Posted by Erik Verryden, National Processing Solutions Inc.
The following post was written by Erik Verryden of National Processing Solutions Inc., PDRA’s partner for credit card processing services. In this post, he covers the following three topics:
- The impact of the Durbin Amendment on the processing cost of debit cards;
- The IRS’ watchful eye on your card processing activity; and
- The ease of signing up for an account with NPS
Impact of the Durbin Amendment
On Oct. 1, 2011, the government stepped into our industry for the first time after complaints of rising costs of debit cards. The government made the decision to lower the “cost” from .95% and .15 cents to .05% and .22 cents.
This was supposed to help small merchants right? Wrong.
While it would save .83 cents on a $100 sale, there are two oversights that occurred:
- That new rate only applies to regulated debit cards, meaning it applies to banks having $10 billion-plus in assets or if the card falls under certain parameters. Since October, we have noticed that only 47.13% of all debit cards meet these requirements nationwide.
- Smaller ticket merchants take the biggest hit. Previously, interchange cost on small tickets was 1.60% plus .05 cents. The percentage really isn’t an issue with items of $20 or less, whereas the transaction fee is. The new cost being .22 cents really hit these merchants hard.
For those in the home improvement industry, the higher transaction fees might not be that pertinent to most. However, what’s important to know is if you’ve been told that the Durbin Amendment will decrease your cost on every debit card, that is not the case. With the PDRA and NPS, you will have costs directly passed on from Visa and MasterCard, and thus it is our duty to inform you what these are.
The most common Visa and MasterCard debit costs will be as follows:
• Regulated Swiped Debit (including Small Ticket)—.05% + .22 cents
• Non-Regulated Swiped Debit—.95% + .15 cents
• Keyed Debit—1.60% + .15 cents
• Small Ticket Non-Regulated Debit—1.60% + .05 cents
IRS Regulations
As some have already noticed, you received a 1099 form from your processor this year. The IRS also stepped into our industry and has a watchful eye on all card income. The IRS has assessed penalties and fees if your Federal Tax ID/SSN and legal name your credit card processor has on file does NOT match what you have on your tax return. The IRS started assessing a monthly fee of approximately $20, and if it is a mismatch after January 2013, they will withhold 28 percent of all of your funds for up to one year!
The way to prevent this is to make sure your processor has the correct information in your file. If you are a client of ours, we will notify you if you are still a mismatch in our system.
Signing Up for an Account with NPS
One thing I have encountered when sending over applications to a potential merchant is that once the application is opened, they can become overwhelmed. I agree. At first glance, the application can look very confusing. Keep in mind that these applications are cookie-cutter and written for every business out there, so there are multiple areas that do not pertain to your business.
Here are some helpful tips:
- Every section that needs to be filled out will have brackets around it on both sides.
- There are a total of three places for initials, followed by two lines for signatures as well as the last page with 1 signature required. So a total of three and three.
- Include a copy of a depository check and fax or email back to us.
- Of course, you can ALWAYS have us walk you through the application over the phone. That will take approximately three to five minutes.
- Once received, it typically takes two to three business days to activate the account
- If we are using your current terminal, all that is needed after activation is a call from our staff to walk you through a reprogram of that terminal.
- If you are using a terminal from us, then it will be shipped out to you already programmed. All you need to do is plug it in.
All in all, it’s a real simple process and whether switching mid-month or at the start of the next month, it really makes no difference. You will not be double billed for your processing costs once your terminal is on our network. All you need to do is call to cancel your current/old processor.
I hope this was informative. If you have any questions, feel free to email me @ erikv@npsmerchant.com.
Tags: credit cards
