By Bill Pirtle
If you want to sell to convenience and grocery stores, you will need basic knowledge of government-subsidized food programs, such as the Women, Infants and Children (WIC) program and Supplemental Nutrition Assistance Program (SNAP), which was formerly the Food Stamp Program, as well as Electronic Benefits Transfer (EBT) payments.
Many processors consider EBT as an afterthought. Understanding how it works may benefit you when pursuing merchants in this niche. Many processor or ISO Schedule A's treat EBTs in the same way as PIN (personal identification number) debits, although they are not always priced the same.
This article will cover differences between EBT and WIC benefits and discuss when it makes sense for merchants to use a terminal provided by you rather than a state-issued one. The Food and Nutrition Service (FNS), a division of the U.S. Department of Agriculture, handles the EBT and WIC programs.
WIC consists of federal grants made to states for supplemental foods for low-income pregnant, breastfeeding and non-breastfeeding post-partum women, and for infants and children up to age five who are at nutritional risk. WIC covers specific items and quantities to designated cardholders. WIC provides terminals with scanners that account for each item cardholders are allotted for the month. Some POS systems can connect to this system, but it is not common.
EBT payments are sometimes referred to as food stamps, because before electronic cards were issued, people were issued coupons in booklets to pay for staples under the Food Stamp Program, which is now SNAP.
With EBT, the state issues the funding on a set day of the month, and cardholders may buy any type of food they wish. A product with a nutrition label is classified as food and eligible; a supplement label designates a product as a supplement, which is not eligible.
Business owners may apply to the FNS under two criteria:
Businesses may contract through their states for a POS device that only works with EBT cards for a set fee per month. In Michigan, this fee is $75 per unit per month. Businesses may also elect to handle EBT through their credit card terminals.
Before you meet with EBT merchants, find the cost for EBT transactions on your Schedule A. I have seen fees range from 2 to 10 cents. Determine a price to offer that enables you to either profit or break even per your cost.
When dealing with a merchant with one or more state-owned machines, determine the total number of EBT sales in a month from every source. Multiply the total number of EBT transactions by the EBT fee you are offering. If this total exceeds the cost of state devices, you have the choice of reducing your EBT transaction cost or walking away from EBT.
If the total number of EBT transactions multiplied by your Schedule A cost exceeds the total cost of terminals, advise the merchant to stay with state devices. This should only occur in supermarkets and convenience stores in more densely populated areas, and rarely then.
In a given month, if you process three thousand EBT transactions for a merchant at $0.10 each, the cost would be $300. If the merchant has four state terminals at a $75 cost each, it would break even – the merchant would pay the same. However, if a merchant uses only two terminals for EBT, your solution would cost more than the merchant pays. Most times calculation will show you can offer the merchant a savings versus the state-owned equipment.
Make sure your preferred processor is not only certified for accepting EBT, but that the terminal/PIN pad selected has also been certified by the processor for EBT. Failing to double-check this will leave you unable to use the terminal for PIN debit or EBT with your processor. Since both require a PIN to use, typically if it allows PIN debit, it will allow EBT.
One word of caution regarding pricing: in a store with four terminals, each using credit, debit and EBT, the result is your terminals will batch 12 times per night or 360 times a month. If you opt to add a batch fee, take the number of total batches into consideration to avoid the appearance of gouging when a merchant or accountant reviews the statement. When you are completing the application, check the EBT box, enter a cost per EBT transaction and enter the seven-digit FNS number assigned to the merchant. If the number the owner gives you only has six digits, ask if the first number should be a zero. It does matter. If the number is incorrect, your application will pend until the number is correct.
Bill Pirtle is the author of the training book Credit Card Processing for Sales Agents. He is the district manager for Clearent in the Detroit/Ann Arbor/Toledo Market. His email is firstname.lastname@example.org. He can also be reached at 248-444-8009 or on LinkedIn.
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