Credit Card Processing

NOTE: To change the image on this slide, select the picture and delete it. Then click the Pictures icon in Credit Card the placeholder to insert your Processing: own image. What Your Nonprofit Needs to Know Presenter: Erik Verryden, Founder/CEO National Processing Solutions (NPS) 602-892-5047 [email protected] www.npsaz.com

Card Brands / Associations Card Issuers Acquirer / Processor (Merchant Service Provider)

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• Visa • CITI • MasterCard • Capital One • Discover • Amex • Chase

• Provides usage of worldwide logo • Allows consumer to use the card with merchants • Considered an ‘Interchange’ Fee Issuer’s Responsibilities

• Issues line of credit to the consumer • Assumes great risk that they may never be paid back by the consumer • Uses marketing to sign new consumers and convince them to spend on the card • Provides customer service

* Also considered an ‘Interchange’ Fee Processor Responsibilities

• Fund the business in 1 to 2 days • Responsible for marketing to new clients • Offers support & service to the business • Assumes Risk: • Potential Fraudulent Charges • Disputed Charges from the Consumer

Did you know? A not for profit organization is one of the lowest risk entities as a donation is rarely disputed and not many thieves that steal a card make a donation with it… Now that we’ve gone over each parties’ responsibilities…

Let’s go over how much those fees are for them to provide their services. But First: Two Definitions

What is a Basis Point? Swiped VS. Keyed • A basis point is a unit of • Swiped means the card is measure for interest rates and present and it is physically percentages. swiped or inserted into the terminal • One basis point is equivalent to 0.01% (1/100 of a percent) or .0001 in decimal form. • Keyed means the card is literally typed into either a .0050 = .50% (fifty basis points) terminal or the customer types it in online .010 = 1.00% (one hundred basis points) Association Fees

Typically 0.13% - 0.15% basis points, multiplied by their own card processing volumes.

$ (IE: .0015 x $10,000 in Visa volume = $15.00). Association Fees

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Consumer Shops Card Swiped If Data not Higher Rates or Donates Captured Fully For You Issuer Fees

Credit vs Debit Issuer Fees - Credit Fees

Credit

Standard Standard Keyed In Visa / Business Cards Swiped Visa Rewards Card & Transactions Per Transaction

• 1.50% - • 1.65% - • 2.10%- • $0.10 1.60% 2.00% 3.25% Issuer Fees Debit Fees

*A debit card is considered ‘Regulated’ if Debit it comes from a bank with $10Billion in assets or higher.

Regulated Swiped/ Non-Regulated Non-Regulated Per Regulated Per Non-Regulated Keyed Card Swiped Card Keyed Card Transaction Transaction

• 1.65% - • 0.05% • 0.80% • $0.21 • $0.10 1.90% Issuer Fees

Woo! Credit vs Debit “Charitable Rates” 1.35% plus $0.05 cents for a Visa credit transaction taken online through your donate button Now onto the Processor… Processor Fees

We know the Processor needs to bill on top of ‘Interchange’ to make revenue… but HOW MUCH is the question. $ • Unregulated Industry • Quoted vs. Actual Billings • Average markup to cover associated costs 0.10% - 0.50% Now what you need to be aware of is what type of pricing model your PROCESSOR is billing you on.

Tiered Pricing or Interchange plus Pricing The Two Basic Pricing Structures Your Processor has to Choose From

Tiered Pricing – Simplistic but Interchange Plus Pricing – possibly more expensive Transparent & typically lower cost Tiered Pricing *Business does not pay interchange fees directly

Business Pays the Processor Tiered Rates

Processor Pays Interchange on Behalf of the Business This allows the processor to classify interchange fees under its own rate structure by assigning individual interchange categories. • Qualified • Mid-Qualified • Non-Qualified Typical Tiered Structure

Interchange Category Interchange Fee Processor’s Tiered Processing Markup Rates Debit Regulated 0.05% + $0.21 Qualified: 1.64% + $0.04 Debit Unregulated 0.80% + $0.20 1.69% + $0.25 0.89% + $0.05 Credit Standard Swiped 1.65% + $0.10 0.04% + $0.15

Credit Charity Online 1.35% + $0.05 Mid Qualified: 0.90% + $0.20 2.25% + $0.25 Credit Business – 2.10% + $0.10 Non Qualified: 0.90% + $0.15 Keyed w/o address 3.00% + $0.25 Square & PayPal’s Structure

Category Interchange Fee Processor’s Tiered Rates Processing Markup

PayPal Debit 0.05% + $0.21 1.99% + $0.25 1.94% + $0.04 PayPal Credit 2.00% + $0.10 3.00% + $0.25 1.00% + $0.15 PayPal Charity 1.35% + $0.05 2.20% + $0.30 0.85% + $0.25 Square Debit 0.05% + $0.21 2.75% 2.70% Square Credit 1.65% + $0.10 2.75% 1.10% Square Charity 1.35% + $0.05 2.75% 1.40% Interchange Plus Pricing *Term used to describe a merchant account pricing model where a fixed markup is applied directly to interchange fees published by Visa and MasterCard.

• Markup isn't dependent on interchange qualification. • Keeps the processors markup the same regardless of: • the type of card you accept, • or how you process it.

There are no qualified, mid-qualified or non-qualified rates with interchange plus. The processor earns a fixed percentage regardless of the underlying interchange. Interchange Plus Pricing – How WE Structure

Category Interchange Fee Your Total Rate Markup

Debit Swiped 0.05% + $0.21 0.30% + $0.31 0.25% + $0.10 Credit Swiped 1.65% + $0.10 1.90% + $0.20 0.25% + $0.10 Charity Swiped 1.35% + $0.05 1.60% + $0.15 0.25% + $0.10 Debit Keyed 0.05% + $0.21 0.30% + $0.31 0.25% + $0.10 Credit Keyed 2.00% + $0.10 2.25% + $0.20 0.25% + $0.10 Charity Keyed 1.35% + $0.05 1.60% + $0.15 0.25% + $0.10 The Two Basic Pricing Structures Your Processor has to Choose From

Woo!

Tiered Pricing – Simplistic but Interchange Plus Pricing – possibly more expensive Transparent & typically lower cost ? Read your statement. But what should you look for? If You’re on a Tiered Structure, You’ll see these key words.... • Qualified

• Mid Qualified

• Non Qualified

• One flat rate

• One rate for Swiped • One rate for Keyed If You’re Interchange Plus Pricing, You’ll see the following….

• Each Card Type’s Actual Name • Corporate Cards • Rewards Cards • Regulated Debit cards • Additional line items with each rate associated

• Full Control • Bill & Report Whatever they Want • Undisclosed Extra “Fees” • Usually Hidden as Interchange Interchange Fees Increase Twice a Year Interchange increases are usually small and help handle new risks. The Processors get the first chance to decide what THEY want to do with the new rates. Do they….

• Pass the costs directly on to the client with no additional markup • Absorb these costs directly and not pass them through to the client • Markup these costs and tell the client they are just passing along their costs directly to the client How much are the Interchange Increases?

• Just a few pennies per specific card brand (ie. Visa) • Or minimal amount of basis points between .01%-.02% on specific card brands and types

*Processor legally has to give you a 30 day written notice Hidden in the fine print… some processors will “pad” the rate increases with their own markups.

Typical Markups:

• 0.05% - 0.10% on ALL cards • $0.05 cents on ALL sales What’s the best thing to do? Read your statement. Other Fees to Look Out For

• Annual fees higher than $100 • Semi Annual fees higher than $50 • Quarterly fees higher than $25 • PCI fees higher than $5/per month • Anything reading ‘miscellaneous’ monthly fee • Any type of ‘compliance’ or ‘non compliance’ fee What’s Non-Compliance?

Non compliance charges can mean a couple of things: • You as the business are really non compliant in how you are storing card information and may be susceptible to more fines • You are compliant but have not taken the annual questionnaire or completed the quarterly scan on your systems • You have completed one of either in number 2 but your Processor just continues to bill you and make profit How to Stay Compliant

Never store Secure your Include a Never email card card info on online shopping “Captcha” on information or ask paper or a cart with privacy your site to a client to send this computer policies stop robots info via email Annual Compliance Survey If you have completed this you should NOT be billed a Non compliance fee from your Processor.

Non compliance fees typically are $19.95-$24.95 / mo

We Give. You Grow.

NPS Gives turns a necessary expense to even accept a donation, into a new flow of monthly revenue for your nonprofit. NPS will Give 20% of the revenue earned from your processing right back to your organization. It’s consistent, flexible, and most of all SIMPLE funding back to your nonprofit!

Copyright 2003 – 2017 DBA: National Processing Solutions; Verrywest Enterprises LLC NOTE: To change the image on this slide, select the picture and delete it. Then click the Pictures icon in the placeholder to insert your own image. Erik Verryden, Founder/CEO National Processing Solutions (NPS) 602-892-5047 [email protected] www.npsaz.com