Is PayPal Payment Processing Enough for Your Business?

paypal payment processing

Is PayPal Payment Processing Enough for Your Business?

PayPal is the most popular payment gateway out there. It has 286 million active users and is easy for business owners to use. Because of this, many companies offer PayPal as their only payment solution.

But PayPal doesn’t always have the best reputation. Is it wise to offer only PayPal to buyers? Could doing so actually make your business look bad? Let’s take a look.

Privacy Concerns

While PayPal is pretty good about security, it’s not always perceived that way. Security vulnerabilities exist, and given PayPal’s size, hackers would love to exploit them. Thus, the company is a regular target for hackers and consumers are aware of this.

PayPal tries to persuade customers to create an account even if they used the credit card option to pay. Not everyone wants a PayPal account and they may blame the vendor for the emails trying to upsell them to one.

Finally, when customers must use PayPal, they transact in a PayPal window, not the vendor’s site. If this compounds the customer’s frustration, it can lead to more abandoned carts for the vendor.

Did you know?

In an eMarketer study, 42% of online shoppers said that the types of payment options offered is a factor that influences them when deciding where to shop digitally.

Bans & Lockouts

Most people know somebody who has had problems with their PayPal account. While some bans and lockouts make sense, others are a complete mystery. Some customers have no idea why their accounts were disabled.

In resolving these issues, PayPal can take days or weeks to explain why it held funds or closed an account. Users struggle for weeks or months trying to retrieve money in the accounts. In some cases, users may not be able to get account access back at all. This can also happen to business owners. If PayPal is their only payment option, they have to scramble to set up another payment gateway.

Business owners should be sensitive to people’s experiences with PayPal. Be aware that you may lose customers if there are no alternative means of payment. Some of them may even hassle your customer service about providing an alternative.

READY TO EXPLORE ALTERNATIVE
PAYMENT OPTIONS? LET'S TALK.

Technical Problems

PayPal has a robust infrastructure, but that doesn’t mean it has 100% uptime – nothing does! If PayPal isn’t working and it’s the only option on your website, customers might click off your site. Technical problems should not deter you from using PayPal, but you should have a backup.

Most people are comfortable with PayPal, but some won’t do business with you if it’s the only option. It’s wise to listen to them.

Those who like PayPal won’t care if you offer payment options. But those who have had problems with PayPal will leave you forever if you don’t give them a choice. As a business owner, losing any customers over something so preventable is unacceptable.

PayPal Supplements & Alternatives

So, what can you use along with PayPal? As your company grows, it makes sense to switch to a full-featured merchant account. There are also a few good alternatives you could provide to your customers right away:

Stripe

Stripe is one of the larger PayPal alternatives and focuses on online business. They have a simple API that makes it easy to integrate Stripe with your website. Shopify businesses are especially fond of Stripe for its easy integration.

Stripe’s transaction costs are on par with PayPal’s. Unlike PayPal, your money goes straight to your bank account. The downside is that the high level of customization can make setup hard if you don’t know how to code.

Square

Square is best known as a way to accept payments in person. It also provides online options through Square Checkout. Yet, if you don’t make any sales in person, you lose most of Square’s strengths. you won’t be able to accept cards with a phone or tablet and a simple dongle.

Square is particularly useful for businesses that sell at trade shows. It eliminates the need to carry a larger device and charges no monthly fee. For online purposes, though, Stripe is generally better.

Traditional Merchant Account

Some small businesses choose PayPal over a traditional merchant account for several reasons. They may think PayPal is user-friendly. They may believe PayPal has lower fees. They may think PayPal is more likely to accept them despite a limited business history. While all this may be true, there are other things to consider.

These may be benefits for many new businesses, but they are not universal. A lot depends on the type of business you’re in. you also need to consider your monthly sales volume and the types of cards you accept. These variables can sometimes make a traditional merchant account a better choice.

A traditional merchant account usually takes only a few hours to a day to set up. Once you establish your account, you run a much smaller risk of having it suspended or your funds held. This is because your business is underwritten and given ranges in which to process sales. And before your business scales, a merchant processor will approve your account upfront for more volume and higher transaction sizes. You’ll also have a much better level of service.

The best option is to offer several means of payment on your website. There’s always the risk of customer reluctance or technical problems, but offering PayPal alone can cause more issues. A single payment option is more likely to push customers into going elsewhere rather than inquiring about alternatives.

Direct Payment Group can help you work out which payment methods you should choose for your business type and transaction levels. We can also help you move on as your company grows. Click the button below to find out how we can help you with online payments and other eCommerce issues.

 

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Online Credit Card Processing Fees: What Entrepreneurs Need to Know

credit card processing fees

Online Credit Card Processing Fees: What Entrepreneurs Need to Know

Most companies chalk up fees as a cost of doing business. But for budget-conscious entrepreneurs and young SaaS companies, online credit card processing fees can be brutal.

Not all credit card processing companies are equal, so it pays to do your homework before signing up with one. Many businesses start with a processor that provides easy setup and low monthly fees, but then stick with it as they grow, even after the initial value is gone.

Growth is the key, so you want a credit card processing company that scales with you. As your company grows, it’s important to find a credit card processor that offers the best deal for your business type, billing cycle, transaction volume, and even your refund rate.

Standard Fees You Should Expect to Pay

There’s no getting around some of the fees a credit card processor will pass along. There are three unavoidable fees, no matter what company you do business with, including:

Interchange Fees

These are fees that are paid to the issuing bank via the card network (Visa, Mastercard, American Express, Discover). Each network charges different interchange fees, with American Express typically charging the most (worth it since AmEx card members tend to spend more).

Assessment Fees

These are also paid to the card network. Assessment fees are much smaller than interchange fees, but they can vary from network to network. Assessment fees can be higher for foreign transactions.

Processing Fees

The fee a merchant pays to the processor for use of their service and tech integration. Processing fees, like interchange fees and assessment fees, are an unavoidable cost of online credit card processing.

Interchange and assessment fees are set in stone since they are determined by the credit card networks and not the credit card processing company. Processing fees, however, are set by the processing company and can be subject to a little negotiation.

Some processors charge additional monthly service fees. Other processors attract young businesses by waiving these fees, but they make up for it by charging higher per-transaction fees. As your business scales, these fees are likely to add up fast.

With such variance in who pays what to where and when (and, of course, the big one – why), it pays to research which pricing models are out there. Eligibility varies, but you should make your decision based on what’s best for your business as it is today, and five years down the road.

Pricing Models & How They Scale

Processors generally charge fees according to one of four pricing models, which we’ve outlined the high-level details of below:

Interchange Plus

This is the most common pricing model. With it you will pay a small monthly fee, then on each transaction you will pay the interchange and assessment fees, plus a markup to cover the processors’ costs. The interchange plus model works for most medium-sized to enterprise-level businesses. Companies processing over $25k per month should consider interchange-plus pricing.

Subscription

With a subscription model you pay a much higher monthly fee, and then only a very small per transaction fee. This is a good model for companies that are working on low margins and may pass along the processing fees to their customers.

Tiered

Tiered pricing puts each transaction into a tier, each of which has a set fee amount. They decide what goes into each tier. Here’s an explanation for why you should avoid tiered pricing.

Flat Rate

Small processors generally charge a flat rate and no monthly fee. You are charged the same percentage on every transaction, regardless of the type of card, etc. However, the price per transaction tends to be high with a flat rate model, making it useful primarily to businesses with a low sales volume or retail stores with high numbers of small transactions.

A word of caution about flat rate pricing: processors also charge this rate for refunds, which can quickly increase your overall rate. Other pricing models don’t do this. It’s wise to know what your effective rate is before committing to a flat rate pricing model.

What this boils down to is that flat rate is good when you are first starting out or for certain businesses that primarily deal in cash over credit cards. Interchange plus works for most businesses, and subscription may be worth it if you’re looking to pass fees along to your customers. You should avoid tiered pricing if at all possible.

NEED TO KNOW WHAT YOUR EFFECTIVE
RATE IS? WE CAN HELP WITH THAT.

Equipment Costs

One often overlooked cost is that of equipment. Physical credit card readers can cost upwards of $1,000, depending on what you need. Some merchants prefer to use their phone or tablet to accept payments as it lets them spend less on equipment and take it with them on the go.

Some processors may offer you a free reader; however, remember that this is an infrequent cost and you should not use it as grounds for picking a specific processor. Make sure that the reader you choose suits your needs and has the features that your business will most benefit from.

Renting or leasing a terminal is also possible, but often costs more in the long term.

 

Did you know?

If you plan to accept payments online, your equipment costs stand to be much lower since you only need a payment gateway. Just make sure you choose a service with features that will fit your business needs.

Watch for Hidden Costs

There are a few more ways you can end up unnecessarily spending more money when shopping around for an online credit card processor. Some of them are best practices, others are hidden costs and fees that processors may charge. Some tips:

  • Take every step you can to reduce fraud. This includes, but should not be limited to: never swipe a card that has a chip; avoid keying in transactions as much as possible; ask for the billing zip code and CVV code
  • For U.S. transactions, consider using an address verification service
  • Make sure your terminal is set up correctly, especially if you are accepting American Express. If you’re unsure, contact your processing company for instructions
  • Compare account setup fees, as many processors will charge you a fee to get started; also look for cancelation fees
  • Some processors have a monthly minimum, and if your transactions dip below that, you’re expected to pay the difference; choose a provider whose minimum fee is well below your typical sales volume or waived entirely
  • Some providers may force you to lease a terminal from them; this is often a worse deal than buying and many terminals can be switched over to other service providers.
  • You may be charged a PCI compliance fee to cover cybersecurity costs; noncompliance would cost you more, but always ask what they are offering you for your fee.

How a Broker Can Help You Get the Best Deal

Finding the right credit card processor can be a real challenge. One way to address this challenge (and reduce the headaches that come with it) is to go through a broker. A good Broker can be a secret weapon for your business; an invaluable expert in your corner who knows what different providers charge and who offers the best deal for businesses of your size and type. They can help you find an online credit card processor and any other payment processing services you’ll need to scale.

Direct Payment Group is here to help. Our team compares fees, helps you assess which plan is right for where you are and where you’re going, keep you away from costly tiered pricing, and set you on the right path. If you want to compare your options against your current processing account (heck, even if you’re just a little curious) click the button below!

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payment processing options.

ACH Payments: The Overlooked Payment Method That Is Costing You Money

accepting ach payments

ACH Payments: The Overlooked Payment Method That Is Costing You Money

Ever consider accepting ACH payments? Your customers are more likely to recognize them as bank transfers or direct payments, but they mean the same thing: convenience for your customers and a big money-saver for you.

Did you know?

ACH stands for Automated Clearing House, A network that oversees processing payment transactions between participating financial institutions.

By using ACH payments, you can withdraw funds directly from your customer’s bank account to yours, skipping the payment processing middle men (and their fees). No checks, credit cards, wire transfers, or cash to worry about.

Traditionally, ACH payments have been used for transactions like your recurring phone bill or mortgage and receiving salary from employers, but ACH payments can be used for all kinds of purchases. One down side, ACH is not available everywhere, which is something you should consider if you do business with customers outside the continental United States.

Benefits ACH Billing Provides

ACH billing provides a number of benefits to both merchants and customers. Here are the most important:

  • It costs merchants less than processing credit cards – ACH billing is free to customers and costs merchants far less than processing credit card payments or accepting wire transfers; ACH processors may charge either a flat fee or a percentage rate
  • Merchants do not have to worry about expired credit or debit cards – Although ACH transactions can be rejected for things like insufficient funds or mistakes when entering account numbers, the rate of decline with ACH payments is far lower than with credit or debit cards
  • It’s easy to process recurring payments – ACH allows you to bill your customers automatically each billing cycle; sure-fire way to eliminate skipped payments
  • No paper checks or invoices – This means fewer trips to the bank for you and customers also appreciate not having to write checks; oh, and who doesn’t like saving trees?
  • It’s considerate of your customers’ funds – ACH insures customers’ are not spending money they don’t have and building up credit card balances while not paying attention
  • ACH Reduces human error
  • ACH transactions clear faster than paper checks
  • ACH eliminates the risk of checks being lost in the mail

How Can Merchants Find an ACH Provider?

To accept ACH payments you will need an ACH provider. An ACH service provider has one essential function: to transfer funds from bank to bank. In contrast to a merchant service provider that facilitates different types of payment transactions, an ACH service provider only insures that funds make their way from your client’s bank account to yours.

One simple way to find an ACH provider is to ask your current payment processor if they offer the service. In fact, there are added advantages to using your payment processor in terms of reporting and tracking payments, so it’s definitely worth inquiring. Many do, but if yours doesn’t it’s worth looking for a payment processor that does handle ACH transactions.

Your bank may also be able to recommend a provider. Large payment processors often offer this service, but you may want to consider a smaller processor who can offer more personalized service.

Whatever you choose, make sure your chosen payment processor follows best practices on security to protect your customer’s data. Bank account data needs to be handled even more carefully than card data.

NEED HELP FINDING AN ACH SERVICE PROVIDER?

What to Expect From an ACH Service Provider

Merchants have three options when choosing an ACH service provider. The approval process varies depending on the type of provider, here listed from most difficult to easiest:

  1. Banks

    Since 2013, the FDIC in conjunction with the Department of Justice has tightened regulations on banks regarding the types of companies they can extend ACH services to. These stricter guidelines, combined with rules set by NACHA, the National Automated Clearing House Association, can turn the approval process into a tedious affair, especially for new businesses. You also need to make sure your bank even offers ACH processing, since not all do. If you find your bank does not offer ACH, the only other option is to establish an account at a bank that does and repeat the vetting process, which may not be possible or worth the effort.

  2. Third-party payment processors

    Acts as an intermediary between your business and the originating bank. Transactions may take longer since the third party provider uses their account to receive funds from the bank, not yours, essentially creating two transactions: one between the originating bank and the third-party processor, another between the processor and your bank. The upside is that a reputable third party processor has already been vetted with the banks, so the application process (for the business) is virtually under no scrutiny at all.   

  3. Stand alone ACH service providers

    Essentially, stand alones are a ACH payment gateways. As such, they do not hold funds at any time, which tends to make the transaction between banks a bit quicker. Also, since stand-alones play such a limited role in the transaction (compared with third-party payment processors) their fees tend to be lower.

ACH is useful for businesses of all sizes, but it pays to do your due diligence in finding a service that best fits your needs and budget. If you have a long-standing relationship with your bank and they provide ACH services, the approval process should be fairly straightforward and you’re able to transact through an institution you know and trust. If, on the other hand, you would prefer an intermediary take care of the application process or if fees are a major concern for your business, I suggest looking into third-party or stand alone ACH services.

How to Strategically Move Customers Off of Credit Card Billing

If you have customers who are currently paying recurring bills by credit card, here are some best practices and tips for moving them over.

The first step is to make your customers aware of the option and its benefits. It’s useful to highlight the fact that ACH payments are a “set and forget” solution. Although they can be canceled easily, your customers won’t ever worry about missing a payment once they’re set up on ACH payments. This includes payments that vary slightly from month to month, such as utility bills.

You can also explain to them that they won’t need to update their billing information when their credit cards expire. Again, they can forget about how their payments are being processed unless their circumstances change, like changing banks.

In some cases, providing an incentive to switch can be helpful. Charging a convenience fee for credit cards is one way to do this, but it might not go over well if you have traditionally offered credit card billing for free. While many customers are happy to switch to ACH, some are less comfortable with it and may need a perk or two to switch, in addition to a full education on how ACH processing works.

It might be better to offer a one-time discount for the month after switching, a sweepstakes for some kind of reward, or a low-value gift card as a reward for signing up for ACH payments. This is an easy way to get your customers to switch and will pay for itself over the next few months as your processing fees drop.

Key to it all is educating customers on what ACH payments are and what they mean. Using other terms such as direct payments can be helpful here; many people are making ACH payments already, without knowing what they are.

If you are looking to start accepting ACH payments, especially for recurring billing, Direct Payments Group can help. Contact us to find out how we can help you with ACH payments as well as credit and debit card transactions. We offer a personalized approach and lower fees than larger payment processors.

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AND OTHER ELECTRONIC Transactions.
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Surcharging, Cash Discounting, and the Right Way to Do Business

surcharges and cash discounting

Surcharging, Cash Discounting, and the Right Way to Do Business

With the economy in the state it is, running your business can be even tighter than ever. Credit card processing fees can add up to a major expense, cutting into your profits and margins. One way to defend against profit-gnawing processing fees is to add the fee to the total cost and pass it along to the customer as a surcharge – but is this ethical, legal, or even good business? Offering a discount when the customer pays in cash is another way to circumvent the credit card processing fee trap, but what are the limitations to this payment option? Are the two options mutually exclusive? Let’s find out. We’ll start by taking a look at both to see how they work.

What is a Surcharge?

A surcharge is adding an extra fee to the transaction when a customer pays by credit card; usually a percentage of the sale to cover processing fees, although a flat fee can also be imposed. Credit card surcharges are still legal in most states, but the list of states that have banned the practice includes Kansas, Colorado, Massachusetts, Connecticut and Puerto Rico, and it’s likely to grow. For right now, though, laws protecting surcharges remain in place throughout most of the U.S. Why is surcharging problematic? First, card brands are against it. Surcharging penalizes customers for using their preferred payment method. That means less revenue for companies like Visa and Mastercard that rely on card swipes to support the massive infrastructure they’ve spent decades building and maintaining in an effort to make credit cards and their acceptance a norm in so many places. Second, customers hate surcharges because they are added at checkout, inflating what they thought they needed to pay. Credit card surcharges are imposed on the customer without any apparent reason, creating confusion that increases the risk of chargebacks. Surcharges are particularly unpopular in circumstances where paying in cash is not an option, or if the customer fails to notice the surcharge until they check out, leaving the customer feeling strapped with a charge they never intended to pay. In short, applying surcharges to compensate for credit card processing fees is risky business. Proceed with caution.

What is Cash Discounting?

The name says it all: cash discounting rewards the customer with a lower total cost when they pay with cash. Not only does cash discounting give the customer a break it allows merchants to keep more of their profits rather than siphoning off 3%-4% in credit card processing fees. Seems like a win-win, right? Hold it, there are some rules to consider.

In a 2018 bulletin, Visa explicitly states that merchants may offer the card holder a cash discount when using payment methods other than a Visa credit card (cash or debit card), provided the offer is clearly expressed in the establishment’s advertising.

Transparency is the key. To take advantage of cash discounting, according to Visa’s standards, the merchant needs to display total cost with surcharges, without surcharges, and explain the disparity.

Visa does not like surprises, so be sure that your signage is displayed along a clear sightline before the customer reaches the POS. Revealing an added fee or special sale price after the cash register has rung is a no-no and is out of compliance with Visa guidelines.

Cash discounting is worth the effort for a lot of reasons:

  • The practice is fully compliant in all states (unlike surcharges)
  • It offers customers the chance to save money if they have cash on-hand
  • The merchant need not lose a percentage of the total sale to processing fees

Gas stations have been doing it successfully for a while, and Visa cites them as being the proper template by which all businesses should pattern their cash discounting offer.

So it’s clear…cash discounting beats credit cards and surcharges hands-down, right? It’s not quite that simple.

As a Business Owner, What Are Your Options?

Everyone likes saving money, but does that mean you should adopt a cash- or debit card-only payment model? Probably not.

Though customers enjoy receiving a discount on small purchases, most do not carry enough cash to pay for major appliances or expensive auto repairs.

As we inch closer to a cashless society, more and more people welcome the convenience of paying with credit cards, and a 3%-4% surcharge is just the cost of that luxury.

So as a business owner, what do you do? One option is to raise prices across the board to cover surcharges; make the pay-by-cash and the pay-by-credit price the same, and thereby absorb processing fees no matter how payment is made. This is great, provided your customers never question your pricing or do any comparison shopping (and we both know they will).

Another option is to just accept that credit card processing fees are a cost of doing business and try to find a service provider willing to give you the same level of service at a better price. This is a roll-of-the-dice approach, and you will inevitably incur surcharges for months or years, and thousands of transactions, before finding that special deal.

Ready to See How Much You're Paying?

A third option, which is gaining popularity, is to adhere to the Visa model of setting your total prices to include surcharges, but offering a discount for paying cash. Customers will appreciate the chance to save a little money but won’t feel cheated for using their credit card.

Making a Pricing Model Decision

For most companies, a hybrid approach with the customer’s convenience in mind is the way to go. On the backend, you should look for ways to optimize your SaaS recurring payments so that your fees are stable, affordable, and fit easily into your budget. Shop around for the right payment processor to be sure you’re getting the best deal possible on processing fees.

Want to learn more about payment processors, surcharges, and offering cash discounts? Keep an eye out for future posts, coming soon. Can’t wait? Contact us today to review your payment processing options.

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How to Spot Costly Tiered Pricing

Costly tiered pricing model

How to Spot (and avoid) Costly Tiered Pricing When Selecting a Payment Processor

There are a lot of factors you need to look at when selecting a credit card processing company. You need to be able to take credit cards, and doing so comes with fees from the merchant bank, the issuing bank, card networks, the payment processor, etc. Payment processors use several different methods of charging, but the three most significant are tiered, cost-plus (also called interchange-plus) and flat rate.

Tiered pricing is the one we are most concerned with, because it has several issues that are not present with the other systems. To understand this, let’s first explain what the three systems are:

Flat Rate

In the flat rate model, the processor charges you the same rate for every transaction, regardless of the type of transaction or how much that transaction costs the credit card processing company, regardless of the card brand; even “expensive” cards like AMEX and Discover cost the same.

For example, one popular mobile processor currently charges 2.9% + $0.30 per transaction. This model has the huge advantage of simplicity. You know ahead of time how much of each transaction you’re going to lose to fees. It’s particularly handy if you sell a lot of things at the same price. Flat rate processors also generally don’t charge monthly fees.

The disadvantage is that the cost per transaction is substantially higher. Flat rate is mostly advantageous to small companies with very low sales volumes, or to companies that only sell face-to-face a couple of times a year, say at trade shows. For these businesses, a monthly fee can end up being more expensive in the long run.

Some companies also charge a lower flat rate combined with a monthly subscription, which can work better when your volume is higher. It’s a matter of doing some math to work out which option is better for you.

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Cost Plus/Interchange Plus

With this pricing structure, the payment processor passes along the true cost whatever card type you’re charging (a practice known as interchange) and their markup. Their monthly statement includes a line item list for each transaction interchange level, which is very helpful in tracking the cost per card type. Generally, these processors have a low monthly fee and give you access to much better pricing.

You also know exactly what part of the credit card payment processing fee is being collected by whom, which means you can track more expensive transactions. This level of transparency makes this model attractive for most businesses, but costs do vary more than flat rate and can be a bit harder to predict.

Tiered Pricing

In the tiered pricing model, the processor splits transactions into a number of tiers and charges a different flat rate for each tier. Typically, these tiers are, from least to most expensive:

  1. Qualified rates, which means debit cards and non-reward credit cards that are swiped or inserted
  2. Mid-qualified rates covers membership rewards cards, loyalty cards, and transactions keyed in manually
  3. Non-qualified covers corporate cards, high-reward credit cards, international cards, and card-not-present transactions (usually meaning phone or online)

While it is reasonable for companies to charge more for riskier transactions, such as card-not-present, the “trick” of tiered pricing is that they charge a lower rate for standard cards and then a much higher rate for “non-qualified.” If your business almost never handles international cards and does not take cards over the phone, tiered pricing can look very appealing. It seems easy to understand, but the processing company could assign certain transactions to higher-fee tiers, which could cost you a buntch.

Selecting the right pricing model for your business can be confusing. If you need quicker answers to your pricing model questions, use the chatbot in the bottom-left portion of your screen or click here and we’ll get back to you ASAP!

The Issue with Tiered Pricing

Tiered pricing is always to the benefit of the payment processor. In their advertising, they tell you the qualified rate; this is often under 2 percent and looks really good. But, here’s the thing:

You can’t always tell what category any given transaction is going to fall under. This is particularly true with rewards cards; you can’t tell whether the card presented has rewards attached to it (some cards advertise that on the card, most don’t). So, while it’s easy to avoid card-not-present transactions, it’s not always easy to avoid “high-reward” credit cards.

Then you are suddenly stuck with a larger bill. On top of that, because the processors only advertise the qualified rates, they can be sneaky about increasing other rates without customers seeing it. There are no rules to how processors define tiers and no industry oversight whatsoever. You also can’t always tell whether the transaction was genuinely more expensive (visible with interchange plus) or not.

The average fee per transaction can be high with these methods – easily higher than the flat rate no-monthly-fee systems designed for low volume use.

Spotting Tiered Pricing

So, how do you know when a payment processor is using this method? Some things to watch out for:

  • It’s referred to as tiered or bundled pricing.
  • Look for the tier names (listed above); most processors use these names or variants of them, and often abbreviate as Qual, Mid, and NonQual
  • The rate is similar across all card brands
  • When you get the statement, you realize the percentage is higher than what you were quoted
  • The rate being quoted in marketing materials seems unusually low; remember that processors offering these pricing schemes are trying to suck you in with the qualified rate, then avoid charging it as much as possible in favor of higher tiers

Avoiding a tiered pricing model is always better for your business. For very low sales volume, you are better with a flat rate card. For higher volume, you should go with interchange/cost plus. With either pricing model, you’ll gain peace of mind by knowing precisely what you’re being charged for each transaction, even if the tiered pricing model seems like a better deal on the surface.

Credit card processing fees are an important part of your small business’ costs. Keeping those costs down means avoiding costly tiered pricing, but also selecting the right payment processor.

If you think you’re being charged too much in processing fees, we can help. Contact us today for a free review of your statement and we’ll work together to determine which pricing model works best for your business. Click the button below to get started.

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pricing model is best for your
business.

TruRate

credit card fees

You’re paying too much in credit card fees.
Or, if you aren’t, you probably feel like you are.


We can help you on both fronts.

Our PayScore system helps us analyze your business, and determine what your card rates should be. 

We can then compare this to what they are, and let you know where you can make changes.

What’s the cost? About 5 minutes of your time. 

Fill out the form below and we’ll get back to you with your PayScore as soon as we can.

7 Questions You Probably (Should) Have About PCI Compliance

pci compliance questions

7 Questions You Probably (Should) Have About PCI Compliance

The PCI DSS has a set of guidelines that – although you might never have heard of them – you absolutely need to follow. The bad news: if you don’t follow the guidelines, you might have some fines coming your way. The good news: being PCI Compliant isn’t all that hard. Just tricky.

If you’ve arrived here from our email list, we hope that this can help shore up a few questions for you. If you’ve arrived from somewhere else, then it’s probably because you have these questions already. PCI Compliance is an important and nuanced aspect of your business.

I Use PayPal/Stripe/Another Payment Company - Do I Care?

If you’re using a Merchant Service Provider (MSP) like Stripe or PayPal to process your payments, then you can relax a lot about PCI Compliance. But you aren’t completely off the hook. Any business that accepts payments needs to be PCI compliant. So, you can imagine that businesses like PayPal and Stripe, which process millions of them every day, will already be doing as much as possible to stay PCI Compliant.

However, they can’t do all of the work for you. If you are processing payments through a server, that server needs to be secure – certifiably secure. We’ll talk a bit more about this later. You also can’t accept card numbers by email or text, even on secure servers. This exposes full card numbers, and isn’t PCI Compliant.

What Are PCI Levels?

PCI Levels describe the difference in standing between categories of companies. Levels are decided by 2 factors: recent data breaches, and the amount of card information that a company processes. There are 4 PCI Levels. A Level 1 company processes more than 6 million annual transactions; a Level 4 company processes less than 20,000 transactions annually.

Depending on the level of the company, the validation requirements of PCI Compliance are different. For example, a Level 1 company only needs to answer Self-Assessment Questions and go through an annual network scan. A Level 4 company must deliver an annual report on compliance.

Is It Better to Be Level 1 than Level 4?

Your level shouldn’t really have an effect on you. It would be better to be Level 1 than 4 because we’d all love to do 6 million sales this year. Other than that, there’s no reason to aspire to a higher level of PCI Compliance. Levels are meant to categorize businesses based on how important it is that their security is top-notch.

Think of PCI Levels as a risk assessment. If a small business has a data breach, it might affect a few hundred people. If PayPal has a data breach, it would affect just about everyone.

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How Hard Is It To Be PCI Compliant?

Gaining and retaining PCI Compliance isn’t an overwhelmingly complex task. There are many security tools at our fingertips these days, and you’re probably already using most of them. A lot of PCI Compliance is in the validation for small businesses. As long as you’re aware of PCI Compliance and letting the PCI DSS know you know, you’re probably going to be okay.

How Is It Compliance Enforced?

PCI Compliance is enforced mostly by way of the network scans. You’ll see one about once quarterly, and be fined if you aren’t compliant. The PCI DSS run a scan by searching for business IPs and any web app URLs that they’re interacting with. This allows them to check how information is being processed, and who (if anyone) is processing in a way they don’t like.

Don’t think you can skirt around PCI Compliance, though. Enforcement is lax for a lot of companies, but the risk is not. Because of the inherent risk of not being PCI Compliant, you can expect to see a data breach if you aren’t. If that happens, you’ll find the PCI Compliance fees more tolerable than the legal fees.

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What’s The First Thing I Need to Do?

The first thing you need to do to become PCI Compliant is to make sure you have an SSL Certificate for your website. If your website is secure, then you’re likely going to be okay. Getting an SSL is easy, and you can likely get one from your web host with a few button presses. (In fact, it’s unlikely that you don’t have one.)

Beyond that, everyone needs to do things a bit differently. You’ll have to give Self-Assessment a shot to see what you need.

Who Do I Ask More Questions To?

We can’t cover all the possible questions about PCI Compliance in one or even hundreds of articles. The topic is simple but each business is unique. Because of that, we know that there will be new questions all the time. If you have one, feel free to shoot them at us at GetPaid@DirectPaymentGroup.com.

We answer free of charge, and we answer because we want to. Direct Payment Group aims to enable your success however we can – answering emails is a simple way to do that.

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Payment Gateways: What You Need to Know

payment gateway

Payment Gateways: What You Need to Know

If you want to accept credit cards as a form of payment, you’re going to need a payment gateway. Regardless of if you’re strictly online or strictly brick and mortar, you need some way to transmit your customers card information to your merchant service provider. A payment gateway acts as a bridge between your customer’s bank account and yours.

Different payment gateways will serve different purposes and it’s important to know what tools are available to you. The 12 digit card reader and the Stripe embed don’t just collect information, they serve a very delicate purpose. And that purpose has a serious impact on the cash flow of your business security of your cardholders sensitive information. Here are the questions you need to ask yourself:

Are you getting the most out of your payment gateway?

  • Is your payment gateway costing you money?
  • Are you paying extra for features you don’t use or need?
  • Can you get more out of your payment gateway?

This is the 101 version of what you need to know about payment gateways. Hopefully, you’ll find a few ways to automate your billing process and accelerate your cashflow.

What Is A Payment Gateway?

Popular payment gateways are through payment aggregators like PayPal, Stripe or Square. These are often the easiest to set up and remain popular because of that. However, there are plenty of alternative payment gateways available. You can have gateways set up through a bank, and through businesses like ours. Often, a less scaled payment gateway will be better for your business.

Because the PCI DSS leads to data security, it also makes consumers feel more secure. Imagine you’re going to a concert, and you’ve never been to the venue before. You arrive and you see no security at the door, people are just walking in. How would that make you feel? Would you feel different if you saw even just 1 or 2 people walking around with SECURITY written on their backs? Probably, right?

why should i use a payment gateway

Why Use a Payment Gateway?

We could debate the importance of accepting cards for brick and mortar businesses all day (that’s why we did our Cash vs Credit article). But for online businesses, cash isn’t a viable option. I guess you could ask your customers to mail it to you? That just seems unnecessary, though. Carrier pigeon maybe?

Payment gateways are important for online businesses because they’re the easiest way to accept and manage payments.You could theoretically use other services, but it’s adding hoops for your customers to jump through and adds compliance issues to your business. More hoops will mean a higher bounce rate and less completed sales.

Similarly, customers also trust payment gateways more than they do other transactional catalysts. Putting yourself in your customer’s shoes, can you imagine putting your card information in anything non-official? Keeping card data safe is one of the most important values to have in modern business. Payment gateways can be trusted by both you and your customers to prevent data breaches.

Beyond their most fundamental functions, payment gateways offer a few other important features. In no particular order, it’s nice to have the following: recurring billing, Customer Management Systems, and Account Updater. 

 

  • Recurring Billing – If you sell a subscription product or bill your customers monthly, choosing a payment gateway with a strong recurring billing feature is a top priority. This tool allows you to enter new customers into a defined payment plan that will charge them their monthly (or weekly, or quarterly, etc) payment on the day of your choosing. Some features include automated reminders sent to you and your customers, so there’s no surprise when your payment is processed. 
  • Customer Management Systems – Most gateways will offer a safe way for you to store your customer’s information for future billing. This is important if you’d like to lower the amount of steps a returning customer must go through before completing their purchase. Having their previous billing data stored saves them an opportunity of rushing to their wallet and perhaps rethinking the purchase. Less friction, less bounce rates.
  • Account Updater – If a customer’s card expires, or gets reported as lost or stolen, it can take weeks for them to get all their services with recurring billing (think Netflix or your internet provider) updated with their new card information. Luckily, Account Updater is here to help. This is a feature that updates your customers’ billing info directly from their credit cards issuing bank. Less chasing new payment information, less declined transactions, less overall churn. 

Why not use a payment gateway? 

The right payment gateway will likely be external from the merchant service provider that’s the best fit for your business. In the case of payment aggregators like Stripe, Square, and Paypal, you are not given a choice on the service providers as they bundle their gateway with a higher-priced service. A robust payment gateway will typically cost a few cents per transaction and let you choose a service provider that best fits your business.

 

Making Your Payment Gateway Better For You

There are a few ways that you can work with your merchant service provider to make your payment gateway work better for you. Usually, large MSPs are less willing to work with you on these sorts of things. So, the most important way you can make your payment gateway better is to work with a focused, more understanding MSP. That said:

First, look into your processing level. Are you processing Level 2 and 3 card information, or level 1? While the higher levels aren’t available for every business, they incur much lower rates. Processing additional information can save you a huge chunk of your gross revenue each month.

Then, make sure you have all of the authorizations you can have. Being authorized through all major card companies prevents customers from turning away because you can’t accept them. If your payment gateway isn’t allowing you to accept payments from some companies, it might be hurting your conversion.

Similarly, you should look for an omni-channel gateway. An omni-channel gateway accepts cash, credit, debit, ACH, PayPal, gum, and every other form of currency. If your customer wants to pay you in gum, you should try to accept it. An omni-channel set up reduces almost all payment friction.

Finally, look into what services you can add and remove. CRM management and invoice management are services that will save you more time than they’ll cost to add. Having them done through your payment gateway makes them more efficient, as well, as less exchange has to occur. Chargeback protection can be great, too.

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Of course, these are all general guidelines. If you’d like to learn more about payment gateways and payment processing, make sure to thumb through our blogs. It’s important to us that you understand and are able to get the most out of your payment processing. If you have questions about payment gateways, a unique situation you need advice on, or would like to get help setting one up, reach out at GetPaid@DirectPaymentGroup.com.

Rolling Reserve And What To Do About Them

rolling reserve

Rolling Reserve And What To Do About Them

Before we get started on today’s topic, we need to answer this question: what is a rolling reserve? A rolling reserve on a merchant account will hold a percentage of your sales with your processor to be released at a later date. A reserve acts as a buffer to protect you, your customers and your merchant service provider from future chargebacks and disputes. Very few businesses want a rolling reserve; instead, they are often placed on an account by a merchant service provider.

You might have seen them in the news recently because of changes that were made to many MSP accounts. With the pandemic overtaking most of the United States, there was an influx of chargebacks. Service providers took defensive measures to protect themselves from exposure. The easy move for some providers was to add a reserve on certain industries altogether. Travel businesses were hit especially hard, but even if you were shipping cookies you might have run into issues. 

If you landed on this article, you’ve probably been suffering from this. If you want our coverage of those specific issues, our article on them is here. However, rolling reserves aren’t an isolated issue. This is what you need to know about them, and what you can do to affect them.

What is a rolling reserve

Why Do Payment Processing Rolling Reserves Happen?

Merchant service providers add rolling reserves to an account for one reason: they anticipate the account having a lot of chargebacks. Chargebacks can get complicated pretty quickly, as you probably know if you’ve ever been on any side of one. Since it’s your processor’s job to return lost funds, they’re always evaluating their exposure on disputes.

A rolling reserve makes this simpler. The idea is that as long as the money is held in reserve, they won’t open themselves up to any risk. If a chargeback is filed, the processor drops into the reserve balance, return the funds to the issuing bank and removes the charge from your customer’s credit card bill. All without your business needing to return funds. 

This can, of course, lead to issues for your business. Your cashflow will suddenly tighten, and you’ll be waiting much longer for your receivables to be paid out. If you’re waiting for money to come in for a long period, your flexibility gets hurt. This is especially true with the emergency reserves, which were originally unclear on when they would be released. There has also been an increase in false flags. Reserves can get added to businesses that don’t need them or aren’t actually high-risk.

Can You Remove Rolling Reserves?

So, you’ve been slapped with a reserve. Or you need one for your account to get approved. You can get it removed, right?

Well, yes and no.

What you have to figure out is why your Merchant Service Provider has placed one on your account. Is there something that happened that put you specifically in this place?

For sweeping, COVID-type reserves, it might be a hard no from companies like PayPal and Square. There isn’t going to be much room for negotiation, regardless of what you do. The best option in these cases is to look for other options.

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But if you’re – for example – in an industry which has been deemed high-risk even though you aren’t, then you might be able to work something out.

Another common situation happens when the sales volume of a business skyrockets. An eCommerce startup might start doing sales volume very quickly that will look sketchy to a payment processor. For these businesses, waiting is the name of the game.

Rolling reserves are typically based on a business or an industry’s sales history. If you can build a good sales history over the course of a handful of months or even years, then you should be in good standing. This will often automatically take the reserve away, or give you negotiating power to get the reserve lifted.

If your business has been in good standing but suffered from a recent spike, you should already have some of that power. You will often be able to work with your Merchant Service Provider to arrange the terms of the reserve.

Unfortunately, in certain cases, payment aggregators like PayPal and Square can make broad stroke risk decisions that may group together high and low-risk merchants because they are in the same industry. This leads to businesses in good standing having reserves place on their account.

What Can I Do About Rolling Reserves?

The best solution to rolling reserves is to talk to your Merchant Service Provider and see what they care about. Why have they pegged you as a high-risk account? What metrics are they paying attention to? If you can learn what’s affecting the rolling reserve, then you can start to make change based on those metrics. This should loosen up the issue somewhat.

Remember that if you aren’t satisfied with these solutions, your hand isn’t forced in choosing your MSP. PayPal and Stripe might be the easy answer, but they aren’t the only answer. There are plenty of businesses that will help provide you with payment solutions. Finding the right business for doing so is a bit of a labyrinthine task, but it’s not unmanageable.

how to handle rolling reserves

 

It’s important to find a flexible MSP that understands and wants your business. This will create more negotiating room in the details of your payment processing, and allow a solution to be found to any potential problems. Payment Processors aren’t as scary as they look, and will often enjoy working with you.

If you’re looking to solve MSP issues, we can make the solution a little bit easier.

Reach out to us at Direct Payment Group today to get set up with an account that will meet your needs first, and make sure your business runs smoothly.

Why is PCI Compliance Important?

pci compliance

Why PCI Compliance Is Important

In 2020, PCI compliance is more important than ever before. As data security remains headline news, consumers are becoming more aware (and almost paranoid) about their data. Even people who generally aren’t too careful with their data know to protect their card data, and businesses know to be careful so as to avoid those headaches. The PCI DSS is here to help ease those concerns, and your business should comply.

pci compliance and security for online data

For the uninitiated, the PCI DSS is the Payment Card Industry Data Security Standards. This is a set of rough guidelines implemented by card brands to protect cardholder information. Businesses follow these guidelines to do the same.

If you’re working to become PCI compliant, our PCI compliance checklist can help you out. It’s a simple, 3-minute survey that will let you know where you stand with the PCI DSS. We’ll give you a PCI score, and an idea of how you can improve it. We’re always happy to help with your payment processing needs, and PCI compliance is certainly one of them – as you’re about to see.

Why PCI Compliance Is Important For Your Business

PCI Compliance has 3 major benefits that make it important: data security, customer trust, and protection for both business and their customers. Each of these is, of course, tied together with a thread of prevention. The goal of the PCI DSS is to reduce the risk of data breaches and theft for both the business and the consumer. The quickest way to summarize the importance of PCI compliance is: it helps keep your customer’s data safe.

pci compliance checklist

Data Security

Data security is the desired outcome of the PCI DSS, which is born out of data risk. In this case, the supervillain came before the superhero. Before we thought to prevent data issues, bad actors thought to exploit them. Now that we’ve stepped our game up, bad actors have a plethora of methods to attempt. The PCI DSS looks at easy points of risk and protects them. By being PCI Compliant, you’re putting locks on your doors that absolutely need to be there.

Consumer Security

Because the PCI DSS leads to data security, it also makes consumers feel more secure. Imagine you’re going to a concert, and you’ve never been to the venue before. You arrive and you see no security at the door, people are just walking in. How would that make you feel? Would you feel different if you saw even just 1 or 2 people walking around with SECURITY written on their backs? Probably, right?

PCI compliance does the same for your customers. We’ve all heard countless stories of issues racked up by buying from the wrong website. Especially in the eCommerce business, people are very aware of the potential risk of their credit card information being stolen. When you’re probably PCI compliant, customers will see that and know that you’re looking to protect their information just as much as they are.

data security for pci compliance

Data Breach Protection

Finally, PCI compliance is important for making sure you’re doing everything possible to prevent data breaches. That’s what makes customers feel more secure in doing business with you. PCI compliance protects customer information to the highest possible standard without you needing to have your own information security team. You never want your customers to be at risk, so it’s important to be PCI compliant on their behalf.

This also reduces risk on your end, of course. Not only is your business data more secure when you’re PCI compliant, but the ramifications of a data breach are also significantly lessened. So even if something does go wrong, you’ll be in a much better spot when it does. This allows you to rest a little bit easier at night, hopefully not constantly thinking about your risk for a data breach.

The Numbers Behind PCI Compliance’s Importance

Beyond the intangibles, there are two major costs associated with PCI non-compliance. The first is merchant non-compliance fees, which should be deterrent enough. Failing to certify with your service providers will incur additional fees on your merchant statement.

Sign up for our PCI Compliance Checklist and become compliant today!

Additionally, if you experience a breach you can be charged up to $5,000 for each exposed record. Getting compliant is much easier and much cheaper, so it’s best to avoid the issue.

Heshy Friedman from Radial Creations has seen many merchants get blindly charged a monthly non-compliance fee, simply because their merchant services provider never bothered to communicate with them about resolving the issue. Heshy had this to say on the topic: 

“To avoid getting charged with this fee, it is important to work with a company where customer service is at the forefront of their offerings. They will work with their clients to avoid this happening in the first place. Many companies are quick to get a good rate and lower fees, but they are terrible at customer retention because they are not looking out for the customer once they are signed up to make sure they aren’t racking up unnecessary fees.”

Proving compliance prevents fines, and shows due diligence in the event of a lawsuit.

Benefiting From PCI Compliance

Of course, PCI compliance is important for reasons that aren’t just preventing bad things from happening. There are plenty of reasons to be PCI compliant, not the least of which being that it gives your company an edge on its competitors. If you are PCI compliant and your competitors aren’t, customers and other businesses will trust you more.

Along the same lines, PCI compliance reduces friction in your cash flow. Does your payment processing company hold money for longer than you’d like them to sometimes? That’s never fun. PCI compliance is a great way to show them that you’re on top of your card data security, and cut down on processing time – and fees! It also can help in the event of any issues that might crop up, like sudden policy changes or – y’know – a pandemic.

PCI DSS compliance is important for your business and for protecting your customers. It might seem like an intimidating beast, but it really isn’t. By using our PCI compliance checklist today, you’ll immediately understand where you stand with the PCI. If you’re struggling to get up to snuff with the PCI DSS or have questions about becoming PCI compliant, contact us or reach out on social media.

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