Gift Cards: The Gift That Keeps on Giving

Gift Cards have been growing tremendously in the last 3-4 years and shouldn't slow down anytime soon, mostly because credit card use is not slowing down. They are quick, easy, portable, and obviously transferable.

Gift Cards can also have any look your team can create. Since they are highly customizable, they are simply used as another advertising medium and help lend credibility to your business. This is because we all assume when looking at nice and shiny, new gift cards that they is some incredible infrastructure behind it. There is of course, but the main thing is how easy they are to get and use, and how that infrastructure gives smaller businesses more weight.

Better yet is the increased sale. Besides the bird-in-the-hand principle, we generally miss something. If a wife buys her husband a gift card at a store, the store has created two customers being her husband, and now her. As well, if she gives him a $50 gift card, he will normally spend that plus an extra 10-50% more. Why? Because he doesn't want to waste any of his gift. If he only buys $48.95 worth of goods, there is money left on the card. He must throw in some extra to get the full value of the gift. What does he care? He just got a $75 item for $25 in cash.

I have dealt with several large firms in this field, but I always compare with a smaller group who can be more mobile and really want my business. There are companies out there like GiveX, Valutec, and a host of processors that already have their own deals. If you have a merchant account, ask your rep about gift cards. Then double check what they can do for you. A smaller firm that I often recommend is World Gift Card. I have personally held in my hand several of their card samples and have always been amazed at what they can put out in terms of some really fine cards.

Why Won't My Checks Scan?

Businesses are more and more realizing that checks did not completely die out. In fact, some businesses are still getting as much as 60% of their income from checks. While those may be rare, there is still a place in this old world for the custom bank note. I spend a certain amount of time on this in What About Checks? and Safer Checks, Really? However, for those of you scanning checks now, here are some answers to the questions that I have been getting. Please remember, that this is not an exhaustive list, but merely a basic set of facts to start from.

Custom Checks
One of the new reasons checks won't scan or get declined popping up these days is the use of custom checks. Everybody gets these ads for vanity checks and I have no issue with wanting Scooby Doo or Justice League/ Super Friends style checks. The problem arises in the fact that these tend to be of lesser quality than those you get from your bank. That is because your bank wants to double-down make sure your checks go through so they purchase from very high quality check makers like Harland. You see a check has a magnetic ink number on the bottom. Check readers known as MICR (mag ink character recognition, pronounced: "micker") readers basically work like a VCR reading the mag ink numbers. If those are not done well, the check will either not scan or simply get declined.

Number Scratch
Sometimes these mag ink numbers get drawn or scribbled through when one signs their name. Depending on how hard your customer writes their name, the quality of the check (such as a vanity check), or whether a ball point pen's pressure scratches off part of the ink can affect the check's viability. Suggest the customer signs a check not touching the number with their signature.

Checking History
Your customer's check writing history will affect whether or not a check goes through. Now this speaks more to Check Guarantee and does not affect Remote Deposit at all. Remember Remote Deposit is the same as going to the bank without physically going there at all. However, Guarantee is asking for the ISO or Processor to front you the money and collect the payment from the check writer. That means risk. The customer might only be writing a $10 check against a bank account with $10,000 in it, but if they have a history of bouncing checks, it will most likely be declined. If that sounds like a credit history, it is. It's simply using paper instead of plastic and you are not even at the grocery store.

Not Enough Money
OK, I had to say it. The main reason we all know a check won't scan or get an approval is how much they have in the bank. This is a direct check and they will look.

These are still just the basic things support systems look for when a business is having trouble scanning checks. There are always more. If you think your business has seen a unique situation, I'd love to hear it. Post your query and maybe we'll send you a free ad that we get every week in a Value Pack for some checks with your favorite cartoon on it.

Sky Miles Cost Your Business... Not Delta

It's amazing what this industry does and who really pays the bill. If you are a business owner that has a merchant account, then it's you. Sorry to break the bad news. But let me give you an example.

Rewards Cards.

Let's say a customer with a Delta Sky Miles card comes in to your shop. Yay, money! Actually, it's less money than you think. You see Mr. Customer comes in and uses his Sky Miles card and makes some purchases. Well, because he used that card, he just got a bonus. Well bonuses ain't free my friend. So who paid the bill? Well duh, it MUST have been Delta. After all, it was a Delta Sky Miles card, right?

Wrong, wrong, wrong.

Your business paid it. The customer got the sky miles, Delta got the glory, and you got a sale, minus your credit card percentage AND minus the rewards card percentage that was used to pay the customer (which was at the time of this writing which was 0.3%). That's not so bad... is it?

Of course it's bad. It's more and it's way, way more. If you were a retail shop and you had a good rate of let's say 1.76% then you just paid 2.06% so Delta, or whomever, could reward their card holders with your profits. That's what it really comes down to is profit sharing, they just do it with other people's money. After all Tom Sawyer only got everyone to do his chores by convincing them it was fun. If he saw this ring, he would be so proud.

Here's the worst of it: There is nothing that you can do. This article is merely an eye-opener. You must be aware of the problem. However, one's business cannot refuse a credit card or they can possibly get delisted. After all, why do you think Discover cost what it did? They would give rewards to their customers by charging the businesses a premium. Unfortunately it's our society driving the sales which hurt the companies. They want rewards, so you foot the bill.

Percentages can Grow Overnight... not just Beanstalks

"But I'm in a contract..." is a phrase that never gets un-funny to me. The number of times I have consulted people and groups that said they were fine as they were "in a contract" is difficult to be counted. The number of those groups that were paying too much is easy. It's over 99%. Seriously, with the cell phone companies out there now, does anyone really think a contract protects them?

Sadly, many do and the industry is glad of it. In truth, the rate goes up constantly, but here is the good news: You can have your account reviewed once a year. That's right. Once per fiscal year, you may request that your account and its rate be reviewed even if you're in a contract (By the way, everyone is in a contract that has a merchant account).

Here's the bad news: So what? All they have to do is say that the Fed Rate and MC-Visa went up and that you just hit a brick wall. This is why you need an advocate on your side. A group that cares more about your account, than they do the processors. This is because of two things. 1)They should be the ones automatically asking for a rate review, and 2)They can say to the processor, "They have been quoted a better rate and are going to leave unless you drop the rate back down."

It's really that simple.

I have seen rates in a single year go from the 1.7%'s which is good for a Retail account to 1.83 % and even 2.3%. One customer in a two year period went as high as 3.1%. Now for those of you who do not know this, the riskier the business, the higher the percentage. 3.1% is getting into the realm of adult media. The only reason I would pay anyone 3.1% is to keep my mother out of the hospital.

There was a book out called A Father's Wisdom . It was full of many pithy one-liners that held great value, but one of my favorites was this: 'Have two keys made to your house and give them to your two best friends. If this makes you uneasy, get new friends.' The same applies here. Your account representative is your advocate, not the processors. If they are not able to argue your account down to a reasonable rate at the end of the year, and every year, then get a new one.

Offshore Merchant Accounts

A question I am often asked is about offshore processing. This has come up enough so that I have to say here, "Pay close attention".

Offshore processing is by definition risky and is only used in environments where traditional US Domestic services will not handle it. The main thing you should ask yourself now is "Why would a traditional US Domestic service not handle this type of transaction?" If you did, you've earned a cookie. Answer: too risky and the processor generally can't get underwriting for it. Underwriting is basically insurance, and as you should know insurance companies rule the world.

Offshore is generally for things such as adult material, time shares, gambling and other things you wouldn't go to with your four-year-old daughter. However, if there is a demand (and there is), then there will always be supply. Enter: Offshore processing. Offshore means any processing bank that is not on US land and is therefore not restricted by US banking regulations. Trust me on this one. The US knows what to do and what not to do (making us the supreme financial super power on the globe) and this is why people leave and go off shore to avoid restrictions like Jonah fleeing God. Remember what happened that time?

I have had a chance to consult for several non-adult themed accounts that were high risk such as time shares and I had to tell them that if they wanted a merchant account to accept credit cards they were going to be forced off shore. There are not a lot of groups that have both.

Now, what to expect. Generally one is going to pay a higher Discount Rate which is a percentage. This is due to the risk nature of the business. For example: a business that has a charge-back rate of 1% in the US will get delisted. A charge-back is not a refund. It is when your customer calls their bank and says that they never purchased the item or service that your company sells that is on their credit card statement. 1% may seem small, but think about your business. Should you ever really get a charge-back? Only in rare cases.

The adult industry; however, can get a charge-back rate of 50%. Half of all purchases are claimed as never made! Imagine this scenario. A wife looking at a credit card statement asks her husband who made a $39.99 purchase from "Ladies Who do Something I won't write here.com"? Her husband creates the best clueless face he can, says it must be a mistake, and while she sits there, calls the bank who issued his card and says that he never made such a purchase.

Just to be fair, there are many times when the man is actually innocent. Companies do make mistakes.

Anyway, these high risks put a premium on the service. Not to mention, as they are off shore and not restricted as American banks are, there are less securities for your money earned. This is where a good relationship comes in. Call. Contact them and see. Talk to an agent and ask what type of assurances do they have from their Offshore Groups. Do they require money down as a security measure? How much higher are the rates than a normal transaction? How long have they worked with that particular offshore processor? What is the normal gripe (there is always a gripe whether offshore or Domestic) about that particular group?

Finally, put in an application and get some more data. Most groups are simply looking for better rates and you want to do plenty of scouting before you jump into high risk ventures. It's better to have friends in the industry with these types of things. OK, I'll be one since you asked. Maybe Ms. Merchant Account can be the other.

If you have any questions on offshore/high risk topics, feel free to post a comment and we will follow up.

Safer Checks, Really?

Will, Will, Will, I get bounced checks all the time and Timmy's stuck in the well! Save us!

I hear it all the time. How to fix it though...

Check Guarantee. By the way, the name says it all. Not really anything complicated there. How one gets to it is another matter entirely. You see, in today's modern world the facsimile has helped us more than most know. Nowadays, when you get your checking statement at the end of the month, you don't get your checks back anymore, you get a facsimile of them copied right onto the back page of the statement. Nifty huh?

Just the fax, ma'am.

Well this is also how we can present checks. It is slightly more complicated as there are magnetic ink numbers on the bottom of the check, but most check scanners people use now are combinations of M.I.C.R. readers (mag ink character recognition, and pronounced "micker") and little fax machines that copy the check and send an image along with it to the banks. Using this advancement, we now have things like Remote Deposit (which I cover in What About Checks?), Verification, and yes, Guarantee.

To get these you must sign up for them and there is a fee. Sadly (and in total keeping with the industry), most groups and banks charge the same rate for Check Guarantee as they would a credit card. One should be able to talk them into significantly lower rates for the check, but that is up to you. Verification will go out and magically check to see if there is enough money in the person's account at that time. However, they can still go out and write a hundred checks before that one ever makes it to the bank.

Guarantee will, ...well guarantee that the check is good. Duh. It will not do this for all checks. It will however, go out and check the system and based on the person's history decide whether or not to pay it. If it declines, ask for another type of payment. If it accepts, then you are good as paid. This is because whomever guaranteed the check (the processor) is now going to pay you and the actual check will pay them back. Woe be to the person that bounces a check to an ISO or a processor. I have seen them chase a customer for 4 years over a $10 check. The check writer by then had over a $100 in fees accumulated over the one bad check.

Check please...

Why Your Restaurant is Paying Through the Nose... Part 2

Last time we spoke (I've missed you ever so much since Why Your Restaurant is Paying Through the Nose... Part 1), we went at length about how the industry often charges you for your getting the nice equipment. But there is more than one way to fleece a restaurant...

Another way is with their cash. Most restaurants use more and more credit cards these days because credit cards aren't real money. They are magical gift cards that taste like happy. Still, many people spend plenty of cash at bars and restaurants and every time the owner takes the cash to the bank, they get taken to the cleaners.

Why?

Banks charge for cash deposits. Oh yes, they surely do!

Now most people actually never see this charge as we deposit anywhere from twenty bucks to a few hundred. After all most of what we deposit is a paycheck. However, places that see a lot of cash, pay to deposit it. This is because a bank has to pay a cashier to sit there and count it all by hand. Think of it as a handling fee when you pay Shipping and Handling. The shipping fee is to get it to you, but the handling part is to pay someone to box that sucker up. Isn't this fun?

So what's the fee? Most banks charge about $1 for every $1,000 in cash that you deposit. This may seem like a small amount, but when your restaurant deposits $2,000-$8,000 a day in cash everyday, it gets expensive. This is why I like small banks. In most cases they have every real affinity you need on a day to day basis, but often do not have the fees some of the larger banks do as they are trying to cultivate business. If you deposit $2,000 a day in cash your savings would be over $700 a year.

Check around and see.