Negotiating Bankcard Costs

Mac Hardin – AASP-MN Bankcard Program

Back in the day, I worked in a gas station. While I was kept busy with oil changes, flat tires and the occasional innertube, the mechanics would be busy fixing anything that ailed a car. The words I would often overhear were plugs, points, condenser and timing. I had a hard time understanding what that all meant so, thankfully, I didn’t pursue a career that eventually turned into chips, codes and computers.

As AASP-MN’s “bankcard guy,” it’s my job to understand bankcard pricing. Hopefully, if you’re shopping your bankcard rates, what I have to offer will not only give you a better understanding, but might just reduce your costs.

These are three main pricing components: Interchange, assessments and the processor’s fees.

• Interchange: This is what the card issuing bank receives per card type (Rewards, debit, hand keyed, business, etc.). It is normally the largest part of the fee.

• Assessments: Visa, MasterCard and Discover, as the organizing entities for the card issuing banks, receive what is called assessments. It is important to note that the per-sale interchange and assessments are the same to each processor. That means the only place a business can negotiate is in what the processor charges.

• Processor Fees: This is where it gets interesting, and it’s where the opportunity is.

The single most important of all the possible processor fees is the percentage that is added to the sale. Consider this: If one tenth of a percent is charged on a $500 sale, that’s 50 cents. If the processor fee is .30 percent, that’s $1.50. While that extra dollar doesn’t sound like a huge amount on a $500

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Contact: Brad Schmid 763-549-2247 / bschmid@cbiz.com repair bill, sale after sale, it adds up. To put it another way, if you have $50,000 in bankcard transactions in a month, meaning $600,000 in a year, we’re talking $1,200!

The processor will most likely have no shortage of other transaction or monthly fees, including authorization charges, statement fees, monthly minimums, batch closing fees, PCI compliance fees, etc. And don’t forget the annual or quarterly charges that seem to creep in. While all the miscellaneous fees can pile up, it’s still the percentage that can most quickly inflate your costs.

Admittedly, deciphering your monthly statement can be difficult. Each processor has a different format. Oftentimes, their add-on percentages are buried in some other numbers. So, you may want to call your processor and ask what they charge for:

• Percentage added to the sale amount

• PCI charges, monthly, quarterly or annually

• Authorization or item fees

• Annual fees

• Batch closing fees

• Minimum processing charges

• Statement, or flat monthly fees

• Any, and all other fees

Not only are these questions helpful when dealing with your current processor, they’re good to have nearby when the annoying telemarketers call. It puts you in charge of the conversation.

If you have questions, or if you would like to see if the AASP-MN Bankcard program can reduce your costs, I can be reached at (612) 750-2988, or at mach@retailfinancialservices. biz