3 Cash-Saving Tips For Adult Merchant Account Owners

Do you have an adult merchant account?  

Yes, you!

As someone doing business and taking credit cards in the adult industry, I'm sure you've heard just about everything in the book - and, I'm also sure a lot of it's negative crap, too.  Adult industries and adult merchant account owners in particular get the short end of the stick in today's wonderfully ambivalent, ambiguously sexualized-but-wait-not-really world we're a part of.  When it comes to adult credit card processing, it's a freaking jungle out there.  What are you to do?

This post is here to help address common problems adult merchant account owners or would-be-owners have with getting decent, competitive costs on their credit card processing.  It's a little more difficult to do than it is for run-of-the-mill businesses, but it's attainable.  Read on!

How to get decent rates on your adult merchant account

Take notes, 'cause this might be on the final.

Suggestion 1: Take control of your chargebacks by obtaining extra information

One of the chief reasons an adult merchant account is considered part of a high risk business is because of the chargebacks you'll often incur.  Chargebacks occur when customers (claim they) aren't satisfied with your products or, more often, when they don't remember ordering them, so they file a dispute with their credit card provider looking to get their money back for the product they ordered from you.  Winning a chargeback battle can be difficult if you don't provide adequate information about the credit card and transaction itself, so you should be absolutely sure to:

• Make sure your customer gives you the CVV code from the back of his credit card.  This is just another piece of information that helps verify the card wasn't being used fraudulently.
• Make sure the customer gives you his billing address.  You'd want this for the same reason you'd want a CVV code.
• For retail adult stores, invest in EMV technology.  EMV isn't mandated yet, and, certainly not everyone uses EMV credit cards yet, but, when the time comes, EMV will reduce fraud pretty significantly because EMV credit cards are inherently harder to replicate.  An EMV-enabled terminal costs you $200 or so.  It's a great investment.

Supplying the extra detail and using EMV card readers won't help you win every chargeback, but it will help you win more than you're winning now.  And, fewer chargebacks mean lower costs for you because your processor doesn't need that extra insurance against your would-be fraudulent transactions.  Everybody wins.

Don't let this happen to your poor customers.

Suggestion 1a (or 2): For retailers, give your business an innocuous-sounding name so your customers (or their significant others) don't freak out at their monthly statement

This may seem silly, but it can help reduce chargebacks as well.  You may not be able to control what products of yours your customer chooses to bring home, but you can control how your business is presented on his credit card statement.  Regardless of the actual name of your establishment, which I recommend you keep so as not to turn away legitimate business, you can choose to you have your adult novelty business show up differently on someone's credit card billing statement.  Using the name of a bookstore or referencing the name of the street address of the business are both tactics you can use.  Be a little creative!

Why isn't this you yet?

Suggestion 3: For wholesalers and manufacturers, use a processing method that can obtain the best base costs on business-type credit cards

Some business owners aren't aware that business cards have a few different set acceptance costs based on how much extra information is provided along with each transaction - that is, the more information you provide, the less you have to pay.  And, of the business owners who do know about these lower costs, not everyone knows if their gateway will accept the information, or even how to do it.  Here's what I suggest:

• If you don't use a virtual gateway for credit card processing (i.e. you're still keying cards into your black box terminal), start there.
• If you do use a virtual gateway, ask your processor if you're getting the lowest costs for business-type credit cards.  They may be able to help you.
• If you know you're getting some discounts from card qualifications, ask your processor what steps you can take to get all the business-type cards you take to qualify correctly.  They may be able to help with that, too.
• If your processor is unable to help you, it may be time to choose another credit card processor.

This is another solution that isn't the entire package but will help lower your costs somewhat.  Again, this is only pertinent to wholesalers, distributors, and manufacturers.

I know it's a little harder than usual to get decent credit card processing as someone who wants an adult merchant account, but, it can be done.  Cost savings are part of the battle, and, by at least utilizing point 1, you'll be doing both yourself and your processor a huge favor, because without the chargebacks, your risk level drops significantly.

Happy trails,

Jeremy

QuickBooks merchant services, masters of the hidden fees

O QuickBooks Payments, how thou slay me (and my wallet)

The inspiration just keeps coming!  I decided to write this partially because of the laundry list of blog posts that pops up if you run a search for “QuickBooks merchant services.”  The consensus from the blog writers is plain to see: QuickBooks merchant services cost way too much.  The bulk of the cost is simply a product of their popular three-tiered pricing structure, which funnels the 350 some-odd possible card types into just three categories, the prices for which are jacked up pretty significantly.  That sort of pricing plan is great for Intuit and other companies that use it because it completely disguises the true costs of the credit cards customers use--and, I'm sure some people aren't even aware that credit cards are cheaper to take than Intuit's pricing plan dictates.

I already did a post on three-tiered pricing, so I would suggest reading that if you need a refresher or just an introduction to that concept and why it’s so convenient for processors to pull it out of their hat.

The three-tiered pricing plan used in most QuickBooks merchant services pricing plans deserves a post of its own, though, because it’s so pervasive and comes marketed under a few different brands (QuickBooks Payments--formerly Intuit Payment Solutions, Innovative Merchant Solutions, and Intuit GoPayment).  QuickBooks dominates the small business market share, and QuickBooks merchant services equally dominate for that reason.  Hell, I think you're automatically enrolled in a merchant account when you buy QuickBooks.  It's easy.  But, as we've explored before, that doesn't mean it's the most cost-effective, especially once you start accepting a lot of credit card payments...

Anyway, a QuickBooks merchant services statement looks similar to other statements using three-tiered pricing.  Check this out:

(Via http://www.cardfellow.com/blog/intuit-merchant-services-hidden-fees-fine-print/, captured October 9th, 2014.  By the way, if you want to read a great write-up on Intuit's merchant services, I suggest you pore over that page.)

Generally speaking, debit cards are “qualified” or QUAL, consumer rewards cards end up “mid-qualified” or MQUAL, and business-type credit cards or purchasing cards all come up “non-qualified” or NQUAL—and, each of those categories carries a different price with it.  In the case of the snippet above, that poor merchant had exactly two different qualifications, but over 80% of his revenue fell into the more expensive NQUAL bracket.  Yikes.

So, what do you do?

You can do a few things, actually.  There are quite a few different companies that provide integrations to QuickBooks besides Intuit itself, though you might be led to believe otherwise.  Century Business Solutions' module, for example, uses interchange plus pricing, not a three-tiered pricing plan, so you won’t be in the dark about how you’re being charged.  (It’s also designed to lower the base price of business-type credit cards and government purchasing cards, so if you happen to work with other businesses or government entities, this might be right up your alley.)

Hope that helped, and happy hunting,

Jeremy

Data breaches: Is this the new norm?

No More Tiers

(Or, the tale of how you pay for convenience)

Not as delicious as it looks when a processor proffers it, I assure you.

This post was inspired by an earlier entry that began by addressing folks who only wantto accept quotes for merchant services over the phone.  While looking for material for the post, I came across a Sage Payment Solutions page that looked like it was offering a great deal.  Observe:

(Via http://na.sage.com/us/sage-payment-solutions, captured October 1^st, 2014)

Okay, looks solid.  But, there’s an asterisk, and, at the bottom of the page we see this:

(Via http://na.sage.com/us/sage-payment-solutions, captured October 1^st, 2014)

Seeing those two images made me want to address the three-tiered pricing plans that many processors still seem to have no trouble doling out to merchants like candy.  How come no one cries foul?  Well, because they look pretty attractive on the surface.  But, as with most things that look attractive, it’s good to give them a closer look before diving into something serious.

The Message in Their Tiers

Let’s look specifically at the graphic and text from the Sage Payment Solutions page above.  Those qualified transactions they mention, along with mid-qualified and non-qualified transactions, make up a three-tiered pricing plan, so we can infer that the claim of 1.85% for qualified transactions is part of this kind of plan.  The three-tiered plan really does make life simpler for merchants, as it breaks the 350 or so card types down into just three categories with three distinct prices.  You might see something like this:

(Via http://firstpays.com/gofirstpay2011/public/images/statement_img/statement.png, captured October 1^st, 2014)

So, in this case, qualified transactions cost 1.75%, mid-qualified ones cost 2.75%, and non-qualified ones are 3.25%.  Sounds okay—just have to make sure they’re all qualified and you’re golden, right?

Not so fast.  Unless you have a policy where you only accept debit cards, you’re in trouble.  And, even if you do have that policy…you’ll never know what kinds of cards came in until you saw your statement at the beginning of the next month.

Universally, when it comes to these pricing structures, all regulated debit cards fall into the qualified category.  All consumer rewards cards fall into the mid-qualified category.  And, all business-type credit cards fall into the non-qualified category.  One hundred percent of regulated debit cards cost less than 1.75% to process.  In fact, they usually cost 0.05%.  The same goes for consumer rewards cards, coming in at an average of 1.5% compared to the 2.75% mid-qualified rate.  The very same goes for business-type cards and even GSA cards, coming in around 2-2.5% with the proper qualifications—not 3.25%.  Across the board, the three-tiered pricing plan raises costs for merchants a full percent or more.  Great deal for merchant services providers.  Not so great for you.

Conclusion: Avoid these pricing plans unless you have a thing for throwing away money

Now that you know that bit about three-tiered pricing plans, you should be able to spot similar plans when you see them advertised.  Square does something similar with its 2.75% swiped and 3.5% keyed rates, for example.  Intuit does the same with many of its merchant services customers as well.  (If you already knew about Intuit's own pricing and were hoping to get away from that, lucky you!  Go check this out.)

In summary: three-tiered plans are very convenient because processors can drop any merchant into one and NEVER lose money… but, they’re a raw deal.  It’s worth the additional legwork (research, getting customized quotes) to save the hundreds—or thousands—of dollars per month.

Hopefully this helps you in your journey to finding the right merchant services provider for your business.

Until next time,

Jeremy

But, what are your rates?

A quick (not really) journey through all those lovely fees you’re promised every day by folks like me

"Why won't you people just TELL me?!"

Ah yes, the moment you’ve been waiting for!  Don’t get me wrong—I would like nothing more than to tell every single businessperson I contact on the phone what our rates are.  It would eliminate a lot of confusion and it would shorten our sales cycle a bit too, I’m sure.

Unfortunately, it just ain’t that easy.

The fact of the matter—and, the reason my colleagues and I have been accused of being evasive when it comes to talking about our rates—is that there isn’t just one rate.  Or, even two or three.  There are about three hundred fifty to choose from.  Behold our good friend, the interchange guide:

Right here.

That tome is the list of base prices to accept every single type of credit card imaginable—over 350 in total—with a broad range of costs, from 0.05% for a regulated debit card to over 2.65% for certain MasterCard business cards; the guide helps us determine our exact costs to process the credit cards you accept for payment.  It’s a lot to take in by itself, and, did I mention the rates change every six months?  Bearing that in mind alone, it’s no wonder most processors just fire one or two numbers at you and see what sticks—without even knowing who your customers are.  It’s less work for everyone involved, and, hey, if they get you to sign a contract, you’re at their mercy no matter what they may have told you your cost would be.

The truth is these lovely, low-priced claims are NEVER (read: never) substantiated by anything, and they’re the reason so many people make the sign of the cross when they hear I deal with credit card processing.

This post is NOT for the faint of heart, but, if you’re ready to take the plunge into processing academia, let me be your professor.

The REAL anatomy of a rate

Don’t worry; this will be at least as fun as your college anatomy class.  Your true costs are determined by a number of factors, such as:

• The interchange (base) cost of the credit card used.  Is it a debit card, which qualifies at a paltry 0.05%?  Or perhaps a Visa purchasing card at 2.65%?  Or…anything in between?  We can get the interchange cost of a certain card by thumbing through our interchange guide.

•  How you accept the card.  Was it swiped into your system, or did you key it into a terminal over the phone?  Costs are higher for keyed in cards since there’s a higher potential for fraud.

• What medium you use to accept the card.  Do you use a box terminal, or do you key the card in online?  Or, do you have an accounting system integration?  Costs are different through each one of those media, too.

•  Did you wait too long to charge the card after pre-authorizing?  (Don’t worry, this doesn’t apply to everyone.)  If you wait too long, your card can be charged a “standard” rate of around 3.00%.

• What type of establishment do you run?  There are other costs that you might incur simply based on whether you run a non-profit organization, a manufacturing plant, or a retail store.

So, yes, there are quite a few factors at play here.  It’s pretty difficult to accurately quote you over the phone without knowing all these things, but, we can determine a good number of them by reviewing a couple of your merchant statements.  You wouldn’t trust a quote from an auto insurance salesman if he didn’t ask you what kind of car you drove, how many miles you put on it, whether or not it was garaged, what kind of coverage you wanted…and so on, so, why offer the same trust to a credit card processor and let them give you a quote over the phone or on the internet without seeing your processing statements?

“Well, someone just offered me a 1.85% swipe rate.  That sounds pretty good.”

(Via http://na.sage.com/us/sage-payment-solutions, captured October 1^st, 2014)

This is a common objection, and, you’re right—1.85% doesn’t sound bad at all.  But, what does that 1.85% really mean?  That could be the total cost of a transaction (Any transaction?  Well, if I’m accepting only business-type credit cards, sign me up!), or it could just be the discount rate.  Well, let’s see what that asterisk after swipe rates means.

(Via http://na.sage.com/us/sage-payment-solutions, captured October 1^st, 2014)

I wouldn’t be concerned about $0.12.  We charge $0.10 per transaction here, and an additional 2 cents per transaction probably won’t break you.  However, they’re good to warn you that additional fees may apply!  Do you know how many business-type credit cards cost 1.85% to accept?  

One.  

There’s a certain corporate type of MasterCard that can qualify at below 1.8%, and that’s if all the proper transaction information is passed.  If you’re taking mostly—or all—business-type credit cards, you can bet they won’t all be that same MasterCard, and, even if they were, you could bet that a processor wouldn’t manage your account for free, so that cost would be more than 1.85%...100% of the time.  Hey, at least they tell you about the additional fee up front.  You might just expect that every time you get a quote from someone who doesn't know who your customers are and what card types you really accept, since the number says nothing about your actual costs.  It’s only a guess, and it probably comes in a package with a lovely early termination fee.  Hopefully that helps explain why we can’t just fire a number at you.

What happens when you let a processor review your statements?

Look at that account manager…just scheming away.

What happens?  Not a whole lot, actually.  The world doesn’t cave in, no one uses your merchant ID to open an account in your name, and nobody extracts your customers’ credit card information.  (That’s not even possible!)  Usually, someone from a processing company will use your statements to determine your actual costs and then (hopefully) offer you something more competitive, whether that means a better cost or an easier solution for you, or both.  When you send statements to one of us at Century, for example, we introduce you to our array of processing solutions, show you a demonstration of the one (or more) that fit your business, and then give you a written proposal that reflects your real costs—the costs of the exact card types you accept on a regular basis.  It’s a little more involved than just firing off a rate over the phone, but it's well worth the additional time you'll have to set aside to reach into your filing cabinet, pull out the processing statements, and fire them over to your happy potential account manager.

Hopefully this sheds a little light on the all-too-common rate sheet problem.  Determining your real costs takes more care than a wild guess can give you, and—I hope I speak for most credit card processors here—we’re in this for the long haul, not just to process you for two months until you figure out we’re not delivering exactly what we promised you.  If, after all this, you still kick and scream, we can give you a rate sheet, I guess...if you’re okay with it being 80 pages long ;)

Yours,

Jeremy