Credit Card Processing – DSP 339

Graham and Ashkahn delve into the wild world of credit card processing. There’s a massive industry of businesses that exist between when your customer swipes their credit card and when it goes into your bank account. The industry seems to be designed to be confusing and some companies only perform certain tasks, making it very difficult to compare services.

The guys give their advice on how to handle finding the right credit card processor for float centers and what to look out for when you’re on the hunt.

Sherpio – Convenient Credit Card Processor Recommendations & Reviews

HelmBot (Formerly Float Helm) – Operations, Task Management, and Scheduling Software for Float Centers

Listen to Just the Audio

Transcription of this episode… (in case you prefer reading)

Graham: All right, hello everybody.

Ashkahn: Hey.

Graham: I’m Graham.

Ashkahn: This is Ashkahn.

Graham: Those are our real names. We were wondering when-

Ashkahn: That’s what you think.

Graham: We were recording, that if it was going to be weird going from our voices into our voices.

Ashkahn: And it was a little bit.

Graham: It’s kind of weird, yeah.

Ashkahn: It’s weirder when you bring it up.

Graham: I thought I was clearing the air you know.

Ashkahn: No.

Graham: Like it was weird as long as I could-

Ashkahn: I feel weird.

Graham: Mention it. Today’s question in from the audience is “what pros and cons did you consider when looking”, cons, don’t get too excited.

Ashkahn: Oh okay keep going.

Graham: “You consider when looking for a credit card processor for online and in store credit card transactions?” You have anything to say? Usually what happens is we introduce ourselves, and then I ask a question, and then you kind of say-

Ashkahn: That’s a great question.

Graham: Yeah, that’s a good one-

Ashkahn: So here’s the deal with credit card processing is that it might be the most complicated-

Graham: It sucks.

Ashkahn: Part of human society-

Graham: It’s a sucky world, the need to wade through if you decide to get into it.

Ashkahn: It’s just insane, so between like your bank account, money coming out of your bank account and going into the bank account of the business that you just swiped a card at, there’s like-

Graham: A billion.

Ashkahn: 15 entities, oh yeah, somewhere between 15 and a billion entities that all take some role in the process, and all take a cut, and all add a layer of complexity. It’s just insane. It’s complete insanity.

Graham: It’s totally yeah, anyway. So we’ve actually gotten pretty deep into that world unfortunately for us.

Ashkahn: Yeah.

Graham: And we know a fair amount-

Ashkahn: 18 of a billion layers in.

Graham: I mean the amount that you need to know fortunately is probably a lot less. For example, if you go with software like MindBody for your scheduling, they already have their own payment processing built into it, and you’re not allowed, or at least not back when we were with them, you weren’t allowed to go with another payment processor I don’t think you are currently either.

So unless you want to go around, shop for your own payment processor, and kind of not use the built in stuff, and key it in manually but also put a card into a separate machine, it just gets a little wonky sometimes. Then you end up going with what they have, and their rates are definitely not the best, but it’s kind of what you’re stuck with, and that’s what you do. Other than that, it really just is kind of rates is what you’re looking at for the most part.

Ashkahn: Like what can be confusing about this is that sometimes a single company will handle like three levels of the process.

Graham: Yeah.

Ashkahn: So it’s like really hard sometimes to compare like company A to company B because company A might be doing something that company B is doing, but company B requires two other companies to make up for what … So it’s like when you’re just trying to compare one to another, you have to really know what you’re getting from each, and what level of service they’re providing. So like example is like Square is a really popular credit card processor now. So they do the credit card processing as well as the like distribution of their credit card processing rates and accounts and stuff like that, as well as full on front end point of sale software. Which is the stuff that like you would actually use as a business to sell a product and swipe somebody’s card in.

In other systems, like for our system like Float Helm, that’s three separate things. Like we’re the Float Helm doing the point of sale side, we have another company called Gravity Payments that is just like a distributor of the actual credit card processing technology company, which is authorize.net. So it’s like hard to compare Square to like one of those three things without comparing it to like all of those together. Like that’s where this can get really confusing.

Graham: Yeah, and there’s also flat rate versus interchange plus, is what it’s called. Which is basically, are you just getting charged a flat rate on every single card swipe that you have coming in? Like 2.75% or something like that, or are you getting charged whatever the credit card or debit card, it’s called an interchange rate, like everything has different rates, from debit cards are usually below 1% to process, and American Express is often above 3% to process. So taking the average of just what all of those different cards, different reward systems when you have things like you get airline miles for swiping a card, that’s actually getting pushed onto every merchant that you swipe that card at.

So any of those cards with benefits have a slightly higher rate that gets charged on every swipe, and that’s how they pay out the benefits. It’s not like the credit card company being nice, they just kind of charge you in this case as the merchant, who’s taking in the credit cards, extra money. Which is also sometimes why you see people not accept American Express, which is interesting. It’s just because they always have these kind of higher rates that get charged through.

But fundamentally, you need to decide on, some places will offer multiple styles, or some processors really lay heavily on that flat rate, it’s okay, one simple rate, you don’t need to understand that every card is different to know the intricacies of interchange to read your bill. It’s kind of the argument on that side, and on the other side if you’re taking a bunch of debit cards, and you have people coming through not with straight credit cards, then your interchange plus might actually end up being cheaper than a flat rate, and-

Ashkahn: Or the number of transactions, right?

Graham: Yeah the number of transactions.

Ashkahn: The things were set up like 10 cents per swipe plus this percentage, as opposed to just a completely flat fee, where if you’re doing 100 transactions versus 10,000 transactions, that 10 cents is going to add up.

Graham: Yeah, and in that sense, Float centers actually do a little better on some of this swiping than other businesses. If you’re selling things-

Ashkahn: High ticket items.

Graham: Yeah, habitually under $5 you really feel that extra like 10 cents, that extra 30 cents more. And yeah, since we’re selling things that are more in the 40 to $100 range, it’s not quite as bad when you get down to the nuance, so it is a lot of the percentage. Anyway, you don’t even need to understand all of this right, like it’s just to say that you can get into the weeds with this stuff, and it’s not only confusing, it’s almost designed to be confusing.

Ashkahn: Yeah.

Graham: Like these companies are essentially commodities, and the way that they convince you that they’re better than other people is lots of times just kind of like magic with numbers, they’re just switching things around and bundling different costs into extra percentages, and it’s actually even really hard to compare apples to apples with these credit card processors, like if you have three companies, which we’ve done, kind of get the best deals we can from three different companies, and negotiate them all against each other for a period of months. This is how we got the Gravity Payments, which we use for the Helm currently.

But the term sheets they give you have totally different line items, nothing quite means the same between people. I mean it’s really, they obfuscate it so that they can charge you more and you don’t quite understand where they’re getting that extra 0.2% that’s going to make their bottom line just a little bigger.

Ashkahn: And some of them can be as predatory as giving you a really good rate, but what you don’t realize you’re doing is signing up for a three year contract that is going to charge you a huge amount of money if you ever try to get rid of it, or sometimes they won’t tell you that the equipment to actually swipe the card as part of their system is going onto your account as a monthly like lease. That like you’re paying $50 a month to lease this credit card swiping terminal from them, like there’s these like weird hidden things in there that make it so that all of a sudden you’re just kind of blindsided by some things.

Graham: I mean, there are good companies out there that will process and be honest, and do good by you. But there also are a lot of people that are out to kind of fleece you, and pull one over and lock you into these contracts, and they’re a dime a dozen. I mean there’s not a week that goes by that I don’t get two to three new payment processors contacting us for the Helm side of things, wanting to partner up or something. And I’ve just had to like really only pay attention to the big multinational ones at this point, like you just can’t take every email or even politely decline them coming in, but that’s the hustle. There are a few big processors out there, and a ton of tinier resellers.

So everyone’s trying to be the one who gets the little cut of the action. So there’s really aggressive outbound sales, and yeah, I mean other than just the pure rates, getting into a contract that doesn’t have a monthly minimum, or you’re only locked into that company for like three months or something really tiny, I think is the way to go. Every decent company that I know out there does not lock you into even a year long contract, like there are yeah, there are many, many companies that will do right by you and not require that you stay on board. It’s like no we’ll just offer good rates, and you’ll want to stay on board, is how it should be.

Ashkahn: So now that you are probably confused, and this all sounds really overwhelming, let’s kind of back up for a second. Because from your perspective as a float center, there are going to be some decisions that could make it so that you can basically ignore pretty much everything we just said. Which is unlike a convenience store, where we’re just putting like price stickers on something and someone is coming and we’re punching those numbers in, and swiping someone’s card or something like that.

We typically have entire robust pieces of software that we use for booking appointments and allowing people to purchase things online, and buy memberships, and auto billing and all that sort of stuff, right? So the fact that you’re already getting some sort of software to handle your appointments and your money is a very good chance that software is going to have credit card processing kind of figured out, and it can range as far as what we said earlier, like MindBody-

Graham: Pre baked in.

Ashkahn: It’s pre baked in, this decision is not even yours to make if you wanted to. Like you’re just getting the credit card processing that’s in their system, if you’re going with that software. To where the Helm is somewhere in between, like we use authorize.net is the company that does the actual credit card processing, and there’s a bunch of different companies that can like set you up with authorize.net that all have slightly different rates, and different deals and stuff like that. So you can choose any company that specifically supports the way authorize.net processes credit cards, so there’s like another level of flexibility, but we also have a company that we found that is particularly good to work with, and we got a good rate, negotiated with, and is not out to kind of trick you and stuff like that. So there’s kind of a meeting-

Graham: Unless they also tricked us I guess.

Ashkahn: Other services where you, they have maybe a number of things on the authorize.net level, like multiple different credit card processors and you can just choose even at that point amongst which ones you want to go with and put your information into their system, or again do it completely separately. Have a system where you’re running your kind of information of what people are booking, but you’re running all the payments through a totally separate independent little payment terminal or you’re punching in the numbers and swiping cards, or using chips, with that level of flexibility it makes it easier to use things like Apple Pay, and Near Field Communication contact lists, payment systems and chip cards and all that sort of stuff that’s coming out nowadays.

Graham: Yeah, and if you do decide to use a totally different system than whatever your booking software is going with, that’s again where it does get a little complicated and you’ll have to start comparing different companies. But I mean again, paying attention to rates, if you are dealing with people who are interchange plus trying to get a sense of average bills for some of their current customers, at the range that you expect to be doing for credit card processing is a good way to get an estimate as opposed to just asking for the rate sheet, which will be really confusing. Again, yeah, just don’t get locked into any contracts right.

If you’re not locked into a contract, the worst that can happen as a result of any of this is you have to spend a little more time finding a better company.

Ashkahn: Or you may have bought like a $300 credit card terminal or something that may no longer work for you.

Graham: Yeah. Have a bridge somewhere that doesn’t go over a river.

Ashkahn: Out of sheer coincidence, I was talking to a friend of a friend who was starting literally a website that helps small businesses compare credit card processors, and find one that suits them well. So like you answer four or five questions about kind of the size of your business and what you’re looking for, and it like lists all of the credit card processors in your area and tells you the pros and cons, and rate comparisons and stuff.

Graham: C-O-N?

Ashkahn: That’s convenient, we’ll put that in the show notes, and it’s a very early I think in their process of starting that up as a website, but it just came across me like a week ago, and here we are, already coming in handy.

Graham: Awesome. Cool, yeah, so that’ll be in the show notes. Anything else? I think that’s about it, that I have to say on credit card processing, other than like if you find yourself really spending your nights delving deep into this stuff so that you can finally understand what’s going on, just stop. You have better things to spend your time on. Don’t waste too much time getting too deep into this stuff.

Ashkahn: Yeah, like I would definitely go with convenience over slight cost saving. Like you can spend all day trying to find like 0.01% better rate on something, but at the end of the day you’re talking about probably under $100 difference per month for your business, as opposed to like having to have an entire external payment system. Just don’t go too out of your way to make something work. If there’s already kind of more integrated solutions that are going to work for you.

Graham: And, if you have questions of your own, cruise on down to FloatTankSolutions.com.

Ashkahn: Yeah.

Graham: Slash podcast.

Ashkahn: Slash podcast. That’s the slash you want. We’ll talk to you tomorrow.

Graham: Bye everyone.

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