Do you own a business that processes credit cards? Could you be overpaying for no good reason? How many thousands of dollars could you be losing right now?
Join in the conversation with our merchant advocate, Cheryl McKenna, and she shares ways to ensure you STOP overpaying on merchant fees right now.
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Save Big Time On Your Business Merchant Fees With Cheryl Mckenna
Welcome to the show that’s for you, those of you that work so freaking hard for your money. You’re ready for your money to start working harder for you right now. You want that freedom and cashflow today, not 30 or 40 million years from now but right now so you can live that life that you love with those you love. Most importantly, it’s not always about getting rich. It’s about living a rich life because as you are blessed financially, you have a greater capacity to bless the lives of those around you.
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I’ve brought on the guest that I should have had at least a few years ago. I can’t believe I haven’t. In fact, I even reached out to her and said, “Cheryl, have I brought you on this show yet?” She said, “No.” I said, “I am failing you.” Cheryl is my merchant advocate. She’s the one that helped get me connected with my merchant services.
Those of you who are in business, and I don’t know how many of you are or not, but if you’re in business, especially if you ever use any kind of merchant account, or even if this is your side hustle, if you’re using a merchant account, you know there are a lot of if, then, and but. There are a lot of little fine prints in there. Sometimes, that can cost you dearly to the tune of hundreds if not thousands of dollars per month.
This is what I found out as well. In my case, I had a merchant provider that said one thing yet the contract said another. It completely created distrust and made me angry. Cheryl was the one that helped reveal it. I knew something was fishy, but I didn’t know what to look for. That’s what Cheryl has been doing for the last 25 years. Since she was a twelve-year-old, she has been doing this. She has been doing this for a long time and doing an amazing job. I want to bring her on to teach you guys maybe some things to look for but also introduce her to you. She could be somebody that could help serve you guys and make your lives better and save you hundreds if not thousands. Cheryl, welcome to our show.
Thank you so much. Thank you for having me. I shy away from podcasts, so it’s not on you that I haven’t been on the podcast. Other people have called out to me as well and said, “You should be on a podcast.” I’m like, “Okay,” and then I don’t. I’m not proactive.
We got you on now. It’s better late than never. Give us a little bit more on your background. Tell us more about who Cheryl is.
I live in Colorado. I’ve lived here since I was twelve, so a very long time. I went to CU Boulder. I received a degree that if I want to make any money in the real world is not helpful, and I needed a job.
Was that a Sociology degree?
It’s International Affairs with an emphasis on Latin America and a minor in Economics and a minor in Women’s Studies. What do you do with that? I catered for a while.
Catering is the natural next step after doing an International Affairs academic degree.
I was doing that all through college and then kept going. A friend of mine who is a year older graduated a year earlier. Her company was hiring. I said, “What do they do?” She said, “Merchant services.” I said, “What is that?” I remember my first day on the job. There were quite a few of us newbies. I was only 25 years old at the time. It was a couple of days before my 25th birthday.
They brought us into the training room. Up on this whiteboard, they had the lifecycle of a credit card transaction. I looked at that and thought, “I am never going to understand this. There are so many pieces. There are so many steps. There are so many players in the game.” Fast forward to today, and I am now an expert in it. I understand every single step of the way what can prevent an owner from making the most profit possible.
There are two parts to a successful business. There’s how much revenue you bring in, and there’s how much revenue you keep. That’s exactly along the lines of what you do because you also teach people like, “You have all this money coming in, but here is how you can keep more of it. Here’s how you can invest in it in better ways.” What I do is along the same lines but in merchant services. There are so many pieces and parts to it. It’s pretty unregulated and also highly lucrative. You get a bunch of sneakiness.
Where do you usually see those holes? In my situation, as a business owner, I was always focused on what’s the interest rate they were charging. That’s the easy baseline that people look at. It’s like, “It charged me 2.6% versus 2.9% versus whatever,” The thing that started getting me to question if I was being lied to or not was all these extra charges that were there that should not have been there. What have you seen in your experience?
I have seen so many things. If you are a business owner and you accept credit cards, you should get every month a statement of your rates, fees, and all of your transactions for the month, whether it’s in the mail or online. It is your bank statement. If you look at that, it might as well be written in Egyptian hieroglyphics to most people, but every single one of those areas could be an area where the business is overpaying. It could be that the merchant provider is knowingly overcharging you, but that’s not entirely the case for 100% of the overcharges. A lot of times, it could be simply the business isn’t set up correctly or there’s a procedural error. Every single one of those line items tells us a lot about exactly what types of credit cards people are accepting and how they’re accepting them.
Let’s say you’re a business that sells to other businesses. You’re B2B. The types of cards that you’re accepting are mostly corporate cards, business cards, and purchasing cards. If you’re not with the correct merchant provider, you are getting charged more. That merchant provider isn’t making more because they’re having to pass the fee to the credit card company or your customer’s credit card company through the processor. By the very fact that your processor doesn’t have the right technology to lower your costs, you’re getting charged more than you should be but you’re not aware of it. It’s not that your processor is overcharging you. It’s not a revenue issue for them, so there’s no red flag. They don’t even notice it. We see that all the time in B2B.
Another thing could be there are industry codes in merchant services as well. It is called SIC or Standard Industry Codes. Many of those industry codes allow you as the business to get a discount on certain types of credit cards that you accept. If you’re coded incorrectly, then you’re not able to take advantage of those discounts. I’ll give you an example. Anyone in healthcare, a doctor, dentist, or veterinarian as well, if your SIC code was not entered correctly when that processor first set you up in their system when you sign the agreement and you’re a new client, then you’re not receiving the healthcare discount that Visa put forth about two years ago. That could be as much as 0.5% that you’re paying over on some of your charges but not all of them. It’s pretty complicated. That’s what’s allowed me to stay in the industry for so long. It’s fascinating to me.
Many industry codes allow businesses to get a discount on certain types of credit cards. If coded incorrectly, you cannot take advantage of those discounts. Click To TweetYou’re saying you like to geek out on some of those little things. These are Ts and Is that you’re dotting and crossing.
All those line items allow us to dive in and see how a business is being overcharged. I was on the phone last week with a retailer that is global. I don’t know how many hundreds or thousands of locations they have. We haven’t gotten into everything exactly with them. What they wanted us to do is a complete evaluation of those line items that are showing up on their statement.
They know that the rate that they’ve been able to negotiate with their processor is amazing. What if their processor set them up incorrectly? You’re talking about processing millions of dollars in transactions every single year. Even 0.05%, 0.1%, or 0.2% can add up to a massive amount, and that’s straight off the bottom line profit that’s being taken.
People might be like me where even if I’m in the finance world, I know that if I pull out a statement, I’m not going to know what most of it means. What’s the information that they would need to provide so you can be able to see what they have?
The entire statement. All pages of the statement. I like to have the most recent three months.
That’s to see if there are trends or patterns that happen, especially in certain months.
That’s right. Sometimes, processors charge part of the fees on one month and part on another. There could be quarterly fees. I also like to see the statement messages that are at the bottom of the statement. Most of the time, they’re at the bottom. Some processors put them on page one, but most put them on the last page. For me, they’re fascinating. I printed one out to read today that I just received. If you don’t mind and if you’ll indulge me. This is what got me excited.
This is business in Pennsylvania. We’re seeing a ton of rate increases happen. They started in October. They’re going through January. When you read these statement messages, it will say, “Effective December 1st,” or “Effective October 4th.” This one is effective December 1st. Every transaction that they’ve been processing this month is being charged more. All of these add up to a 17% increase in fees for this particular client. Listen to everything that’s going up.
It said, “Effective this December 1st, 2022, your payment processing fees will be increased to offset the rising cost of transaction processing. Your qualified base discount rate will be increased by 0.20%.” That’s a pretty big amount, “A transaction network access fee of $0.10 will be increased to all your authorized transactions including returns and declines.” That’s the second one, “Your non-qualified surcharge processing fees will be increased by 0.7%. If you are not currently charged this fee, one will be added at 0.7%.” That’s number three, “The fees for access to card-ran services fee will be increased by 0.1%.” There are four biggies that could happen.
0.1% and 0.7% at a time is nothing big.
It adds up to 0.9% and $0.10. That’s a lot.
It’s about 4%.
The 0.7% is non-qualified. Non-qualified is an ambiguous term used in the merchant services industry. It could be a rewards card. It could be a hand-entered card. It could be a corporate card. There’s no set definition of non-qualified. Each processor gets to choose which types of credit cards fall into non-qualified. Many years ago, I worked as a processor. When they were deciding what was going to fall into non-qualified, they put a very common credit card type into non-qualified. It was a mistake and they were like, “Oh well.” They were making so much extra money by putting in that credit card type. It was a low-level rewards card. It should never have been non-qualified, but they didn’t care to undo their mistake because they were making a ton more money. Also, it’s unregulated, so why not?
You can complain all you want, but it’s their rules.
I believe in who, not how. I know you do as well, Chris. That’s exactly why people engage you to help them with their financial future and freedom. That’s your specialty. You know how to help them with that. This is what we know. What I know are merchant services. There are so many places where you can cut costs and stop paying your processor for all your hard-earned work.
Amen to that. The question I can hear from some of our audience coming up is this. They say, “All this merchant account drama is exactly why I don’t have a merchant account. I use Stripe,” or “I use PayPal,” or something equivalent. What are the advantages or even the disadvantages of using those processing systems?
People perceive it as an advantage to use Stripe or PayPal because it’s a flat rate. Getting a four-page statement with all these line items, the average business owner’s eyes will glaze over when they try and read them because it doesn’t make any sense to them. It’s a very simple statement. They know they’re paying maybe 2.75% or maybe 3% flat. It’s easy. Maybe even for budgeting purposes, they can anticipate what their bill is going to be from their merchant provider.
I say perceived advantage because, generally, those flat-rate pricing structures end up costing a business owner a lot more. That 2.75% or 3% is generally more advantageous to the processor. There’s a lot of extra profit built in there. Some software will only interface with Stripe. Sometimes, you’re stuck using Stripe. Developers love Stripe because it’s easy to implement. Their API is great for developers but not necessarily fabulous for the software users who are forced to utilize Stripe for their merchant services.
That makes sense. I know that with Stripe or PayPal, they could cancel you or say, “You seem too high-risk of an industry. We can cancel you at any time.” I’ve seen that happen to people before. Especially if that’s the one main line they go to, they no longer have any way to collect.
Risk departments are very important. It’s important for a sales rep to have a good relationship with the risk department or even someone higher up in that processor. Most of my clients don’t change processors. They whittle away at their rates and fees while keeping them with their current provider. Some clients need to switch processors.
I have a handful of processors I use, but there are some that I would never put certain clients with because that processor doesn’t understand that industry type. It’s going to be a nightmare for everyone involved. Transparently, it would be a nightmare for me as well. Who wants to get a call from an unhappy client? It’s no fun. Life is complicated enough. Let’s see if we can at least make one area of it as smooth as possible.
That makes sense. This has been awesome. Do you have any last-minute advice for people?
If you’re hand-entering credit card sales, make sure that there’s a ZIP code or that your system is asking for a ZIP code. If you are taking business cards, make sure your processor is capable of allowing your transactions to qualify for a low rate. Every single month, you need to look at your statement. If you do nothing else, look at your statement and find the total fees charged and the total volume you processed. Divide the total fees charged by the volume you processed and see what your net effective rate is or your NER.
It should fluctuate a little bit here and there every single month. If there’s a drastic change in that maybe by more than 0.3% or 0.4%, that could indicate some sort of issue. It could be your processor’s raised rates, but it’s indicative of something going on and you are paying too much. You can send me the statement and I can tell you why.
That’s what I was saying. You could do what I did. I said, “I suspect something is happening. I’m not exactly sure I understand why or how it’s happening. Cheryl, please help me.”
If you look at your statement and say, “I have no idea what this means, but it looks like a lot of money coming out every month,” the analysis is free. There’s no reason not to do it. You’ll make me happy because I get to look at another merchant statement.
I’m so glad you’re happy to do that. That’s weird.
That’s what makes the world go around. We all specialize.
We love weird for that very reason alone. Thank you so much for joining us today. It has been awesome. Everybody else, reach out to Cheryl. Especially if you were wondering, “What’s going on with my situation? Am I losing money? I have this leak in my money that I’ve never known I’ve had this entire time,” go ahead and ask Cheryl. There’s no risk to that. Have her take a look at your stuff. That’s how we get real value from the show. It’s one thing to learn from it. It’s another thing to take something, implement it, and watch your life start to change incrementally day after day and week after week. Thank you for joining us today. Make it a wonderful, prosperous, and hopefully, less cash-leaky week. We’ll talk to you later.
Thanks. Bye.
Important Links
- Cheryl McKenna – LinkedIn
- Passive Income Calculator