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You’re the Boss Blog: Processing Credit Cards and Anger

April 9, 2013 by Leave a Comment
Staying Alive

The struggles of a business trying to survive.

I’d like to thank everyone who took time to comment on my posts on searching for credit card processing. Many of those comments shed additional light on aspects of the experience that I, for the sake of brevity and clarity, left out. As I hope I made clear, the world of card processing is extremely complex. Here are a few further thoughts, in no particular order:

Obviously, there is no one best solution for everyone. You will need to identify the size of your typical transaction and project a monthly charge volume in order to start the shopping process. My situation is unusual in that my transaction size is large and I never swipe cards. If I were running a restaurant or a store, I would have different needs. But I am sure that every merchant would benefit from a deal that has no fixed term and that you can get out of at minimum cost. Many providers are willing to waive term requirements and cancellation fees.

It also seems that leasing a terminal is a bad idea — it is much less expensive to buy one. Another warning that everyone should heed is to enter a personal identification number with debit card transactions. If you don’t, you will be charged very high interchange fees, instead of the low costs mandated by the Durbin Amendment.

My posts concentrated on the structure of the deal and short-changed discussion of pricing alternatives. Commenters were divided into two camps: those who favored interchange-plus pricing and those who liked a fixed fee, as offered by services like Square and Stripe. Nobody had anything good to say about tiered pricing (that link goes to an article that is informative but has a definite point of view). And there are still other pricing options out there. If you are looking for a short, authoritative look at all of the pricing alternatives, I wish you luck. The most comprehensive page I found was at Wikipedia. It offers concise definitions for the terms you might run across in your search but little guidance as to what might be the best choice. All of the other information I ran across was provided by someone who was trying to sell a particular type of transaction and should be understood in that context.

That said, I was intrigued with the service offered by CardFellow. This site allows you to submit information about your business and get offers from various processors. I tried it out and was quickly contacted by a company that promised me interchange plus .1 percent, a very attractive rate, along with a no-term contract and waiver of all cancellation fees. That seems to be about as low a price as anyone will offer. The accompanying agreement that I reviewed had all of the usual unfair provisions — the acquiring bank can levy a reserve account and change the deal any time it wishes. I have not seen an agreement that omitted all of this, but perhaps someone, somewhere, is offering one (let us know!). What I liked about CardFellow was the opportunity to get a variety of quotes and the site’s well written blog (not unbiased, but informative).

If you are looking for a single place to see reviews of various merchant service providers, take a look at Merchant Maverick. I came across this site while searching for information on CardFellow, and I read a few reviews. I liked the format. I have no idea whether it is doing a good job, but at least it offers a point of view. It didn’t offer reviews of PNC or Emerald World, but it did review Wells Fargo and WorldPay, both of which I have dealt with — and those reviews seemed to comport with my limited experiences. Merchant Maverick also has reviews of point-of-sale systems and shopping-cart providers — something for everybody!

Nobody had much to say about American Express. It seems as if we are all stuck with the company’s high fees and slow payment. Last year, about a third of my card transactions were American Express transactions, and I paid a little less than 4 percent in fees. I should probably stop accepting American Express — it is of no benefit to me, as a merchant. I would bet that most of the people who offer us an American Express card also have a regular credit card and that refusing it wouldn’t cost me sales.

One point that did not come up in comments but that I thought about a lot during this ordeal was whether worrying about credit card fees was a good use of my time. Here’s the sad math: even if I cut my card processing costs in half, my savings would be 2 percent of $400,000. The $8,000 savings is not insignificant, but there are many issues I could have spent time on that might have yielded similar or greater savings.

The more I learned about the credit card industry, the angrier I got, but rage is not a great reason to burn a lot of hours on a project. My free time is precious. I always have a list of things I can do to improve profitability. For example, I could have been working on my pricing spreadsheets to make our quotes more accurate. Or I could have dug deeply into our labor costs, or spent time on the shop floor making sure our procedures are as efficient as possible.

Credit card costs are on that list, but a rational analysis probably wouldn’t place them at the top. There is much more money to be saved elsewhere. Of course, the service providers know this, and the market is clearly structured on the assumption that this is true for the vast majority of small businesses — it takes a huge amount of time to figure out what is going on, and at a certain point, most merchants will give up and accept the deal that is being offered, just to get it over with. That’s what I did – after all of the time I spent with Wells Fargo and Citizens, I decided to just pull the trigger on Emerald World. It was a much better deal than I had at the time with PNC, so I went ahead with it. Now that commenters have exposed more options for my consideration, I may or may not revisit the issue. I’ll work with Emerald World for a while and see what happens.

I hope that the hours I spent on this project are of use to you. If anyone has anything further to add, please comment.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside Philadelphia.

Article source: http://boss.blogs.nytimes.com/2013/04/09/processing-credit-cards-and-anger/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

German Central Bank Doubles Reserves

March 12, 2013 by Leave a Comment

The Bundesbank said it raised its risk provisions, money it sets aside to cover losses such as a default on euro zone bond holdings, to 14.4 billion euros, or $18.7 billion, from 7.7 billion euros a year earlier. The bank’s profit for the year, which it transfers to the German government, was little changed, rising to 664 million euros from 643 million euros.

Jens Weidmann, the Bundesbank president, said the increase in loss reserves “takes appropriate account of the risks on the Bundesbank’s balance sheet.”

But the decision to set aside further billions may also be interpreted as a verdict by Mr. Weidmann on the European Central Bank’s measures he has long criticized, such as purchases of Italian and Greek government bonds to try to keep those countries’ borrowing costs under control.

Mr. Weidmann, a member of the European bank’s governing council, has played the role of Cassandra as Mario Draghi, the  bank’s president, has led a vast expansion of the central bank’s powers.

Fears the euro zone will crumble have receded since Mr. Draghi promised last year to buy bonds of troubled euro zone countries to contain their borrowing costs. But Mr. Weidmann has often complained that the E.C.B. has gone too far, endangering its independence from political leaders and its mandate to guard price stability above all else.

On Tuesday Mr. Weidmann repeated his contention that the best solution to the euro zone crisis is for countries to get government spending under control and improve the performance of their economies. He said that relative calm on financial markets was due not only to bank policy, but also to progress by political leaders.

“The reduction of tension on financial markets should by no means lead to neglect of the necessary structural reforms,” Mr. Weidmann said in a statement.

The Bundesbank decision to bolster its reserves may also reinforce fears among Germans that their money is at risk because of European bank policies designed to keep the euro zone from falling apart. The Bundesbank is one of Germany’s most respected institutions, widely regarded as a bulwark against less prudent members of the euro zone.

Since 2010 the E.C.B. has acquired bonds from troubled euro zone countries valued at 209 billion euros, with Italian government bonds accounting for nearly half of that amount. In an attempt to encourage lending to businesses and consumers, the E.C.B. has also vastly expanded the collateral that commercial banks can post in return for cheap central bank loans.

The 17 national central banks in the euro zone, which carry out much of the work involved in running a currency union, would share the losses if a country were to default on its bonds or if collateral posted by a bank were to lose value.

Among Germans, there is widespread fear that Germany would bear much more than its share of the cost if the euro zone fell apart. The Bundesbank acts as the clearinghouse for large transactions in the currency zone, and other central banks have what amount to large overdrafts.

At a press conference to present the Bundesbank’s annual results, Mr. Weidmann repeated warnings that France was slipping behind because of its failure to make economic reforms. But he acknowledged that E.C.B. policies had not yet led to an increase in inflation.

“In the short term, we in the euro area have, if anything, declining inflation risks,” he said. Mr. Weidmann also said the German economy was in good shape.

The Bundesbank, like other central banks in the euro zone, continues to do much of the day-to-day work of the euro zone, including making sure there is enough money in circulation, storing gold reserves and acting as go-between for large payments between commercial banks.

Its activities generate interest income, which totaled 11 billon euros last year, up from 8.6 billion euros in 2011. The Bundesbank’s profit, however, has plunged 90 percent since the financial crisis began in 2008, as the bank set aside ever larger sums to cover risk.

Article source: http://www.nytimes.com/2013/03/13/business/global/german-central-bank-doubles-reserves.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: Deutsche Bank Taps Co-C.E.O.’s to Replace Ackermann

July 25, 2011 by Leave a Comment

Deutsche Bank named Anshu Jain, left, and Juergen Fitschen as co-chiefs.ReutersDeutsche Bank named Anshu Jain, left, and Jürgen Fitschen as co-chiefs.

FRANKFURT — Deutsche Bank resolved a leadership crisis on Monday, saying that Anshu Jain, head of its investment bank, and Jürgen Fitschen, head of the bank’s German unit, will share chief executive duties at the country’s largest lender starting next year.

Josef Ackermann, who has been chief executive for a decade, is likely to become chairman of the supervisory board in early 2012, Deutsche Bank said in a statement. Clemens Börsig, current chairman of the board, will step down from the part-time position.

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“I’m humbled and honored at having been asked to lead this great institution together with Jürgen,” Mr. Jain said in a statement.

Mr. Ackermann had already postponed his planned retirement because of problems finding a successor. Tension between Mr. Ackermann and Mr. Börsig had broken into the open as they quarreled about the best solution.

Investors favored Mr. Jain, whose unit supplies the greatest share of profits, as chief executive. But Mr. Jain, a native of India who is not fluent in German, was regarded as not ready to assume the statesmanlike duties expected of the head of an institution that holds a prominent place in the nation’s identity.

Mr. Fitschen is expected to help overcome reservations by Deutsche Bank staff members about Mr. Jain. German employee representatives make up half the members of the supervisory board and thus have a strong say in the decision.

Article source: http://dealbook.nytimes.com/2011/07/25/deutsche-bank-taps-co-ceos-to-replace-ackermann/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,