The Green Sheet Online Edition
June 24, 2013 • Issue 13:06:02
Tricks of reading credit card statements
Some payment professionals believe merchant statement analysis is pass�. However, analyzing merchant statements and providing accurate cost comparisons that reflect the potential savings should merchants switch processing platforms remains a basic, and critically important, sales tool for merchant level salespeople (MLSs).
How complicated has the merchant statement become? Very! Of course, interchange plus is easy to understand, but 3-tiered and 4-tiered pricing, enhanced bill-backs, noncompliance fees, and other regulatory fees make reading merchant statements increasingly difficult.
Getting to the nitty gritty
It is a challenge to look over one of today's black-and-white statements and answer:
- What really is the base rate?
- What is the effective rate?
- How can the merchant save money?
- Do merchants understand that dividing their total fees into the total revenue will provide an effective rate?
I often wonder why salespeople who earn residual income work so hard to price a merchant doing less than $10,000 per month at interchange plus 10 basis points. Are they doing a service for themselves to make a few dollars per month in residual income? Are MLSs doing it for the bonus money or for the equity value of that account?
The industry is becoming increasingly commoditized. It is critical that MLSs understand the nuances of interchange management. They need to focus on merchant types and industry verticals where they can present a more competitive solution and save real money for the merchant while earning a well-deserved residual income stream.
Learning to focus on the right market
For sales reps and merchants, understanding statements and what your competition is charging is a critical aspect in this industry. Josh Axinn, Relationship Manager at Charge Card Systems, has analyzed thousands of merchant statements during his career.
Axinn said, "The many salespeople are great at selling but need to become better educated at interchange whereby they can quickly, by eyeballing a statement with a merchant, confidently mention that there is a huge savings opportunity with, for example, regulated debit, or your account is taking a lot of corporate cards and by instituting Level 2, we can reduce your fees from a mid-qualified rate to a qualified."
Axinn feels he is privileged to be able to educate sales reps and merchants on rates and how to control the bottom line. "My philosophy is to take a step back and ask the merchant what they are paying," he said. "Some of the responses I receive are, 'I don't know but the rates are low,' 'I pay 1.42 percent,' and 'I used to pay 1.69 percent, but the rates went up last month.'"
However, Axinn has found that after doing a statement analysis, many merchants are paying over 4 percent for their effective rate. "This 4 percent effective rate includes duplicate transaction fees, extraordinary surcharges and excessive monthly fees," he said. "Cost comparisons include suggested pricing that is designed to provide the merchants competitive rates structures that allow the sales rep to maintain profitability."
Axinn believes in offering competitive low rates that will generate referrals. "My philosophy, given the competitive nature of merchant services, is to offer a fair, yet competitive rate coupled with great service in order to alleviate attrition," he said.
Understanding merchant priorities
It's an interesting paradigm that entrepreneurs and business owners spend a significant time on key issues like labor and inventory management, but many do not understand the cost structure of their credit card processing; they do not know that with a little effort, they can save significant money, which will drop to their bottom line.
It troubles me that business owners also take extra efforts to go green, but do not understand what kind of margins they are paying to their credit card processors. In most cases, their monthly processing costs are more expensive than their utility bills combined.
I am a proponent of better education for salespeople whereby we play on a fair playing field by providing real analysis and real savings. It's unfortunate when an MLS fabricates the savings, earns a merchant account, and then - one month later - the merchant receives his or her first statement only to see that the business is now paying a higher fee.
There are millions of merchants to prospect. What is so exciting is that we only need to convert a small percentage of this number to earn a great living with a terrific quality of life.
Jeffrey Shavitz is one of the founders of Charge Card Systems Inc. He is also an active member of The Green Sheet Advisory Board and the First Data ISO Advisory Board. He can be reached at firstname.lastname@example.org or 800-878-4100. Josh Axinn is CCS' Relationship Manager; he can be reached at email@example.com. For additional information on CCS, please visit www.chargecardsystems.com/gsadvisoryboard or the company's corporate website at www.chargecardsystems.com.
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