MCC stands for Merchant Classification Code and it is the mechanism that the card brands (Visa, MasterCard, Discover, AMEX) use to identify what your business offers their card holders.  It is also what the credit card processing industry uses to organize which credit card rates you are charged for transactions depending on whether there are special rates set up for your industry. 

So what are some examples of MCC codes that might provide you with better credit card processing rates?  Here is a few examples:

• The Small Ticket program is the broadest program and most businesses are eligible for it.  It provides a lower per item fee on transactions under $15. 
• Restaurants (MCC 05812 or 05814) and Supermarkets (MCC 05411) can qualify for lower per item rates
• Gas Stations (MCC 05542) can qualify for lower rates for transactions completed at the pump
• Hotels and Motels (MCC 07011) and Car Rental Companies (MCC 07512, 07513, 07519) may be able to qualify at lower swiped rates for keyed transactions as well as being able to consolidate multiple authorized transactions for the same customer into one settled transaction.

Businesses should be aware that if your merchant solution provides you with 3 or 4 rate “categories” that you are charged, the savings that these programs provide might not be flowing to you.  This is because these programs affect the wholesale rate that the processor is charged.  If you are not on an interchange plus or “pass through” program, your processor may be recieving the cost savings without it being passed along to you.   

Merchant Classification Codes (MCC) are also used by the card issuers for other security related purposes.  A few examples are:

• The ability to limit the types of businesses where a card can be used
  1. This is how card issuers limit the use of Healtcare FSA and HSA cards to medical providers, pharmacies, and similar businesses. 
  2. This function is also helpful for companies who want to ensure that their corporate purchasing cards are only used at business appropriate to their industry or the specific job function of employees. 
• The ability to analyze when a transaction is outside of the cardholders normal spending pattern which may proactively indicate that the card has been stolen or the transaction is fraudulent. 

MCC Codes aren’t something that you may have ever been aware of, but they help the credit card industry keep itself organized, keep card holders safe from fraud, and may even reduce your overall processing costs.

If you think that you might qualify for one of the programs mentioned above, call your merchant processor and ask them about it. 

As always, we hope that this article has been helpful and informative.  If you have any questions that we can answer or have a question of your own, please don’t hesitate to email me directly at ben.wallace@thepaymentpedia.com

Thank you,

Ben Wallace

Some common solutions for remote payments include:

Using a wireless terminal – Credit card terminals have come a lot way in the last few years as battery technology and cellular solutions have improved.  Todays wireless terminals typically will work on one of two systems, CDMA (used by Verizon and Sprint) or GPRS (used by AT&T).  As you probably if you have a Verizon or Spring cell phone, you can get a cellular signal almost anywhere in todays world.   Todays wireless terminals are battery powered, easy to use, and in some cases will even identify when a signal is not available to store the transactions for processing in the future.

Web-based Solutions – If you have ever travelled for business you know that the number of available wireless networks in convention centers, hotels, restaurants, and other public areas has grown exponentially.  This presents you with the opportunity to use a wireless-capable notebook computer to process your transactions using a web-based terminal.  This allows you to potentially use the same solution in the office or out of the office as long as you have a wireless connection.  If you need to finish up your invoicing from home, you can process payments anywhere a browser is available.  *Please Note* regardless of how you process transactions it is important to always be aware of PCI Security considerations.  If you must store sensitive cardholder data, make sure you are following the proper storage guidelines.

Cell Phone Solutions - Today’s cell phone technology has improved drastically and the number of quality vendors creating quality applications has increased as well.   Today you can actually process credit card transactions from quite a few of the latest smartphones.   Phone based application may be some of the most cost effective if you are worried about up front cost.  In some cases you simply pay a monthly fee or one time application fee and don’t actually need to apply for separate merchant account.  Others might have a purchase price but allow you the flexibility to use your existing merchant account to integration into the solution.  Again, you must ensure that any application you are using is PCI compliant so that you aren’t putting your business and your reputation at risk due to fraud.    Do your homework before purchasing or processing any application and make sure to read the fine print in terms of fees connected to any credit card transactions.

Whether your business operates wherever your customers are or you only have one or two events a year where you need to run credit cards away from the office, you can find a solution that is cost effective and safe.

Was this article helpful?   Would you like to see other topics addressed on The Payment-pedia?  Email me at ben.wallace@thepaymentpedia.com and tell me what YOU think.

Have a great day!

Ben Wallace

• PCI Compliance regulations put your business in the hot seat – Every business is required to be compliant with PCI Regulations regardless of how many transactions they take or how they take them.  If credit card data falls into the wrong hands, your business is on the line.  Your processor is required to ensure that you are PCI compliant and they will fine you monthly if you do not complete and pass the compliance process.   Want more information straight from the PCI standards council?  Click here for a PCI Quick Reference Guide
• A breach could bankrupt your company – The cost of a breach is increasing, a study released in January of 2010 showed that the average cost per credit card number stolen was $208 per record.  However, the most alarming figure was that of all the breaches they studied in 2009, the least expensive one cost the company $750,000.  Click Here to read about this years study.  Think about your business, could it withstand the hit of having to pay $750,000 if your company was breached?
• Impact of lost customers - Even scarier than the financial impact is the decline in business because customers do not want to do business with an unsafe company.  If you have done any reading on the impact on a company’s brand reputation from a breach, you may have read about TJ Maxx, Radisson hotels, or even Berkeley.  In today’s market, your customers have many competitors to choose from.  A loss of reputation may choose to do business with someone other than you if they don’t feel they can trust your company.  Would you be hesitant to business with a CPA or Lawyer being investigated of fraud?
• Learn the information for yourself, you can’t “pay for compliance” – There are many resources like the ones below that can help you educate yourself on the intricacies and responsibilities that come with PCI Compliance.  Companies that offer “breach insurance” may be giving you a false sense of security.  They may tell you that because their system is PCI compliance and “secure” that you don’t have anything to worry about.  What you should know is that the risks of fraud don’t just come from the technology and networks involved in processing your credit card transactions.  They can be as simple as pieces of paper or imprints with your customer’s credit card information on them being stolen by someone because they were left out in the open.  PCI compliance isn’t a once a year process, it is something you need to consider every day.

For more information on how to keep your business PCI compliant and protect yourselves and your customers, take a look at the resources contained below:

PCI Security Standards Council – https://www.pcisecuritystandards.org

Wikipedia – http://en.wikipedia.org/wiki/Payment_Card_Industry_Data_Security_Standard

Merchant Council – http://www.merchantcouncil.org/merchant-account-information/merchant-account-basics.php

If you have specific questions about PCI Compliance or the process to becoming compliant, please do not hesitate to let me know.

Thanks for reading,

Ben Wallace

ben.wallace@thepaymentpedia.com

The challenge to any business is predictable and timely cash flow.  Even when you have a business that relies on consistent recurring payments, you will always have a certain number of customers whose delayed payments can cause a financial burden to your company’s cash flow.

By using automated recurring billing solutions, you can reduce the cost of manually inputting and managing client payments and at the same time offer a value added benefit to your client by eliminating the need for your client to send in a check via postal mail each month.

Recurring payments can be set up using a variety of mechanisms all depending on what your merchant provider offers as options.

There are two general electronic payment types used for recurring payments, credit card and ACH.  Depending on the amount of your recurring payment amount, one or the other may be more cost effective for you.

If your recurring billing amount is $100 or more, an ACH payment will provide you with the ability to automatically deduct funds from your clients bank account for a flat fee typically less than $1.00 per payment and in some cases less than $.50 per payment.  If you were to take the same automated $100 payment from your customer and they paid with a credit card, you could be paying in excess of $3.00 per transaction depending on what kind of card your client is using.

If your client payment is less than $100 each month, the differences in payment cost between credit card and ACH diminish.  In fact, if your payment is less than $10.00 per month you may actually end up paying less if you chose to accept a credit card rather than an ACH payment.  ($0.45 for credit card versus $.50 for ACH).

They type of payments you take and the mechanisms you use to collect those payments can make a significant difference in how much profit flows to your bottom line each year, especially if you are taking a high volume of structured payments from your clients.

If you have questions about this article or the information and solutions provided, please contact me at ben.wallace@thepaymentpedia.com.

The goal of this website is to provide the information business owners and managers need to make good business decisions.   While I am a merchant services professional, there is never an assumption or obligation on my part that I will be chosen to provide you with merchant services when you contact me.

Have a great day!

Ben Wallace

One thing that you should be aware of is the fact that taking payments from remote customers costs more because the card is not present at your business during the transaction.  Whether you have customers putting their information into a web cart, take their credit card number over the phone, or have your customers filling out a form and mailing it to you via postal mail, each of these transaction types will cost you more than swiping a card and having the customer sign for it at your location.  Here are a couple of tips to make sure you are keeping the costs as low as you possibly can:

• Make sure your merchant account is set up for Card Not Present or MOTO transactions – If your processing company mistakenly expects your business to be primarily taking swiped transactions, your keyed transactions will end up as a mid or non-qualified transaction.  This mistaken expectation will likely end up costing you even more than a correctly set up Mail Order/Telephone Order (MOTO) solution.
• Make sure that you are capturing the required data from the client – Because MOTO merchants tend not to see their clients in person, it is important to capture the data needed to qualify your transactions for the best rate possible.  This includes the card holder name, address, zip code, card number, expiration date, and CVV code.   Requiring this information from your client will ensure that you reduce the chance of your transaction being flagged as flawed by Visa, MC, and Discover or your processor which may result in higher fees.  If you are taking payments from companies where actual sales tax is being assessed, make sure to enter the sales tax collected when your terminal asks for it.  Corporate card transactions that ask for tax information may be charged more if the correct information is not provided accurately.
• Make sure your transactions are settled within 24 hours of when they are received – This is especially true if you are using a standard credit card terminal and simply keying in the card information to process the transaction.  You need to make sure that the terminal is set to automatically settle the transactions at the end of the day or that you are settling them manually each business day.  If you do not settle your transactions in a timely manner, you risk the chance of being charged a “standard” rate which means the highest rate that a card can be charged from the card brands.   If you are using a web-based terminal or a web cart integration such as Authorize.net, the terminal will typically be set to automatically settle the transactions daily.
• Insist on a merchant account solution that fits your business - If your business takes both Retail (swiped) as well as MOTO (keyed) or E-Commerce (Web) payments, you need to do 1 of 2 things:
  • 1) ask your processor to set you up with 2 merchant accounts, one retail and one MOTO so that you can capture the best rate for each type of transaction or
  • 2)ask for interchange plus or cost-plus pricing.  Using this method, your processor will take the cost that Visa, MC, or Discover charges them and adds on a mark-up to cover the processors costs or profit requirements.   For more information on interchange plus pricing click here for a recent article on the topic.
• Make sure your DBA name is set up correctly on your merchant account - The number one reason for customer chargebacks is that the business name or DBA name that shows up on the customers debit or credit card statement doesn’t match the name of the company they purchased from.   If your DBA name is Jones Plumbing but the name on your merchant account is ABC Inc. which is your legal name, your customers may be confused and be more likely to ask for a chargeback.

These tips are a great starting place to ensure that you are not paying more than you need to for your credit card transactions, regardless of how you take your customer payments.

Thank you for reading, if you have any questions you can contact me in a few ways:

Email: ben.wallace@thepaymentpedia.com

The Payment-pedia Group on LinkedIN – A new LinkedIN group devoted to creating a place for merchants to discuss issues, solutions, technologies, and other topics that might be helpful for your business

Look forward to hearing from you,

Ben Wallace

Many business owners assume that nothing can be done about an employee who doesn’t have the ability to take advantage of direct deposit because they don’t have a bank account to deposit into.   However,  there are Payroll Card solutions that can be used to replace the need for paper checks.  These solutions allow you to issue a debit card to your employee that they can use just like a bank check card.  The solution provides you with an account and routing number which is linked to the card that you can put into your direct deposit system just like the information off of a voided check.

So why would you even consider such a solution?

• Employers that typically pay up to 5 times more to issue paper checks each payday compared to direct deposit
• Employees that are issued paper checks may be paying 3-10% each payday just to cash their checks
• Paper checks that are issued and then lost or stolen cost the employer $8-$15 to replace per incident
• Positions with high turnover can cost a company up to 10 times more in payroll administration costs

A Payroll Card Solution allows your company to:

• Reduce the cost of issuing paper checks with a solution that works with your existing direct deposit system
• Shift the burden of lost or stolen paychecks to the payroll card provider
• Lower the financial and administrative burden of high turnover or seasonal positions
• Provide a valuable, money-saving benefit to your employees

Curious if your company could be saving money each year by using a payroll card solution?  Click this link to use Visa’s Payroll Card Savings Calculator to find out how much money you could be throwing away on paper checks.

In some states electronic payments for services such as unemployment, child support, and food stamps has been implemented through payroll cards to help reduce the costs of administration and handling.   In some of these states employers are allowed to require electronic payment options with their employees, check with your state office for more information.  Don’t know who to call?  Click Here to find out who your state contacts are.

If you have more than 150 employees that are currently being issued paper checks, you may even be able to take advantage of partnership programs that would provide a Payroll Card Solution to your company without any implementation costs.  Contact Me at takingcards@gmail.com to find out more.

If you are a payroll service provider and don’t currently offer your clients payroll cards, you may be able to partner with someone who could provide you a payroll card solution at little to no cost.   Contact Me at takingcards@gmail.com to find out more.

Using an electronic payroll card solution might be a way for you to decrease your cost of payroll and outsource some of the more administratively cumbersome tasks such as lost or stolen paychecks.  At the same time, you are providing your employees with a very valuable benefit that can result in more of their paycheck going into their pocket.

If you have more questions about payroll card solutions and how they might help your business, email me directly at takingcards@gmail.com

I am your trusted advisor when it comes to how your business takes or makes electronic payments.  Don’t hesitate to let me know how I can help you.

Thank you,

Ben Wallace

Typically retail businesses have an average ticket ranging from $10 to $500 and are focused on speed and simplicity of checkout.  Your customers expect you to get them checked out and on their way in a reasonable amount of time and don’t want to have to wait in line forever.  They also want to have the freedom to pay with cash, check, or credit cards.  Your goal is to give them a good experience so that they continue bringing their business to you instead of the competitor across the street.

Regardless of how or what you sell, you need your payment solution to be simple and cost effective.  Here are a couple of tips to ensure that your solutions is as cost effective as possible:

• Use a solution that is compatible with more than just one payment processor – Simply put, choice is power.   Having a larger number of competitors vying for your business will give you the opportunity to compare rates and ensure that you are not being taken advantage of.  If you are concerned about whether your rates are too high, click here for help looking at your current solution cost.
• Ask for an interchange plus or “pass through” pricing structure – Instead of charging you based on three or four categories of customer card types, this option gives you pricing that is driven from the wholesale cost that Visa, MasterCard, and Discover are charging the processor.  For a more in-depth look at interchange pricing, click here.
• Make sure that your MCC is for a retail business – The Merchant Category Code (MCC) categorizes your business based on what you sell.  Your MCC may qualify you for special rates that will give you access to lower cost fees, especially if you have a smaller average ticket or are a restaurant.  If you don’t know what MCC your business is under for your merchant account, call your provider and ask.  In many cases, your MCC for a retail business should start with a “5.”  Click here for an example of an MCC Guide that may help you clarify where you should be categorized.
• Swipe cards whenever possible - The cost of a swiped transaction is less expensive than a keyed transaction.  Use a terminal cleaning card on a regular basis to ensure that you don’t end up paying more just because your dirty card terminal or swiper can’t read your customers card information.  Ask your office supply provider about a credit card swipe cleaner or find one here.
• Make sure to settle your transactions daily – One of the top reasons a swiped transaction might unnecessarily cost you more is that it wasn’t submitted for settlement in a timely manner.  This will also affect how long it takes for you to receive your money from the transactions.  Make sure your terminal or POS software is set to automatically batch at the end of the day.  This will help ensure that even if someone forgets to do it, your transactions will be submitted.

Hopefully these steps will help you ensure that you are adding more profit to the bottom line of your retail business.  If you have any questions about this information, please don’t hesitate to let me know.  You can email me at takingcards@gmail.com or find me at www.linkedin.com/in/wallaceben

Have a great day!

Ben Wallace

Please Note: The information included below is a summary of wholesale rates which is estimated based on the most common card types for each category.  For more specific information regarding interchange (wholesale) rates, see the links to the Visa and MasterCard websites located at the bottom of this article.

First, A couple of facts about the rates you pay as a merchant who accepts credit card payments through a merchant account:

• Visa, MasterCard, Discover, and American Express all set their brand’s wholesale rates.  There is almost no negotiating leverage that any merchant acquirer* has to get a better “deal” than another.  (Examples of the wholesale rates are provided below)
• The interchange or “wholesale” fees are taken by the card brands and shared among the card issuer, acquirer, and processor.
• The fees you pay for the merchant account can be broken down into three types:  Set Up (one-time fees), Monthly Fees, and Transaction Fees.   Each of these may have a cost associated with it but typically the set-up and monthly fees are almost totally profit for the acquiring company.  Transaction costs will be made up of the wholesale rates and fees as well as the acquiring company’s mark up.
• Rates can be assessed using two basic methods:
  • 1. As “tiered” rates where 3 or 4 rates are offered and the transaction method and card type dictate which “tier” the merchant pays.  (See Tiered example below) or
  • 2. As “cost plus” rates where typically a set markup is applied to the wholesale rate charged by the card brand.  This results in tens or hundreds of potential card rates.  Each method of assessment has its benefits and downsides.

Here are a couple of examples of some approximate “wholesale” card rates based on the method of taking payment, card present (swipe) or card not present (keyed)**:

• Debit Card Swiped – approx 1.05% + $0.15
• Debit Card Keyed – approx 1.75% + $0.15

• Ordinary Visa/MC/Disc Swiped – approx 1.70% + $0.10
• Ordinary Visa/MC/Disc Keyed – approx 1.95% + $0.10

• Rewards Card Swiped – approx 1.80% + $0.10
• Rewards Card Keyed – approx 2.10% + $0.10

• Corporate Card Swiped – approx 2.30% + $0.10
• Corporate Card Keyed – approx 2.50% + $0.10

• Standard Rate*** – approx 2.95% + $0.10

• AMEX Retail Merchant – approx 2.89% + $0.10
• AMEX Remote (Keyed) Merchant – approx 3.50% + $0.15

If you only pay attention to one piece of information from this article it should be this: Anything above and beyond the approximate wholesale costs above are profit that is going to your merchant provider and possibly the back end company that processes their merchants’ transactions.

For an idea of how much profit is going into your merchant providers pocket, use this 3 step process:

1. Take your latest merchant statement and divide the total Visa/MC/Discover transaction fees by the total Visa/MC/Discover sales volume for that month, this will provide you with an approximate net-effective rate.
2. Take the net-effective rate from step one and subtract the percentage rate above for the method and card type that you believe most of your business goes through.
3. The result of this is the approximate net profit rate that your merchant processor is receiving from you.  If you take this and multiply it by your approximate annual Visa/MC/Discover volume, you will get an idea of how much money you are giving your merchant services provider.

For more detailed rate information, refer to the links below:

Visa Interchange Information: http://usa.visa.com/download/merchants/october-2009-visa-usa-interchange-rate-sheet.pdf

MasterCard Interchange Information: http://www.mastercard.com/us/merchant/pdf/MasterCard_Interchange_Rates_and_Criteria.pdf

* A merchant acquirer is a company that facilitates the means of transacting merchant business.  Some companies are direct acquirers meaning that they facilitate the authorization, settlement, and funding of merchant transactions.  Indirect acquirers or ISO’s resell the acquiring services of another company.

** Note: examples do not include brand assessments or other branding fees assessed by each card network.

*** Standard Rate denotes a flawed transaction due to various factors which could include incomplete information, transaction not settled in a timely manner, etc.

Hopefully this information has been helpful.   If you have any questions regarding your current merchant provider or would like assistance in putting together a merchant analysis, please do not hesitate to contact me at takingcards@gmail.com

Have a great day!

Ben Wallace

Take just a couple of minutes and answer this six question survey focused on providing simple resources to better understand the complicated world of accepting credit cards and other electronic payments.

http://www.surveymonkey.com/s/PZBWS97

We appreciate taking just a minute out of your day to help and make the world a less complicated place to do business.

Have a great day!

Ben Wallace

The typical reasons that a business might decide it makes sense to take credit card or other electronic forms of payment can be narrowed down to a short list as follows:

Customer Request – If your customer comes to you and says that they would like to do business with you but that they require or prefer that you take a credit card payment, it might make sense for you to take their card rather than miss out on the business.  That being said, you always want to make sure you are doing everything possible to ensure that the credit card number is authentic and belongs to the person giving it to you.

Shifting Payment Risk – If you sell items that cost a lot of money or provide a service where you typically aren’t being paid within a 30 day period, you can shift the risk of payment from you to the credit card issuer by asking for an up front payment via credit card.  The standard credit card payment process allows you to get instant verification that funds are available on a customer’s credit line.  If you are doing a transaction with the customer present and aren’t sure whether the person presenting the card is the true card holder, you can call your processing company to check and see if the card billing address that the client is giving you matches the one on file.  This is called the AVS or Address Verification System.

Speed up Working Capital – If you have a business where you are billing customers on a monthly basis, you inherently will have a time lag created by the time it takes to send out the invoice and for the customer to find the time to mail back a check.  Statistically speaking you probably wait anywhere from 5 to 20 business days to get paid for services that in many cases have already been provided to the client.  When you provide for a customer to be able to call in their card number or even arrange for automatic payment, you can expect to cut the average time almost in half.  This allows your business to increase your cash flow which allows you to better manage your available working capital, the lifeblood of any business.

Convenience to Business –  When you create options for your business to process transactions electronically you create opportunities to reduce the effort it takes for money to get from your customers to your bank account.  Whether you accept credit card payments, ACH payments, or use Remote Deposit Capture (check 21) you may be able to reduce or eliminate trips to the bank.  This may be especially helpful if your business is a distance from your bank or if you frequently attend remote events where you might be managing your payments away from the office.  If all of your customers are paying you remotely, giving your customers the ability to pay online via credit card or ACH automates the payment process for you and the customer and can improve how quickly you are able to verify payment and fill the customers order.

A/R Aging –  Regardless of what you sell or what service your business provides, if you don’t require 100% payment at time of service, you will have some level of receivables.   Even if you require payment with a certain number of days, you probably have clients that pay right away, and those that string it out as long as they can.  When you offer your customers the ability to do make payments with a credit card or via an ACH transaction from their bank account, you essentially give yourself more control over your receivables and ultimately your own cash flow.  If a customer is behind on their account and you find the need to touch base with them, you can offer to take a credit card or ACH payment over the phone to bring them current.  Instant remote payments are something that only electronic solutions offer.  There are things you need to ensure you have in place to safeguard customer payment information such as a secure tokenized software or a secure internal process.

You must make a business decision regarding whether taking electronic payments will benefit your business or not.  While industry experts such as myself can give you advice, no trusted advisor should ever be making the decision for you.  Your trusted advisor should be providing the information, options, and insight to help you better understand and make an informed decision.

If I can help answer your questions please don’t hesitate to let me know.  My information is in the “Contact Me” tab above.

Thank you and have a great day!

Ben Wallace