A Greenwich Village restaurant in New York City recently stopped accepting cash payments from diners, now taking only credit or debit cards. The owner states that it has sped up checkout and reduced concerns over employee pilferage and security concerns for bank deposits after hours, As well, by shifting all of his revenue stream to his merchant account, he hopes the increased volume will result in a reduced rate from his bank card processor.
In Miami, Florida, a new policy will soon be implemented of no cash fares. Instead, passengers will load funds onto special debit cards. The cards will be “contact less”, meaning the rider merely taps the card against a terminal and fare is paid and deducted from their card balance. Miami operates an extensive public transit system over one of the largest counties in the United States, and their system includes not only hundreds of buses but the elevated Metrorail train and downtown driverless elevated People Mover system. The cost to count and process the vast daily load of coins and paper dollar bills has become prohibitive. Passengers may still purchase weekly or monthly unlimited-ride passes as well.
These are only two examples of a growing and worldwide trend. Handling cash requires extra security and background checks on employees and there is always the risk of robbery of the store or perhaps while making late-night bank drops. Banks usually charge commercial customers to obtain rolls of coins and bills needed to stock cash registers and make change.
The cash register itself is now more and more replaced by a point of sale system (POS) that has the capability to scan bar coded merchandise and swipe plastic payment cards including credit, debit, gift and loyalty cards and get instant approval through a high-speed Internet connection. The steel “cash” drawer below is becoming almost an afterthought and more often a storage drawer for signed customer receipts.
The Internal Revenue Service always more closely scrutinizes the tax returns and accounting records of traditional “all cash” businesses which have often been found to be hiding income or involved in illicit money-laundering schemes. Accounting is simplified when all payments are processed electronically and direct-deposited into the business checking account, and those banking records easily integrated into any standard accounting software program.
And if cash is dying or dead, paper checks are definitely terminal. Those businesses that do still accept checks from their customers almost always now utilize a process of check verification that compares the bank account number and customer drivers license to a national bad check database and then approves and electronically processes the transaction as an ACH debit out of the customer’s checking account that is direct-deposited into the merchant’s own business checking account. The paper check is then handed back to the customer as a receipt. No need for a daily trip to the bank to deposit checks! This process of electronic check conversion is secure and has eliminated the risk of bad checks but is still more time-consuming than accepting the customer’s check card, and for this reason many businesses no longer accept checks at all. Even business checking account customers are usually provided by their bank with a debit card for making purchases. In addition, monthly invoices are often encouraged to be handled as automatic debits from the customer’s account, or paid via their bank’s online bill pay system.
For both consumers and businesses alike, the new federal Checks 21 regulation has made life easier. A paper check may be scanned in and emailed or transmitted to their bank and deposited with Remote Deposit. The new regulation states that such an electronic image of a check is just as valid as the presentation of the original check. Bank of America’s ATM system now directly scans in deposited checks, no envelope is used, and the deposit instantly credited.
We are in the twenty-first century and truly entering a cashless world. A business that is not utilizing these and other forthcoming electronic payment systems is wasting time and money and will find themselves increasing inefficient and competitively disadvantaged.
Your go-to expert and free consultant for electronic payments processing is your account executive with your merchants services provider. They are familiar with all of the above strategies and can set up your accounts and provide all necessary hardware and software.
Commerce, a restaurant in New York City’s Greenwich Village, recently stopped accepting cash from customers. They only take credit and debit cards as payment from diners.
Tony Zazula, the owner, said he hopes to get a lower rate for processing cards by dedicating his store to only plastic, in addition to eliminating concerns of theft and robbery.
Zazula is not concerned about losing customers. “It is far more inconvenient to want to pay a merchant with a card and be told they only accept cash,” he stated.
Zazula was inspired to drop cash payment option after a series of flights this summer on airlines that only accept payment cards in passenger cabins.
I recently added a new page to my site for merchants interested in setting up a gift card or loyalty card program for their retail business. The page includes links to sample cards, brochure, application and my contact information. Just click the link below to visit my site!
Gift Card & Loyalty Card Programs
Most non-profit organizations obtain the bulk of their revenue via various fund-raising strategies. Donations made online, In person, via mail or telephone. Sales of pumpkins for Halloween and Christmas trees. They run thrift stores, community centers, canteens and other retail enterprises. Accepting credit cards is a basic business necessity for them, and setting up the right kind of merchant account and having the optimal processing equipment are key to efficiency and savings for them.
Let's first discuss merchant accounts. There are two basic types-retail and MOTO. MOTO stands for Mail Order / Telephone Order but has come to also include online (Internet) credit card processing.
A retail merchant account is best utilized at the point of sale when the customer is physically present and presents their card for payment. In fact, if this type of account is used to take cards for mail or phone or online orders, the merchant may be in violation of their contract, and manually inputting credit card numbers into a terminal also will result in the merchant paying a much higher "Non-Qualified" rate for that transaction. If the non-profit is running a store, great. A retail account will work fine.
The next question for a retail merchant account holder is what sort of terminal to utilize. Many non-profits have a "bricks and mortar" store, and in that case a conventional credit terminal next to the cash register or integrated into a computerized point-of-sale (POS) system is fine. However, what about selling those Christmas trees in a shopping center parking lot with electricity but no phone line? Or at fairs, festivals, etc., with similar conditions? For these events the non-profit would be best served to employ a wireless credit card terminal to swipe customers' cards and get the lowest retail rate. The terminals usually work off packet radio signal and that service is available almost everywhere in the country now. The terminal prints a receipt for the customer to sign.
A MOTO account is often mandated by the merchant service provider if a majority of credit cards are not being physically presented by the customer, and this type of account will save the merchant money. Manually keying in credit card numbers and paying a non-qualified rate of 4% or more, versus around 2% for a MOTO account...the savings are obvious and will also keep the merchant compliant with processor regulations.
Some non-profits have a website and accept donations online. Some have employed PayPal or a similar service to process those donations. PayPal is easy to use but expensive, around 4%. The web designer who set up the non-profit's website can easily build a new "Donate Now" button to route those transactions through a MOTO account and save the non-profit a lot of money.
There is a great service I offer many of my own merchants, non-profit and for-profit alike, it is called Trinity and allows processing of transactions three ways- online, cell phone and in-person retail via a swipe bar attached to a personal computer.
Sorting out the options is largely a matter of examining the number and type of transactions and dollar volume of same. If a non-profit is not selling very many items per month, a special wireless terminal will not save them money but be actually cost-prohibitive. If they only get an occasional online donation, PayPal may be more convenient than setting up a MOTO account.
As always, it is important to not try to make decisions in a vacuum, but in consultation with an experienced and trustworthy account executive from your merchant services provider (MSP) or bank. 10:34 AM GMT | Read comments(0)August 06How does rising debit card usage affect your retail business?
Debit card issuance is rising in the United States, according to both Visa and Mastercard. Visa reported a 16.5% increase in debit card issuance last year; Mastercard says debit card issuance rose 10.5% in the same period. Not surprisingly, both credit card associations also reported a substantial dip in credit card transactions and an increase in debit card transactions.
What does this mean to you, the merchant? Well, with more debit cards coming into use, you will see an increase in the number of your own customers that will present a debit card for payment at the register, versus a credit card.
In today’s economy many people have maxed out their credit cards or have damaged their credit and can’t qualify for an actual credit card. Then there is the growing sector known as “The Unbanked”, individuals who are not in the banking system, either by choice or due to credit problems. These people often carry pre-paid debit cards purchased at check cashing stores, etc. They load cash onto the cards and use them just like any bank-issued debit card. The cards carry either the Visa or Mastercard hologram.
Debit cardholders may elect to have you swipe their card as either debit, requiring the customer to enter their Personal Identification Number (PIN), or have you swipe their card as “credit”.
Most merchant normally actually ask the customer, “Debit or credit?” This is not the way to save yourself money on transaction processing costs. As most merchants know, the cost is much less to process a transaction as debit than credit. Debit transactions do not run through the Visa or Mastercard interchange network, and thus bypass their fees. A typical credit card transaction might cost a merchant 1.6% and 20 cents transaction fee. To process that same transaction as a debit, the cost is typically 0.7% and 30 cents. The difference will average roughly $100 savings per $10,000 in sales. ( In this example, 1.6% would represent a transaction at the lowest tier, known as Qualified. If the card has rewards, such as cash back or airline miles, it would run as Mid-qualified at around 2.7% or more. A business or corporate or foreign card at 4% or more.)
So why would you leave the choice of processing to the customer? They don’t care, trust me. What you should be doing every time you take a debit card is swiping it as debit and presenting the PIN keypad to the customer so they can enter their PIN. If you ever get a customer who for some odd reason really prefers to run the transaction as credit, just hit your cancel button and re-swipe as credit. Some pre-paid debit cards do carry a transaction fee to the cardholder for credit swipe transactions and I have met people who incorrectly believed their bank would charge them a fee for a PIN debit transaction.
Being proactive like this can save you thousands of dollars a year, and with debit card use on the rise, processing debit cards properly will become ever more critical.
What’s that you say? You don’t have a PIN keypad? Well, contact your account executive with your merchant processor and order one today. They cost anywhere from $100 to $300 and are often available refurbished.
Many credit card terminals actually have a PIN pad function built in, the customer enters their PIN directly on your terminal keyboard. Check if your terminal does this.
One final remark about the savings by processing a debit card as debit versus credit. Depending upon what your merchant services provider (MSP) is charging you for debit card PIN-based transaction versus credit card, there is a price point below which you may save money by choosing to swipe a debit card as a credit card. Example: You sell ice cream cones. Average sale ticket is $10 for a family’s purchase. To process as a PIN-based debit, the cost to you will be .70% plus 30 cents. That comes out to 7 cents and 30 cents= 37 cents to process as debit. As a credit sale it would be 1.6% and perhaps 15 cents so that comes out to 16 cents plus 15 cents = 31 cents. 6 cents lower that a PIN-based debit sale. Not a big difference for one sale, but multiplied out to a month’s sales volume it amounts to a bit of money you might be wasting. You will have to run your own numbers depending on your own processing costs.
What’s that you say? You don’t know exactly what you are paying to process plastic? Well, you need to find out!
My own company, the merchant services provider for whom I am an account executive, offers a free analysis of your recent merchant account statement. We break down what you pay for all three tiers of credit cards (known as Qualified, Mid-qualified and Non-qualified) as well as the various monthly fees that may be tacked on, and we the, side by side, show you what we propose to charge and what your bottom-line savings could be by switching your merchant processing to us. All in one neat and easy-to-read page. Free. I have looked at many merchant account monthly statements in my time and most can be very confusing to the customer.
We are entering a cashless era in society and the ability to take electronic payments - credit and debit cards, gift and loyalty cards, electronic check processing and more - is a crucial aspect of running your business, and managing the associated costs is just good business. 7:39 PM GMT | Read comments(0)