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Street SmartsSM:
Ask "Street Smarts"

By Ed Freedman

Ask "Street Smarts"

Thousands of other merchant level salespeople (MLSs) across the country are out there every day dealing with the same issues you face. You are not alone. This column has become a forum to acknowledge and address those important issues.

But as an MLS you face other concerns, too. For instance, where do you go to get solid business, legal or financial advice? You contact a lawyer or CPA. But whom do you turn to with bankcard woes? "Street Smarts"-that's who! I am very pleased to introduce a new series designed to give MLSs everywhere a new forum to come to for answers to any type of business-related queries. To kick it off, I recently posted these comments on GS Online's MLS Forum:

"Do you want expert advice but don't know where to go? Why not ask 'Street Smarts'? You now have a place to turn with all of your questions.

"For this to really work, I need your support and participation. So, go ahead. Ask me anything. You'll see my answers to your questions in upcoming features of 'Street Smarts.' Let's get this new series started!"

The response on the MLS Forum was immediate and encouraging. From the many submissions I received, I selected several that represent the most talked about challenges facing MLSs today as well as the most frequently asked questions.

Following are the questions I selected to feature in this premier column of "Ask 'Street Smarts'" and my corresponding answers:


"What is interchange?" - Cardmaster

"On interchange, specifically, what is Consumer Debit Refund (1.18%)? How would that work, and when is it applied?" - Desdinova


"As many of you know, interchange is what the card Associations (i.e. Visa and MasterCard) determine to be paid to the card issuing banks. The card issuing banks get paid for providing an interest-free loan to their customers (the cardholders).

"Interchange goes to the card issuing banks while assessments get paid to the card Associations. One interchange category is Consumer Debit Refund. This particular fee is a MasterCard interchange category for issuing credits.

"When a merchant issues a credit, the acquirer gets some money back from the card issuing banks. The acquirer does not get the same amount it pays. That would be too simple. Instead, the acquirer gets something slightly less than originally paid when the transaction was processed. "Be aware, interchange is getting more complicated. As of October, MasterCard expanded the number of interchange categories to three different groups for Consumer Debit Refund, five different groups for Consumer Credit Refund and four different groups for Corporate Credit Refund.

"The amount you get back (which never includes the 10 cent or 15 cent transaction fee) depends on a several different things that are too confusing to try to explain. I think the simple thing for you to understand is that you do not get all the money back, which makes billing merchants on net sales (gross sales less credits issued) an even less appealing option.

"Also, please note that you never get the assessments back, which means you eat another 9.5 basis points if you bill merchants on a net sales basis."


"Where do you see this business in 10 years for the little guy? Can the MLS make it LARGE in this business and how?" - Bankcardrep1


"There's a tremendous opportunity for growth in the number of accounts acquired by ISOs/MSPs. We are entering a period where new terminal equipment will replace old terminals. These new multi-application terminals really provide incentives for upgrades.

"With one such terminal, a merchant can process credit, debit, EBT, check conversion/guarantee, prepaid, gift/loyalty cards, Internet and wireless transactions, etc. With all these new services, and terminals that can handle them, we're in a much better position than the banks to sell and service merchants.

"It's a more complicated sale and as a result, it's less likely that banks will be able to continue to sell and service merchants. I think this is a real opportunity for MLSs, but only if they are willing to get educated and trained on how to sell and support these terminals and value-added services."


"How does an MLS make six figures in this industry? Besides knocking on doors of businesses, what other effective ways are there to generate business? I've talked to MLSs that claimed to make high six-figure incomes, but they didn't want to reveal how they do it." - JoeT


"To make six figures in this industry, generate leads and lots of them. There' s only one difference between a sales agent making $50,000 to $100,000 per year and an agent making $250,000 to $400,000 per year.

"The agent generating leads is making the big bucks. I detailed this hot topic in a recent 'Street Smarts' article titled, 'Taking the Lead,' (The Green Sheet, Aug. 11, 2003, issue 03:08:01)."


"My merchant called me today and said a company called Advanta called and can set her up with credit card processing: 1%, no transaction fee, no statement fee, no fees at all.

"But she needs a special machine that only Advanta can provide and [the company] would not tell her the equipment type. When is the madness going to stop? How can they make such an offer? $50 monthly minimum?" - ccguy "You should be able to talk around that pitch that they use about being the biggest processor. It's below interchange! I know it's tough to do, but you should all have a scripted pitch you can fall back on when someone quotes below interchange.

"Maybe this is the topic of another thread. Ed, do you want to take a crack at this one? I think this is a tough spot a lot of MLSs find themselves in on a regular basis." - Ccwarehouse


"In these situations, merchants are most likely confused by the offer. I recommend contacting them and explaining that perhaps they might not understand all the details of the offer.

"Suggest that they either send you a copy of the written offer they received (with specific rates and fees) or send you a copy of their first processing statement. Figure out when they would receive the credit card processing statement, and then go to work.

"In addition, I'd warn any merchant against a proprietary terminal. There's nothing like 'free agency' to get the best deal. And if you invest a bunch of money in a terminal that can only be used by one merchant account provider, then it could be a 'bait and switch' technique where rates go up after a certain amount of time (just like all those offers from the card issuing banks). "I would also make sure you always have a good copy of the most recent interchange chart available. Circle the retail qualified discount rates (currently 1.54% + $0.10 per item). Make sure your chart includes assessments.

"This is something you can bring to your appointment or fax if necessary. Review it with the merchant. Explain how everyone has the same cost structure (Bank of America, Wal-Mart, etc.). Interchange goes to the card issuing banks while assessments get paid to the card Associations. This way you can prove if an offer is below cost.

"Lastly, you need to ask merchants key questions such as how long will they be able to offer rates below their cost or is there something you missed as far as how they'll make up for losing money in this area.

With a merchant proposal like this, you might need to offer a lower rate for check cards. Be sure to offer the merchant a deal that's very competitive such as 10 to 15 basis points above cost (e.g. 1.75% credit cards, 1.30% check cards and pass through for all other types of transactions)."


"When do you plan on selling your company?" - IndustryPro


"I have no plans to sell my company anytime soon. I've always run Total Merchant Services on the assumption that I'll never sell it. Every single decision, every hire, every dollar spent on IT, even every single sales partnership is built on this foundation.

"I'll just keep my head down, religiously follow my business plan and philosophy while dealing with every situation from the most ethical position possible. Being a part of this phenomenal business and making money by helping so many people is just too much fun to consider leaving."

I hope you agree that this is a great start to a terrific new series that will be viable for years to come.

One of my other new favorite series in "Street Smarts" is the guest columnist series. I am thrilled to announce that Joe Kaplan, President and Chief Executive Officer of Innovative Merchant Solutions, an Intuit company, will host the next "Street Smarts" column. We are all excited to learn what's on Kaplan's mind these days.

As always, I'd love to hear from you. Please send your comments on this column and any other topic to . I cannot stress enough that your voice must continue to be heard.

"The important thing is not to stop questioning."
- Albert Einstein

See you next time where the rubber meets the road.

Ed Freedman is founder and President/CEO of Total Merchant Services, one of the fastest growing credit card merchant account acquirers in the nation. Freedman is the driving force behind all business development activity as well as the execution of Total Merchant Services' marketing plan, including recruiting and training independent sales offices and establishing strategic alliance partnerships with leading vendors, so that Total Merchant Services can provide its customers with the highest quality and most reliable services available.

To learn more about Total Merchant Services, visit the Web site at To learn more about partnering with Total Merchant Services, visit or contact Freedman directly at

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.
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