CEDF clients come from a wide variety of industries, but a surprising number accept credit cards from their customers, even those that we don’t think of as “retail” businesses. And a shocking proportion have never or infrequently analyzed the rates and attempted to strike a better deal.
One reason may be that it is very difficult to understand the pricing structure of a merchant services account. I think this is by design. Charging what seems like dozens of different rates for corporate cards, reward cards, debit cards, or the various card brands is a great way to confuse small merchants into submission, if not tears.
Recently I sat with a client and pointed out that considering the high percentage of customers paying her by credit card, and the long relationships the business was fortunate to cultivate, if she could save half a point on (what I thought was) her high rate, she could probably pay for a year of college for her child over not too many years.
There aren’t too many places to go to get authoritative information on merchant credit cards so you can understand what a sales agent is talking about, and information is key to being able to negotiate effectively. Happily, I’ve discovered a series of articles written by an executive from the merchant services industry who lays out a lot of the definitions and insider information you’ll need.
Phil Hinke has a series of very informative posts in Practical Ecommerce, beginning with “Credit-card-processing Negotiating Mistakes, Part 1: Terminology, Exits.”
Don’t be put off by the reference to e-commerce if you don’t do business online because anyone who accepts credit cards can benefit from this coaching. He begins by explaining how two sales people can appear to be offering the same rates but in reality apples are not apples and oranges are not always oranges. Knowing precise definitions is essential.
And once you’re hooked on a contract, it can be painful to leave. The merchant services providers like stability and they don’t want you to consider shopping around.
Finally, his article demonstrates why “match the rate” and “match the cost” are not the same thing. Any business accepting credit cards will benefit from reading this introduction. But don’t stop with Part 1. Click through to the other articles in his series to arm yourself with the knowledge required to strike a better deal.
— Frederick Welk, CEDF Business Advisor