Today’s guest post is by Cheryl Garabedian, a 23+ year veteran of the credit card processing industry. Her site, AcceptMobileTransactions.com, is dedicated to helping entrepreneurs find the best small business credit card processing option for their unique situation.

In today’s economy, it is important for small business owners to eliminate unnecessary expenses wherever possible. After all, it just makes good business sense to keep operating costs under control in order to boost profit margins. Throughout the course of my 23-year career in the credit card processing industry, I have shown thousands of small business owners how to improve cash flow, while keeping costs in check.

Of course, the ability to accept credit card payment is now a necessity. Fact is, most of your customers expect to be able to pull out their credit or debit card for everything from groceries to oil changes to major home repairs. As a result, accepting credit card transactions is a necessary part of operating a business.

Here are 3 of my favorite tips to save money on credit card processing fees:

1. Be Skeptical of “Free.” Too often, I find merchants who were lured into accepting unfavorable credit card processing terms with false or deceptive promises of “free equipment” (or worse – “free merchant accounts.”) In my experience, “free” equipment almost never is. While it may be tempting to save a few hundred dollars on  a new terminal, you often end up paying for it many times over in the form of higher transaction costs, minimum monthly fees and other unnecessary charges.

Instead, be sure to look at the whole picture before making a decision. Get a clear picture of the transaction rates and monthly fees* you’ll be charged in writing. Also, look into purchasing your own equipment – it is possible to find relatively inexpensive, reliable and PCI-compliant terminals by doing your homework – or working with a reputable merchant account provider. (Refurbished equipment that comes with a guarantee is also a great way to cut costs).

(Note: I wouldn’t agree to any contract which tries to lock you into monthly minimum fees).

Another popular alternative is to convert your mobile phone into a mobile credit card terminal. For example, for around $125, you can purchase a credit card encryption sleeve which slides over your iPhone to instantly accept credit card transactions. This option is a great solution for on-the-go entrepreneurs, such as trade professionals, business consultants or crafters/artisans.

2. “Swipe” Transactions Whenever Possible. Physically “swiping” a credit card at the point of purchase almost always carries lower transaction costs than manually entered (or “keyed-in”) transactions. This is because “swiped” transactions simply carry less risk of fraud or human error. This is a main reason why converting an iPhone or other mobile device into a mobile credit card terminal is such a great option for business owners, like roofers, marketing consultants and craft/trade show vendors who conduct the majority of their transactions away from their office or studio.

3. Ask for Separate Pricing for Debit Transactions. Debit card transactions cost less to process than credit card transactions. Therefore, if your business accepts a lot of debit card transactions, you may be able to save a significant sum of money by having debit cards broken out from credit card transactions in your contract. Unfortunately, many credit card processing reps tend to bundle them together because it is more profitable to do so.

Tip: When talking to a potential merchant account provider, ask if they offer “6-tier ” or “Interchange plus” pricing options. Some may only offer 4 tiers, but what matters is that they are willing to break out swiped debit transactions from swiped credit card transactions.

And now I would like to offer you a complimentary, no-obligation review of your current merchant account to recommend ways you may be able to keep a little more money in your own pocket. To get started, simply contact me via phone or email today!

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Save Money on Credit Card Transactions

This is because debit transactions carry less cost than credit card transactions and by breaking them out into their own pricing tiers, I am able to pass some of that savings onto my customers.

This concept can be taken a bit further by exploring the distinction between Pin-Based and Non Pin-Based Debit Card Transactions. I asked Cheryl Garabedian, Senior Vice President of Partner Relations at Vision Payment Solutions to  help explain the distinction and provide some insight into which offers the better cost-saving option for merchants.

The answer is, of course, it depends. Pin-Based transactions offer a better cost solution for merchants with higher average ticket sales, but there are a number of other factors worth considering when making this decision. For the full article on this topic, click here.

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April 2009 interchange rate changes are here.   Visa and Mastercard release updates to the interchange rates several times a year, with the most significant changes normally occurring in April.   For 2009, those changes include the following:

(WARNING:   For the average business owner this may not mean much.   Heck, its my JOB to know this stuff and it still sounds like “blah, blah, blah” half the time!   If this gets too painful to read, click here for  7 easy tips you can use to start saving money on your Merchant Account today).

Visa: Visa will modify several Consumer Credit and Signature Preferred Interchange fees. Visa is lowering Card Not Present, Key Entry and E-Commerce Interchange rates as well as lowering Hotel and Car Rental rate categories. Restaurants will be impacted by a 5 basis point increase on Visa Rewards cards. Visa will extend Small Ticket Interchange Rates to Service Stations when the transaction size is $15.00 or less. Visa will modify Interlink Interchange fees including the establishment a unique Interlink interchange category for Automated Fuel Dispenser (AFD) and Service Station transactions.

MasterCard: MasterCard will modify commercial Interchange rates. MasterCard will launch the availability for issuers to enroll Consumer World accounts in the “World High Value” program to qualify for differentiated interchange. As of April 2009, Interchange rates for the new category will mirror those currently used for the Consumer World Elite cards, so there will be no immediate impact of this launch. In an upcoming April 2009 initiative, the MasterCard Acquirer Access fee that is currently in place and being billed at a pass through cost of $0.005 per authorization is being eliminated and replaced with Network Access and Brand Usage (NABU) fee which will be billed at a pass through cost of $0.0185 per authorization. This MasterCard change will greatly impact merchants with small transaction sales.

Realistically, what does this mean to you and your business?  It depends on the type of business you are in and what categories the bulk of your business falls under.   I recommend you check with your Merchant Account provider and find out if any opportunities for cost savings exist for your unique situation.   (The way I set up the majority of my accounts automatically passes on new interchange fluctuations without the need for revamping their rate schedule.  For more information on how I do this, click here).

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Debt Consolidation may be a great option for you if you have a number of outstanding credit card and loan balances.

If your outstanding balances are racking up high interest fees, you could find yourself sinking deeper and deeper in debt.  In that case, debt consolidation could offer a viable way to get back on track.  Debt consolidation involves combining a number of smaller balances into one larger debt (at a lower interest rate) – thereby rolling a number of monthly bills into a single more manageable payment.  When used correctly, debt consolidation can save you hundreds of dollars each month and simplify your bill payment process.

One way to consolidate your debt is through traditional methods, such as a home equity  or other bank loan.  With the current credit crunch, these loans are more difficult to obtain than they once were.  However, if you have a good credit rating (i.e., FICO score of 700+) and you have enough equity in your home, you may be able to qualify.

A home equity loan wouldn’t be my first choice, however.  If the recent real estate meltdown taught us anything, it should be that using your home as an ATM can have serious financial consequences.  I would ONLY consider this option if you have the discipline to cut up the newly paid off credit cards and guard against running up additional balances elsewhere.

With other types of bank loans, you will still need some type of collateral in most cases.  However, some banks do offer smaller loan amounts (less than $5k or $10k) without this requirement.  The terms (length of loan and interest rates) will depend on your credit history and FICO scores.

Social lending (aka Peer Lending) is a newer and very  interesting alternative to traditional loan options for credit worthy applicants.  A variety of lending networks have popped up in recent years, with Lending Club among the most popular.  Membership is free for both lenders and borrowers and the online application process is fairly simple and straightforward.

Within these networks, borrowers can make a loan request to consolidate their outstanding debts.   Private lenders (individuals) within the network can then make offers to lend all or part of the requested amount.  With Lending Club, loan amounts range from $1,000 to $25,000 with a fixed repayment schedule of 3 years.  Once approved, funds are usually deposited into the borrower’s account in less than two weeks.

This option is not available in all states and is open to those with FICO scores greater than 660 and with a debt-to-income ratio of less than 30% (excluding mortgage).  To learn more , visit Lending Club.

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