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Have you ever wondered how much a fast food shop pays in credit card processing fees? I have, since transaction size tends to be small (one component in the calculation of fees is transaction size). Since healthy sandwich shops seem to be the craze, let’s examine a sandwich shop.
So for an example, let’s look at Jimmy John’s, which has about $850,000 in revenue per store. About a quarter of that is collected in credit card and debit card sales according to the 2008 Hitachi Consulting Study of Consumer Payment Preferences (for fast food restaurants).
The average interchange rate that TransFS expects such a restaurant to have is in the neighborhood of $0.1255 + 1.56% for transactions greater than $15 and about $0.04 + 1.60% on transactions less than $15.
If we assume that 50% transactions are < $15 that the average size for such a small transaction is $7.50 while the average size of a transaction > $15 is $20 (which means that this restaurants overall ticket size is about $14) then the average interchange rate for this restaurant is about 2.16%.
TransFS’ proprietary software has read thousands of customer bills, only to find that the average restaurant pays around 0.75%+$.20 markup above interchange, meaning this is about 2.2% for a sale of $14.
If we apply the overall rate of 4.36% (2.16% + 2.2%) to the 27% of this restaurant’s $850,000 in sales we can calculate that this restaurant will pay $10,006 per year in credit card processing fees.
Yikes!
Restaurant owners can get the best deal on credit card processing by comparison shopping for a processor using TransFS. Start an auction now to keep more of your hard earned money!
Image thanks to http://www.flickr.com/photos/28233229@N00/1407449118/
Lessons in Customer Service
Being a newbie to customer service, I wasn’t quite sure what to expect, or what was expected of me. However, after hundreds of phone calls and chats with TransFS users, I’ve learned some general guidelines make customer service one of the most satisfying parts of my day. Here are some tips from lessons that I learned:
1) What is your personality?- As face-to-face interaction decreases and digital communication increases, a lot of behavioral cues taken from body language and human contact are lost. This means that language used in email is critical for getting not only your message across, but projecting whatever attitude or personality your business embodies. I had to tone down my professional speak a bit for TransFS, since we like to be seen as casual and approachable. On the telephone end, voice cues are your way of getting personality and message across. I like to smile before dialing a user, it just makes the whole interaction more pleasant. Even when you’re discussing something as seemingly mundane as credit card processing (trust me, it’s actually fascinating!) that extra bounce in your voice lets the users know you actually care.
2) Politeness and Energy Go a Long Way- Think extra polite in your interactions with users. Making jokes and laughing are always appropriate, but having that extra bit of respect will make you stand out. Adding more “thank you’s” is an easy way to show your appreciation and concern for your customer’s problem. Use your voice to show how excited you are in helping your customer deal with their issues and see value in your service.
3) Think Like the Customer- When customers ask questions, try to understand their context. Why are they asking this question? Maybe there is a deeper issue they mean to address. If you can get at this deeper concern, you’ve done your job. You’ve also assuaged the customer because they feel that you understand and care for their issue to be resolved. Another approach is to make sure you do not sound salesy. Speak to your customer with phrases that imply agency vs commitment. For example, “feel free to check out this feature…” ”we have a cool iPhone App that is free to download…if you want.”
4) Speak to Your Customer- Especially in an industry as technical as merchant account services, knowing at what level to speak to your customers is critical to their happiness. Try to gauge their level of understanding from what they tell you, and make them feel knowledgable. For example, it’s nice to say “As a dentist’s office, I’m sure you already know that accepting a variety of credit cards is important to meet the payment needs of your patients, but did you know….” Or end with…”but you probably already knew that.”
5) Make Sure They Are Satisfied- Always end your interaction by asking if your customer is 100% satisfied with your service, and ask if there is anything else you can do. Doing this ensures your customer will hang up the phone feeling particularly comfortable with your service. Asking this may also bring to light other issues they might have.
6) Go the Extra Mile- Follow up with your customers; show them you care. Speaking with customers is an important way to drive innovation, referrals, and keep your business in check. Working in your bubble can make decision making narrow sighted, but by broadening and really getting to know your customers, you will understand your business more completely.
Are you completely happy with this post? If not, feel free to email me at Stella@transfs.com 
Image thanks to http://www.flickr.com/photos/10159709@N07/2566010605/
Interchange is the fee that businesses pay directly to credit card issuers for the service of processing their credit cards. Visa and Mastercard publish their rates for public knowledge, while American Express does not. After doing some digging, we found that the American Express 2007 Annual Report reveals that, on average, Amex’s discount rate was 2.56% (2007), 2.57% (2006) and 2.58% (2005).
Compare this to Visa’s interchange rate, which averages out to be 0.77% lower.
Keep in mind that the average Amex discount rates shown above are an average and include a much lower interchange rate that large companies can negotiate with Amex. A great example of this kind of partnership is Amex’s deal with Costco (as discussed in Paying with Plastic p. 169). After accepting only Discover card for eight years, Costco signed an exclusivity agreement with Amex which industry experts say put Costco’s Amex interchange rate at about 1.11%. In return, Costco customers had membership cards which doubled as American Express credit cards.
Compare that 1.11% to the fact that small businesses pay about 3.25-2.75% for Amex interchange.
Let TransFS help you find the best deal on credit card processing for your business. Start here to get multiple bids from top quality processors at no cost, all apples-to-apples comparison, and transparent pricing. What you see is what you get. Users save an average of 40% on credit card processing with the most transparent pricing: interchange plus.
The government has adopted a new philosophy (and one we’ve long rooted for): Transparency. In response to President Obama’s mission to make government more transparent, the Open Government Directive was established in December 2009. Here are some of the sweeping goals, direct from a White House memo:
The three principles of transparency, participation, and collaboration form the cornerstone of an open government. Transparency promotes accountability by providing the public with information about what the Government is doing. Participation allows members of the public to contribute ideas and expertise so that their government can make policies with the benefit of information that is widely dispersed in society.
The Open Government Directive has four broad goals:
1) Publish government info online.
2) Improve the quality of government information.
3) Create and institutionalize a culture of open government.
4) Create an enabling policy framework for open government.
Pretty cool. So I know you’re probably thinking, “how does this affect me? Why should I care?”
Besides being an informed citizen, this Directive has multiple benefits for your business. Read all about them at Business.gov, however, the most important benefit is the availability of raw government data.
This data can be manipulated to create meaningful new tools for small business owners. Already some tools have been created such as the Loans and Grants search on Business.gov, which gives businesses information on federal, state, and local financing programs for which they may qualify. The tool which makes this powerful resource possible is the underlying data provided with the new initiatives. Powerful stuff. Image thanks to http://www.flickr.com/photos/35034352455@N01/7486278/
Referral Marketing
Many business owners mistakenly think that their sales cycle will be jumpstarted with cold calls bringing them to leads. Although this strategy is somewhat effective (based on volume of cold calls), a better strategy is to focus your marketing efforts on getting referrals from existing customers. This great post from About.com outlines a seven step approach to getting referrals. Here are a few:
1) Set measurable goals- Decide to grow your referral business by a certain percentage per month, and do everything to hit that target. This way, you’ll know how much more or less you need to do in order to gain a certain number of referrals. For example, in the insurance industry, agents are known to get at least three referrals from each person they talk to.
2) Pick your top twenty- Not all customers are comfortable giving referrals, so it may be more helpful to target those with whom you have the best relationship. Twenty percent of customers may be a good starting point, and feel free to branch out should you feel that your relationships with more customers is getting stronger.
3) Give, Give and Give- Provide customers with the best service possible, and watch the referrals come. Go beyond what you think is necessary, and make sure customers feel special. According to the principle of reciprocity, which states that people want to help after being helped, customers will willingly refer you to others.
Image thanks to http://www.flickr.com/photos/36499169@N04/3563008885/
The New Jersey Star-Ledger reported yesterday that some gas stations in the area were employing a two tiered pricing structure to fight credit card processing costs. A sign outside one station showed two numbers representing different forms of payment; $2.93/ gallon or $2.49/gallon, an almost 20% difference.
The different payment types? Cash or credit of course. Gasoline industry experts have noticed an increase in the number of people employing plastic to pay for gas in recent years, especially when gas hit sky high records of almost $4 a gallon. For example, 70% of New Jersey gasoline purchases are made with plastic, leaving gas stations with smaller profit margins due to extra costs for processing that are not included in gas prices.
“Too often credit card fees are a cost of business customers rarely appreciate,” Sal Risalvato, who is the executive director of the New Jersey Gasoline C-Store Automotive Association, said. “Today everybody uses a Visa or MasterCard.”
The two-tiered system is completely legal, however is not an option for many gas station owners. Pumps that have the technology able to track dual-prices cost anywhere between $12,000 to $15,000, meaning many small stations simply cannot afford such a luxury…and are stuck with smaller margins due to processing costs.
An easy way gas stations can save money on processors is to comparison shop processors on TransFS.com.
Image thanks to http://www.flickr.com/photos/65013758@N00/26603770/
CHICAGO, Jan. 05, 2010— Transparent Financial Services (TransFS.com), a leading marketplace for businesses seeking financial services, today announced the launch of the TransFS Credit Card Processor Directory, the first comprehensive website through which businesses can research, rate and review credit card processors.
In the past, researching the quality of a new credit card processor required a business owner to conduct hours of research across processors’ own websites, BBB ratings, message boards and discussions with fellow business owners. The TransFS.com Credit Card Processor Directory dramatically simplifies this process by aggregating all of that information into a single place, and making it simple to sort, filter, and compare processors side-by-side.
“While review sites like Yelp.com have become indispensible tools for consumers, it is still hard for business owners to find good, honest information about services such as credit card processing,” said Sean Harper,CEO of TransFS. “We wanted to give business owners the same opportunity to learn from the experiences of others and share their own reviews, and this centralized resource achieves that goal.”
The TransFS Credit Card Processor Directory enables business owners to:
- Search the TransFS database of more than 800 credit card processors, both nationwide and locally across more than 320 U.S. cities
- Filter processors by performance ratings provided by the Better Business Bureau (BBB) and by other business owners on TransFS.com
- Quickly and easily rate their own processors on a five-star scale and through detailed comments about their experiences if desired.
“Research suggests that the recommendations of fellow users are more important than any other factor in decision-making,” said Joshua Krall, CTO of TransFS, “but for credit card processing, the decision is infrequent and business owners may not have a deep network to draw upon for opinions. Our directory solves this problem, making it easy to exchange reviews with users from all around the country.”
The release of the TransFS Credit Card Processor Directory continues the mission of the company to bring transparency and ease to the process of shopping for credit card processing services. The directory is available free of charge at www.TransFS.com. Also available at TransFS.com is the company’s free credit card comparison shopping service, through which business owners can reduce their merchant fees by an average of 40 percent.
About TransFS.com
TransFS.com is an online comparison-shopping service that enables business owners to shop for credit card processing services quickly, efficiently, and at no cost. TransFS evens the playing field for business owners, letting them keep more of their money without time-consuming, annoying sales calls from service providers. TransFS employs instant reverse auctions to quickly negotiate better deals, automated bill analysis software to identify unnecessary or undisclosed fees, a stringent certification program and an online ratings and reputation.
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Contact:
Stella Fayman
309.368.5987
stella@transfs.com
In growing a new business entrepreneurs often wish for more money and other resources to grow the business more quickly. Recently, I was talking to a friend who runs a very successful asset management business here in the Chicago area. Aside from being a 2-time successful entrepreneur himself, many of his clients are successful entrepreneurs and he usually has a great perspective on business strategy.
His lesson this week was:
Even the best businesses take a while (years) to cashflow and many businesses need time more than they need money, entrepreneurs need to be patient and not give up so early.
I thought more deeply about that comment and it began to make a lot of sense to me. Small changes can be made and tested quickly, but making major changes to product or marketing strategy both require time to measure the impact of each change. If it takes 50 major changes of direction to get a product right and each one takes 2 weeks to make and monitor, that’s 2 years worth of work!
Image courtesy of bogenfreund on Flickr — http://www.flickr.com/photos/28548387@N00/556656621/
The Boston Globe reported that Boston businesses are taking action against inflated credit card processing fees by offering customers discounts if they pay cash.
A business profiled is a Japanese restaurant which decided to offer more than half off on Sundays to customers who would forgo using credit cards for cash.
“We’re like, ‘Why are we giving that money to the credit card companies? They’re like loan sharks,’’’ owner Diane Chung said. “Give it back to the customer and everyone’s happy.’’
Business owners have been increasingly complaining about swipe fees affecting their bottom lines in a down economy. Credit card companies counter that rates are fair and have not increased as much as businesses claim, and that even if fees were lower, businesses would not pass them on to the consumers.
“They [businesses] want to have Congress come in and regulate a business-to-business contract under the guise that they’re doing it for customers, when, in fact, they’re trying to line their own pockets,’’ said Ken Clayton, a senior vice president for card policy for the American Bankers Association.
Many consumers can’t think of denying themselves the luxury of using credit cards which they use to accumulate lucrative miles and points. To them, the benefit of miles outweigh the benefit of a discount.
Businesses should not have to forgo customers due to inflated credit card processing costs. TransFS.com exists to help business owners get the best deal on credit card processing. Check out our credit card processing calculator (it’s free) to figure out how much your business can save, and start an auction to begin saving today.
Image thanks to http://www.flickr.com/photos/78695167@N00/442805346/
Photo by Thomas Hawk http://www.flickr.com/photos/thomashawk/
As a frequent visitor to NYC (at least 6 times / year) and Boston (which recently added a similar program) I really like the ability to pay for cabs with a credit card and I wish Chicago had it too. A recent Huffington Post article Cash or Credit? In a Taxi, It Depends Which Side of the Partition You’re On describes some of the challenges faxed by cab drivers in that situation.
A recent story in the New York Times reported that credit card use in the city’s yellow cabs has risen steeply, suggesting that cabbies are making more money because of it… To the contrary, it appears they in fact have been hit with a pay cut, in the form of credit card processing fees, payment delays, bunk cards, chargebacks, and system failures.
While most businesses, from bodegas to bars, are charged an average of 2% on credit card processing fees, when you swipe your card in a cab, the driver has to pay a hefty 5% for the transaction. This fee is placed on the total metered fare, including the tolls, the tip, and now, even on the fifty-cent MTA surcharge. Why are New York’s cabbies paying so much more than everybody else?
Because of all the middlemen.
That 5% goes back to the garage or medallion broker, where the owners take an average cut of 1.5%. The rest is passed along to the TLC-selected vendor supplying the device. That company takes out another average cut of 1.5% and then, finally, passes the rest on to the bank that is actually processing the credit card. Multiply these numbers by millions of cab rides a year and it becomes clear that a few people are making truckloads of money on drivers’ backs.
That’s actually not that different from most smaller businesses (see previous article average credit card processing rates) – small businesses usually pay a 1%-3% markup over the wholesale (or interchange) rate for their transaction. There are two reasons for it – 1. it costs more for the processors to reach them so the processors need to build those sales costs into the price and 2. they operate at a big informational disadvantage and are taken advantage of by the processors and/or the middlemen.
It stinks that the cabbies are not given choice in which processor they use. If they had a choice they could shop on their own (or use TransFS!!) to cut out the middlemen and get a fair deal.
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About TransFS
TransFS is a comparison shopping website for credit card processing.
Our unique auction process and comparison shopping engine leads to an average savings 40% on credit card processing.
Click here to learn how TransFS works or try TransFS now to quickly add cash to your bottom line. Search
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