On the 26th of August,2006, I had the opportunity to be inteviewed by Rachel Johnston on Austin Biz Facts. Rachel is the owner of
OperTuneUs and also the host and producer of Austin Biz Facts, a local Public Access Cable show, designed to educate the business community as to resources available in the Austin area. Rachel's company is an expert in Construction Photography, Virtual Property Tours, and Virtual Walk Thrus. Her services are competitively priced and ideal for Realtors, homeowners or other business owners who have a web presence and would like to visually introduce their clients to their business.
Below is the text of Rachel's (R)interview questions and my intended answers (T) during the interview, titled "The Truth about about accepting Credit Cards for Payment". The segment was recorded for release later in the year and I will post the date/times here when I have them. Hopefully, the actual segment will be at least as clear as prepared remarks below!
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R: Tell me about yourself?
T: I’m obviously not a native Texan. I grew up in Virginia, spent 9 years in the Army and got to Texas as soon as I could!
R: Tell me about your company?
T: Surechecks is in its 7th year of operations, and its third year under our management. We are based out of Pflugerville, Texas.
R: What are your Business Goals and who is your target customer?
T: Our primary business objective is to develop brand awareness for SureChecks so that we can become the preferred provider of Merchant Services in the Austin local area while continuing to build a National presence as well. Our target customers are any sized retail, telephone or internet merchants with monthly revenues less than 250K, preferably locally or privately owned.
R: What are Merchant Services?
T: Good question, there's few good definitions of this. I wrote an entry on
Wikipedia.com to describe Merchant Services. Basically the term Merchant Services is used to describe any of several types of payment enabling services. Most commonly, this refers to credit card payment, check guarantee and conversion services and gift card programs.
R: Why should a business accept credit card/ merchant services?
T: Not every business needs them. If a business wants to get paid faster or increase the amount of their sales, these services can often help them. For example, if they are losing business because they do not accept credit cards, then they should consider adding this service. For most retail businesses they need to accept credit cards to be competitive.
Check Guarantee Services are important for businesses that get more bounced checks than they are willing to accept. Guarantee services protect them by alerting them to potential bad checks and guaranteeing payment in the event a bad check occurs.
Gift cards are often a good way to increase impulse sales for certain types of businesses, such as coffee shops, restaurants and gift shops.
R: What is the process for setting up a credit card / merchant account?
T: For each client we work with , we discuss with them which services they think they need and explain the pros and cons of each type. If the merchant decides to move forward, we take an application and supporting documentation, submit the application and setup their account once it is approved by our risk analysis group. It can occur very quickly for an existing merchant, usually 2-3 days. A new merchant should plan on beginning the process at least two weeks prior to opening their doors to allow for any delays and training their staff. National Holidays can significantly delay an account setup, so merchants need to plan ahead.
R:What are the costs to setup the process?
T:Every processor is different, but the only setup costs we charge to our clients are those for equipment, if required.
R:What fees should a business owner expect when processing credit cards?
T:This is a difficult question as there are many different types of services and levels of service available and each can add expense. Every processor is different.
However, the minimum they should expect is what is called the ‘Discount rate’ and an ‘Authorization’ fee. The discount rate is a percentage charged on each completed transaction, while the Authoriziation fee is a per transaction fee, typically $0.25 or less. These are typically around 1.75% and $0.25 per transaction, depending on the processor.
The other fees that are typical are a service/statement fee and extra charges for higher cost cards, such as Rewards/Miles cards.
Since there are so many ways to charge a merchant, we try to get the merchant to focus on what we call the ‘Cost ratio’ instead of the individual rates. The Card processing industry is similar to the mortgage industry in that there are dozens of ways to mark up the processing costs to the detriment of the merchant. When merchants focus on just the basic rate, instead of all the costs involved, they place themselves at a disadvantage.
The Cost ratio takes all rates and fees into consideration in comparison compared to their sales. This is really the true cost of accepting credit cards. We calculate the cost ratio for each merchant so they will know what they are really paying for as well as give them a tool to comparison shop if they decide to do so. A retail merchant should try to have the cost ratio of all their fees between 2.5 – 3%, this is a good target. Along with that, you should ask what is being purchased for that cost. For example, who has to fix problems the merchant or the processor? We believe that a merchant has better things to do than sit on the phone with customer service while they are trying to run a business. When our clients have a problem, they call us and we send a representatve in to fix the problem.
R: What credit cards can they accept with merchant services?
T: This is the merchant’s choice and is usually determined when they set up their account. The most common are Mastercard and Visa Credit and Debit Cards. American Express, Discover and Diners are the next most common. The merchant can decide to accept all or only one particular card type.
R: Are the fees different per credit card?
T: Yes. American Express and Discover are usually higher than MasterCard and Visa, however consumers with these cards often spend more so a merchant may wish to accept these cards to increase revenue. Mastercard and Visa also have higher rates for Rewards/Travel and Commercial and Business Cards, which sometimes makes their cost as high as American Express.
R: Do you have to use a terminal?
T: No. However, you must have a way to transfer the cardholder data to the processor for approval. We can set up our clients to accept cards on their cellphones, using a payment terminal, a Computer or over the internet. Depending on the type of business, some methods are more appropriate than others.
R: Can you use a internet process or phone process instead of a terminal? How would that work?
T: Internet (offline): The website shopping cart sends the data to the merchant who manually enters the data using their selected payment system. The merchant then contacts the consumer by email to let them know the authorization was approved.
Internet (online): website sends the data directly to the processor and the consumer is immediately notified of approval.
Telephone/Cellphone: Merchant dials into a automated approval center, enters the Merchant ID, the credit card data and receives approval over the phone.
R: What is involved for having a gift card program for a business?
T: Very similar to accepting credit cards, except you issue the cards to the customers. A gift card program involves three components;
1. A Gift card service account and processor.
2. A way to add/subtract value from the cards – this is usually done by using an existing credit card terminal
3. Cards to sell to customers.
This process also applies to loyalty cards such as frequent diners programs.
R: What are the fees for gift cards?
T: Usually a monthly fee based on the number of annual transactions, sometimes a setup fee depending on the program chosen, sometimes a per item fee and also purchase/design costs for the cards. There are too many options to describe fully here, but we have a popular program that is now free to setup, includes the first 100 cards and charges only $35/month with no per item fees.
R: What is the process for gift card setup?
T: Very similar to credit card processing; we Q&A to determine the best program, make an application, setup the account and provide merchant training.
R: Can you select your art for your card?
T: Yes, custom art is available as well as pre-printed cards that can be imprinted with the merchant’s information
R: What types of business normally use gift cards?
T: Gift shops, restaurants, coffee shops, Spas. Really any business that offers products that one person may wish to give to another as a gift or reward.
R: What the process is for getting started?
T: Just a phone call or email to a sales office is all it takes to get things going.
R: Do you offer consultation or talks for understanding merchant services?
T: We do, but do not currently have anything scheduled. We plan on doing several in 2007. Anyone interested in knowing when our next event will be can contact us and we’ll notify them of the next event.
R: How can a business owner get in touch if they are interested?
T: Call us at 512-698-3676 or email at Surechecks@sbcglobal.net. They can also join our free newsletter by contacting us by phone or email. We use the newsletter to educate our clients about ways to lower their costs, avoid fraud and coming changes in the marketplace. We also send out extra value items as our way of saying thanks. In the past, we have sent out free oil changes, coffee, and other gifts.
