ul><li>Then there is a another rate for “mid-qualified” transactions, maybe 3.25% </li></ul><ul><li>Card transactions such a swiped rewards cards and keyed in regular consumer cards </li></ul><ul><li>fit into this category. </li></ul>
  18. 18. How do you have a 1.19% rate? <ul><li>Then there is a another rate for “non-qualified” transactions, maybe 4.25% </li></ul><ul><li>Card transactions such a corporate cards and Visa EIRF fall into this category </li></ul>
  19. 19. How do you have a 1.19% rate? <ul><li>Let’s see the numbers on this comparing the 1.19% rate to 1.95% using your July Merchant account statement… </li></ul>
  20. 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. 21. So the 1.19% rate does not lower costs It causes them to go up $100.95!
  22. 22. $100.95 Loss? How can this be?
  23. 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. 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. 25. <ul><li>Merchant account providers </li></ul><ul><li>have conditioned merchants </li></ul><ul><li>to focus on the base discount rate… </li></ul><ul><li>… when there actually two price points to focus on: </li></ul><ul><li>Base rate </li></ul><ul><li>Surcharges Fees </li></ul>
  26. 26. So What Is Our Offer? <ul><li>Base Rate – 1.95% </li></ul><ul><li>Surcharges – at cost from Visa and MC </li></ul><ul><li>Here are some surcharge examples: </li></ul><ul><li>Visa swiped rewards - 1.95% +.11% = 2.06% </li></ul><ul><li>Visa card not present - 1.95% +.31% = 2.26% </li></ul><ul><li>MC Comm. Face to Face - 1.95% +.47% = 2.41% </li></ul><ul><li>Visa debit card swiped - 1.95% +(.51%) = 1.44% </li></ul><ul><li>MC debit card swiped - 1.95% +(.53%) = 1.42% </li></ul>
  27. 27. Who Is US Merchant Services? <ul><li>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. </li></ul><ul><li>14 Years in business. </li></ul><ul><li>BBB member with a “AAA” rating. </li></ul><ul><li>$1.8 Billion in annualized volume (new business) in 2006. </li></ul><ul><li>Reprogram 200-250 merchants per month. </li></ul><ul><li>5 th 3rd Bank – 145 years old; over 1100 locations. </li></ul><ul><li>T-SYS – The original Visanet, created by Visa. Now owned by Total Systems, is the largest single payment platform in the world. </li></ul>
  28. 28. Who Is US Merchant Services? <ul><li>US Merchant Services provides the following processing solutions: </li></ul><ul><li>Prioritized 24/7 Customer Service. </li></ul><ul><li>No Hidden Fees. </li></ul><ul><li>Full Visa/MasterCard Check Card Rebates. </li></ul><ul><li>A Straight Pass-Through from Visa/MasterCard on Surcharges and Interchange Reductions. </li></ul><ul><li>Premiere 24/7 On-Line Reporting. </li></ul><ul><li>Discount Charged Monthly, Not Daily. </li></ul><ul><li>No Switching Costs. </li></ul><ul><li>Full Disclosure of all Processing Fees. </li></ul><ul><li>Easy to Understand Monthly Statements. </li></ul><ul><li>An Account Executive Permanently Assigned to you. </li></ul>
  29. 29. Want More Information? <ul><li>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. </li></ul><ul><li>Get a Straight Pass Through merchant account </li></ul>

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