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Turn Cost into Cash!

September 13, 2019 by Michael Krause Leave a Comment

Last January, merchants in the state of New York were given the legal right to add a surcharge to all credit card transactions, as long as the consumer is clearly informed in dollars and cents, of the amount of the surcharge. In other words, New York merchants can pass along up to 4% in credit card fees assessed by their financial institutions as long as they clearly disclose the fee to the consumer making a purchase. 

Merchants can call the fee whatever they want: a surcharge, extra cost, price differential, additional fee or something else that gets at what it is: a surcharge for the privilege of using a credit card to make a purchase. Discounts for cash purchases have been around for years but merchants had to absorb credit card fees as a cost of doing business. Now there’s a way to right that situation.

As consumers, it may make each of us tighten the grip on our wallet a little. But as a merchant, it brings the opportunity to turn a cost of doing business into a little extra jingle in the balance sheet. 

Follow my math here: 

  • On average, merchant fees are 3% on $10,000 sales or $300 per month.
  • Now you can pass that 3% fee along to your customers, defraying the total cost. 

—OR—

  • Assess a 3.5% fee to your customers (you still pay 3%) on $10,000 sales for $350 per month
  • The surcharge covers your 3% fee and you add $50 profit each month
  • In a year’s time, your surcharge cost is covered and you add $600 to revenue ($50/month x 12 months)

Do the math on your monthly sales and decide what’s the best direction for you.

For more information about credit card and merchant services processing, contact Mike Krause, mike@salessensepayments.com, 585-704-6453 and please visit SalesSensePayments.com.

Filed Under: credit card fees

Payment Choices Across Generations

August 13, 2019 by salessensepayments Leave a Comment

With payment technologies evolving from cash and checks for Baby Boomers (and older) generations to contactless and mobile payment options, offering the right payment choices for your customers is complicated. 

The obvious and durable choice, cash is still with us, despite predictions of a cashless society.

A 2014 Federal Reserve report says cash is still a strong favorite for all age groups. Consumers use cash more often than other forms of payment, including debit or credit cards for the following reasons:

  1. Cash is best for lower value transactions
  2. Cash is useful for specific types of purchases
  3. Cash is sometimes the only alternative
  4. Cash is the preferred payment choice for Gen Y
  5. Cash is the best payment option for lower income individuals
  6. Cash is hack proof

Besides liking the feel of folding money in our pockets, each generation has a preferred way of paying for things, traceable to what was available as they came of age.

Baby Boomers and Beyond

Baby Boomers and older people are now retiring in large numbers, and many have learned to use more advanced payment methods, such as online payments. However, this generation is the biggest user of paper-based checks and American Express to date. In fact, about 68 percent of people over 65 still write out checks and mail them to pay all their bills. Higher wealth individuals tend to prefer American Express for its prestige and acceptance worldwide. This age group sticks to what it knows best – checks and cash have been monetary staples since coming of age in the 50s and 60s.

Middle Aged Generation Xers

The “kids” of the 1970s and 1980s are now easing into middle age and cling to their credit cards. They grew up as credit cards proliferated and made “slide-and-sign” payments popular. Gen Xers are in their prime earning years, have longer credit histories, and better opportunities for increasing income. Credit cards allow the Gen Xers to live comfortably, buying what they want and what they need. Curiously, some Gen Xers find chipped EMV (Europay, MasterCard and Visa) cards confusing. 

Generation Y Rocks On

Consumers born in the 1980s to mid 1990s have it all: they grew up accustomed to cash, checks, and credit cards and they’re adept at digital technologies including mobile payments and PayPal. Yet, Generation Y’s young adults still lean heavily on cash – possibly because they are still in school, working off student loans, in low-paying or early professional jobs. 

Generation Z (Millennials)

The first generation of the 21st Century, born in 1995 or later, is fully digital, having played with cell phones from birth, so electronic payment methods including PayPal and smartphones with tap-and-go apps are natural for this group. This generation has been surrounded by social media and mobile technology from the time they could walk; their online information access affects how they see the physical and digital world. With easy access to the Internet and its plethora of products/services, Gen Z approaches buying much differently than previous generations.

Generation Zers like combining technology with a brick-and-mortar store experience. They browse online, then head to a store to make the purchase. Although it’s tempting to generalize about Gen Z and their purchasing habits, this demographic is still evolving as they mature.

If your online or brick-and-mortar business caters to one or more of the age groups described, you will want to focus your marketing and payment options on their preferred methods. However, if you serve many generations, making it easy for everyone to buy from you will serve your profit goals more successfully.  

My question: since we have used up X, Y and Z in the alphabet, what will the next generation be called?

For more information about credit card and merchant services processing, contact Mike Krause, mike@salessensepayments.com, 585-704-6453.

Filed Under: Uncategorized

Fascinating Facts About Credit Cards

June 20, 2019 by salessensepayments Leave a Comment

Credit cards are a way of life, especially in the United States, although other countries are equally heavy credit users as we are. Here are some interesting facts about credit cards from when they started transforming the payment industry in 1950, only 69 years ago!

  • It costs a credit card company about $80 to acquire a new customer, factoring in the marketing and processing fees, factoring in TV and radio commercials, telemarketing, print ads and direct mail.
  • The word Visa is itself an acronym that stands for Visa International Service Association, founded in 1958, headquartered in Foster City, California 
  • Merchants accepting credit cards spend $7 billion each year in credit card processing fees. Providing the ability to use credit cards to its customers generates approximately 15% higher sales from consumers who prefer to carry plastic for purchases rather than cash or checks.
  • Across the United States, people in Alaska generally carry the most credit card debt, averaging $13,000; Ohioans have the least debt, about $5,500. 
  • Averaging across the United States, a person’s or family’s average credit balance is just over $6,300 and Americans overall pay more than $100 billion in interest and fees each year.
  • To you and I, a deadbeat is someone who doesn’t pay their bills on time. However, in the credit card industry, deadbeats are those careful spenders who pay off their credit balances each month. Financial institutions prefer financially irresponsible card users who aren’t paying off their balances each month, enabling the bank to charge them interest and generate profits. In fact, conscientious financial “deadbeats” cost banks money if they aren’t paying interest charges and qualify for reward programs and cash-back incentives

Filed Under: Uncategorized

To Surcharge or Not? The Debate Heats Up!

May 17, 2019 by salessensepayments Leave a Comment

In January 2019, a lengthy court battle that began in 2013 ended by giving New York State merchants the right to charge a fee for purchases paid with a credit card, as long as the pricing was clear to the customer beforehand.

The guidelines require that the higher credit card price for an item must be listed in dollars and cents, such as Hamburger $15.60 Credit Price; $15.00 Cash Price – similar to how gas stations list credit and cash pricing. The pricing can be displayed on the menu, a price tag or on a display sign. Merely posting the credit card percentage upcharge isn’t enough: the state does not want consumers to have to do arithmetic to calculate their actual charges.

However, consumers are shocked and unhappy when they find the extra 3% or 4% fee masquerading under creative titles such as Technology Fee, Non-cash Adjustment, Service Fee, Muddling Fee, Merchant Fee, Checkout Charges, Usage Fee, Additional Fee Extra Cost, Swipe Fee, Differential, Surcharge and others. 

Should You Surcharge or Not?

It’s a decision every merchant must consider now that New York State law allows it. Of course, there are advantages and disadvantages for your business and your relationships with your customers that should be weighed carefully. Large retailers including Wal-Mart and Home Depot have declared they won’t be adding “checkout fees” because these would impact customer loyalty and reduce overall competitiveness.

To Surcharge

  • Surcharges lessen the bite of credit card processing costs, putting some (probably not all) of the burden on the customer’s shoulders. However, merchant processors will charge more for processing the additional surcharge so that’s a somewhat hidden extra fee that could actually increase your processing costs rather than decrease them.
  • If you have already built processing costs into your pricing, you might be able to lower your prices across the board, making your business more competitive, particularly if your customers usually pay with cash, checks or debit cards rather than credit cards.

 Not to Surcharge

  • If most of your customers pay with credit cards, surcharging may not be a good idea. Studies show customers spend more when paying with credit cards than with cash. If you add a surcharge to their bill, customers will instinctively buy less, unless they are wealthy and money is not a concern. How much is customer loyalty, good will and repeat visits worth? Many customers surprised by surcharges on their bills vow to avoid dining or buying from that merchant ever again.
  • Virtually every town, village or city has other restaurants or shops customers can patronize. If a customer can buy a meal, services or products somewhere else without a surcharge, you can bet they will. Even with a great value proposition, an extra charge makes your customers weigh your service or products against your competitors.
  • If your typical credit card transaction has commas in it, adding another 3% or 4% to the price will definitely give your customers pause. The more your products or service costs, the more thought a customer gives to buying from you or buying at all.

 Follow the Rules

If you decide to add surcharges to customer purchases, make sure you understand and follow the law to avoid chargebacks or other penalties from your bank or credit card companies.

  • Charge only the fee you pay for credit card processing. The rate is derived from your merchant discount rate in the previous quarter.
  • Keep the surcharge fee to 4% or less per transaction as established in the court settlement.
  • Debit cards or prepaid cards are exempt from the settlement; don’t assess a surcharge on those.
  • Add a notice on the menu or on a sign near the front door and on receipts so your customers know about the surcharge. They must know there’s a fee for credit card transactions before using their card for payment.
  • When issuing a refund, you also must refund the assessed surcharge, whether it’s a full or partial refund.

Get More Information

Want more information about surcharges, merchant processing and how to minimize credit card fees for your business? Contact Mike Krause, President of Sales Sense Payments, mike@salessensepayments.com or 585-704-6453. Ask Mike about your free fee processing analysis to help your business save on processing costs.

Filed Under: Uncategorized

Do You Need a Foil or Metal Wallet?

May 1, 2019 by Michael Krause Leave a Comment

​​With the advent of RFID (radio frequency identification) chips in credit cards, there has been a lot of chatter online, on TV and in social media about protecting your credit cards from detection by RFID-equipped devices.

 Some people are wrapping their credit cards individually in aluminum foil. Others are purchasing RFID-thwarting wallets, purses, travel bags or credit card sleeves. The percentage of credit cards equipped with RFID chips in the United States is very small – about 5 percent of all credit cards issued. If your credit card is embossed with a  Wi-Fi symbol, then it is RFID equipped.

 So, do YOU need to do this?

 How it Works and Embedded Safeguards

These cards emit a code that is picked up by a reader when you make a purchase. However, the cards constantly change the code so even if the code is stolen by someone with criminal intent nearby, they get one code for one purchase. But what the thief doesn’t get with your RFID info is the 3-digit CVV code on the back of your card so any purchases requiring that will be stopped. Also, if you have multiple RFID-equipped cards in your wallet or purse, the codes received by the thief are likely all jumbled, preventing any illicit activity.

Please note that your EMV (Europay, Mastercard, Visa) chipped card, with the visible chip on the card is not same as an RFID-enabled card. There are millions of EMV cards now in use in the US but, as stated above, only about 5 percent of all cards are equipped with RFID capability.

Whether you should get an RFID-blocking wallet or credit card sleeve is up to you and depends on your sensitivity to risk. While the number of RFID-equipped cards are low currently, that number is likely to rise in the coming years. There are so many other ways for thieves to steal your personal information – telephone or email scams for example – that you should probably be more concerned with protecting those with strong passwords and checking credit reports frequently.

However, if you’re shopping for a new wallet or purse, it’s reasonable to consider adding RFID protection for tomorrow, even if it’s not needed today. Or, if you’re handy with a role of aluminum foil, you can block RFID signals effectively and inexpensively without ever leaving home.

For more information about protecting credit cards and minimizing your exposure to fraud, contact Mike Krause, Sales Sense Payments, www.salessensepayments.com or 585-704-6453.

Filed Under: credit card fraud

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