Maybe it’s because it’s not the most glamorous topic, but we don’t often see payment processing get as much coverage as say, branding and social media marketing in business blogs. But every business needs to get paid, right?
We got in touch with Stella Fayman, who’s a member of the founding team at FeeFighters, a comparison shopping website for credit card processing. Passionate about entrepreneurship, she’s also an organizer for Ignite Chicago and a mentor for the Future Founders program for high school students.Here Stella offers some tips on simplifying the often complex and overwhelming experience of finding the best credit card processor for your business.
SS: What was the biggest roadblock FeeFighters faced in the startup phase, and how did you overcome it?
SF: The biggest roadblock for us is gaining trust from our users. The credit card processing space is notoriously spammy, and we are trying to go against this by being honest and transparent. Users come to us already burnt from a bad experience elsewhere, so we have to build their trust and make them see that we are different. Once they have contact with us, they are so happy to have a trusted source they can turn to when they have questions or need help. And we are very happy to fill that void.
SS: What are the top few things business owners should keep in mind as they search for the right credit card processors? What is the most common mistake people make?
SF: Be wary and read the fine print. Business owners get ripped off by credit card processors who take advantage of the fact that they are not experts in credit card processing. The best way to make sure you’re getting a good deal is to comparison shop and ask the right questions. Ask for interchange plus pricing: it’s the most transparent form of pricing since credit card processors get the same fee no matter what kind of transaction takes place. When you hear about different “tiers” for transactions, run the other way. Signing a tiered pricing contract with a credit card processor is a sure way to get ripped off.
SS: What kind of fees can we expect from payment processors, and what kind of fees are warning signs that we might be getting ripped off?
SF: There are three different fees that you can expect to be charged:
1) Interchange- This is the fee that goes to banks and is set in stone by Visa/MC
2) Assesments- These make up a tiny portion of fees and go to Visa/MC
3) Processor markup- This is how much the credit card processor charges for their services
When you’re shopping for a processor, in essence, you’re comparing different markups since the other fees are the same no matter who you use. One solid rule to stick by is to negotiate cancellation fees. Most processors have the ability to take them out, so make sure you can easily get out of working with a processor if you have a bad experience.
On your contract, watch out for “non-qualified” or “mid-qualified” rates which are indicative of tiered pricing. What processors will often do is quote the “qualified rate” which only applies to transactions deemed qualified by the processor (like a debit card transaction) and then charge much higher rates for every other transaction. This is why interchange plus pricing is advantageous; it’s the same markup no matter what transaction occurs.
SS: Can you tell us a bit about the proposed rule by the Federal Reserve that would cap fees bank charge retailers? How would it work and what how can business owners expect to be affected by it?
SF: The new rule affects only debit card transactions and is still open for “public debate” until February (which gives banks time to react). The rule would limit debit fee to $0.12 while the current average is about $0.44. Although this may sound like a good deal for business owners, debit card transactions make up a small percentage of all transactions, and business owners might be hit with higher interchange credit card fee to make up for the lost revenue. I’d say keep an eye on what happens, and make sure that your processor follows the rule if it goes into effect,
SS: Can you tell me a bit about your experience working with FutureFounders? We often hear that entrepreneurial skills aren’t taught early enough in schools. Do you agree, disagree?
SF: FutureFounders is awesome because it gives students a different option from the norm and empowers them to go after their ideas. When I was in school, entrepreneurship was not taught or mentioned, which is a shame because high school is such a good time to develop business ideas. More importantly, FutureFounders teaches students that they have what it takes to control their destinies and build their own businesses. Even if things don’t work out, they get access to top notch entrepreneurs in the community and leave with a sense of accomplishment. I wish someone similar had existed when I was in school!
SS: Name two things you have and one thing you need.
SF: I have a MacBook Pro and an HTC Evo, but I need an iPad! Just kidding, I don’t really “need” one but I would certainly love to have one.
SS: What is your instinctive response to “women in business.”
SF: It’s kind of cliché. Although I belong to this community and even blog for a few women’s blogs, I find the phrase to be cliché and overused. I’d like to see a more descriptive or cool phrase that talks about women’s achievements, challenges or unique stories in navigating the business world. Idealistically, I’d love to belong to a world where both women and men in business had the same opportunities and same challenges to face (like childcare not just being a women’s issue). Again, I mentioned this was idealistic.