Hi, my name is James Shepherd.
Today I want to talk to you about how to read a merchant processing statement that’s on
tier pricing.
Now how do you know that a statement is on tier pricing?
Well, it’s actually pretty simple.
When you look at that statement, if you see words like qualified, mid-qualified, non-qualified,
it’s tier pricing.
Now usually they’re going to have those words shortened to qual or m-qual or mid-qualified
Right?
n-qual, non-qualified.
So you’ll see various abbreviations of this, but when you’re looking for it, it’s pretty
obvious.
So qualified, mid-qualified, and non-qualified, this is tier pricing.
So before I explain how to tell if the fees are competitive, let’s talk about what it
is.
What is tier pricing?
Well, in our industry there is actually about four or five hundred different rates for a
transaction that could run and these are called interchange rates.
We are going to talk a little bit more in depth about that in the next video, but in
our industry, we have all these different rates.
So many credit card processing companies have said, “Rather than passing those costs on
to a merchant where it’s you know you’re looking at a statement and you’re just seeing
like a huge table of all these different costs,” which can be a little confusing and complex,
instead the processor says, “We’re going to take this group of those transactions based
on certain criteria,” which we’ll talk about, “and we’re going to make those
mid-qualified.
We’re going to take this next group and we’re going to make those non-qualified.
We’re going to take this group and make them qualified.”
They’re going to put them into buckets.
Okay, and each bucket has a flat rate.
So it’s kind of like flat rate pricing, but there is like three to six different rates.
Depending on the type of transaction, it goes into one of these tiers, buckets, rates, whatever
you want to call it.
That’s tier pricing.
That’s what it is.
Okay, now how can we tell if our rates are competitive?
Well, the first thing that you actually need to look at and this is the biggest mistake
people make, when they look at tier pricing is they look at it and they go, “What are
my rates?”
That’s actually not the most important thing to look at that’s going to determine your
fees.
You would think, “Well, of course it is.
It’s my rate.”
No, what’s actually going to determine your fees more than your rate is your card mix.
In other words, what percentage of your transactions are qualified versus mid-qualified versus
non-qualified?
Because what a lot of credit card processing companies will do is they will have these
rules because there is no industry rules or regulations about which transactions go at
the lower rate versus the higher rate.
Okay, so what a lot of credit card processing companies will do is they’ll say, “Well,
we’re just going to put all, we’re going to give you a really, really good qualified
rate, which is the lowest rate, but we’re going to put very few of your transactions
into that bucket and we’re going to put most of your transactions into the non-qualified,
which is the highest rate.
Okay, so you need to look at that and see where you’re at.
So how can you tell if your card mix is a little bit screwed up?
Well, there is a couple ways.
The easiest way is this: If you’re a physical location business, you know you’re a retailor,
restaurant, auto repair shop, really you should see 70%, 60 to 70% of your transactions should
be qualified.
Okay, the others should be split fairly evenly between non-qualified and mid-qualified.
So mid-qualified is the middle one.
Non-qualified is the highest rate.
Okay, so they should be split about evenly, but importantly 60 to 70% of your transactions
should be qualified.
If they’re not, odds are you probably have some potential savings there because there
is really not a lot of reasons why a physical location business would not have the majority
of their transactions be qualified.
Now the second way to figure out if you’re competitive is to actually understand why
a transaction should go into qualified, mid-qualified, or non-qualified.
Okay, here we go.
Qualified transactions should and again there is no hard and fast rule across the industry,
but they should be transactions with regular card types that are swiped through the terminal.
So if you look at a statement and you see that wow, there is you know 60% mid-qualified,
well maybe it is a pizza shop and if you’re looking at a pizza shop statement, well, it
could be that there is a lot of phone orders for delivery.
Right?
So think about what percentage of the orders on this statement are phone orders and that
percentage should be in that mid-qualified bucket, not qualified.
Why?
Because they are not swiped through the terminal.
So again, the qualified transactions would be regular cards, so not corporate rewards
cards, not platinum cards, you know regular cards, credit cards and debit cards, credit
cards and signature debit that are swiped or insert the chip into the terminal, physically
processed at the terminal.
Those should be qualified transactions.
Okay.
The second one is mid-qualified.
I already mentioned one, which is the method of entry.
So if a transaction is maybe you have an online shopping cart, on the statement there is an
online shopping cart there.
Maybe there is phone orders that are going in.
Whatever it is, the method of entry.
It’s not swiped through the terminal.
It’s not, the cards aren’t inserted in the terminal.
Those should be mid-qualified transactions, if they’re standard card types.
Also, there should be some of the lower cost rewards cards.
So the type of card really determines the interchange costs or the underlying cost of
running that transaction for the processor.
So of course, if the cost is really high for a transaction, they are going to put it into
the highest bucket.
So there are rewards cards that don’t have a really high cost and those are going to
be in the mid-qualified bucket.
Then based on the card type, those are rewards cards, corporate cards, so if you’re a large
ticket merchant, or if you do a lot of business to business, those transactions are probably
all going to go into the non-qualified bucket.
Okay, which is the highest cost bucket.
So the first thing to look at is that card mix.
All right, and make sure that based on what I just said, make sure the statement adds
up based on the way that the business is actually processing transactions.
Okay, so then the next thing you want to look at is the rates, the rates.
Well, with the rates, I’m actually not even going to get into mid-qualified and non-qualified
because I’m going to give you another way to figure that out in a second, but as far
as qualified, there is really two things you need to look at.
First of all, is this particular statement on 3 tier, or 4 tier pricing there because
if it’s on 4 tier pricing that means there are actually two different qualified rates.
There is one qualified rate for debit cards and check cards.
There is a different qualified rate for credit cards.
Okay, if that’s the case, usually those costs are going to be a little bit lower than
a blended qualified rate.
So I would always recommend that if possible, try to change your qualified statement there,
try to get those statements on 4 tier pricing, where you have that lower qualified rate for
check cards and debit cards because the underlying cost is just a lot less expensive.
So many times just taking a statement and changing the qualified from blended rate,
where you have one qualified rate to split rate, where you have check card qualified
and credit card qualified, that can do a lot of savings.
Now maybe at some point in this video, I lost you and you’re like, “James, I’m sorry.
I don’t know what you’re talking about anymore.”
That’s totally fine.
Okay, I’ve seen literally thousands of statements, so it’s a little easier for me to talk about
it and understand it.
But here’s what I’ve done.
I’ve created a website for you.
It’s examplemerchantquote.com, examplemerchantquote.com.
You don’t need to sign in, or log in, or have an account or anything like that.
You just go there.
Select a business type on the statement.
Put in the total volume from the statement.
Put in the total fees from the statement and if you have questions about where to find
those, look at the last video that we did on the effective rate.
Put that information in.
Create a quote and right off the bat, you’re going to see everything.
We’ll email you a PDF version of the quote.
You can just check it out right there.
Why do we do that?
Because we have a great quote tool.
Okay, we have our instant quote tool that we use for agents in this industry and ISOs
that want to provide accurate quotes.
So this is an example, like an approximate quote.
You could also send in a statement, if you want us to take a look at that to really get
a full side by side comparison because our tool does statement analysis, like a full
side by side statement analysis, or it could just do a really quick, down and dirty, real
fast approximate estimate based on our huge database of statements that we have.
So two things I’ll give you real quick.
Go to examplemerchantquote.com to check out and see, are the fees I’m paying competitive?
Okay, on this statement, are these fees on this statement competitive?
The second thing I’ll tell you is my email address: james@ccsalespro.com, james@ccsalespro.com.
If you have questions, looking for help in anyway in this industry, I’ve been in the
industry about 11 years now.
I know just about everybody in the industry, all the different companies, and so I’d
look forward to working with you and helping you in anyway that I can.
Just reach out james@ccsalespro.com.
I hope you have an awesome day!