Comments on: Do you pay for refunding customers? http://www.merchantaccountblog.com/archives/108 Merchant Accounts, Ecommerce, Processing Equipment Wed, 07 Jan 2009 06:57:22 +0000 http://wordpress.org/?v=2.7 hourly 1 By: Jason Bordeaux http://www.merchantaccountblog.com/archives/108/comment-page-1#comment-1298 Jason Bordeaux Wed, 13 Dec 2006 19:03:29 +0000 http://www.merchantaccountblog.com/?p=108#comment-1298 Gross or Gross Plus pricing is theft - plain and simple. Keep in mind that a merchant processor only receives 10% to 20% of what a merchant pays for bankcard processing. The majority goes directly to MasterCard and Visa who have exact standard rates that they charge uniformly to every merchant processor. The only differences a merchant will ever see is in the merchant processor's rate structure. With Gross pricing, the merchant processor receives and keeps the full amount that was paid for on a refunded transaction. If they usually receive 10% to 20% of fees per transaction, they will receive 5X to 10X more than that for a refunded transaction. With Gross Plus they will receive double that amount because they are charging for a phantom transaction - 10X to 20X! Take a look at this (very) simple comparison using a simple interchange rate without other factors. Merchant Monthly Volume: $10,000.00 Merchant Average Ticket: $100.00 Refunded Transactions: $300.00 Net Pricing Rate: 2.00% Fees: $194.00 Gross Pricing Rate: 2.00% Fees: $200.00 Gross Plus Pricing Rate: 2.00% Fees: $206.00 There are many other factors to consider like transaction fees, monthly fees, other fees, what the actual competitive rate would be, etc., but the bottom line is that most business owners will just jump on the lowest rate even though it may cost them more. The more refunds there are the wider this difference will be. I am in merchant processing sales and I would say that 10% of merchant processors charge net, 10% charge gross plus and the remainder charge plain gross. I discuss our net pricing structure regularly and you'd be surprised how hard it is to explain this to merchants who are more interested in the "discount" rate than anything else. Gross or Gross Plus pricing is theft - plain and simple.

Keep in mind that a merchant processor only receives 10% to 20% of what a merchant pays for bankcard processing. The majority goes directly to MasterCard and Visa who have exact standard rates that they charge uniformly to every merchant processor. The only differences a merchant will ever see is in the merchant processor’s rate structure.

With Gross pricing, the merchant processor receives and keeps the full amount that was paid for on a refunded transaction. If they usually receive 10% to 20% of fees per transaction, they will receive 5X to 10X more than that for a refunded transaction. With Gross Plus they will receive double that amount because they are charging for a phantom transaction - 10X to 20X!

Take a look at this (very) simple comparison using a simple interchange rate without other factors.

Merchant Monthly Volume: $10,000.00
Merchant Average Ticket: $100.00
Refunded Transactions: $300.00

Net Pricing Rate: 2.00%
Fees: $194.00

Gross Pricing Rate: 2.00%
Fees: $200.00

Gross Plus Pricing Rate: 2.00%
Fees: $206.00

There are many other factors to consider like transaction fees, monthly fees, other fees, what the actual competitive rate would be, etc., but the bottom line is that most business owners will just jump on the lowest rate even though it may cost them more. The more refunds there are the wider this difference will be.

I am in merchant processing sales and I would say that 10% of merchant processors charge net, 10% charge gross plus and the remainder charge plain gross. I discuss our net pricing structure regularly and you’d be surprised how hard it is to explain this to merchants who are more interested in the “discount” rate than anything else.

]]> By: jestep http://www.merchantaccountblog.com/archives/108/comment-page-1#comment-1059 jestep Fri, 03 Nov 2006 15:30:34 +0000 http://www.merchantaccountblog.com/?p=108#comment-1059 The Gross Plus is what I'm referring to for being charged both directions. I think the majority of providers use the Gross type plan. I have rarely seen a Net plan for the average small business. The Gross Plus is what I’m referring to for being charged both directions.

I think the majority of providers use the Gross type plan. I have rarely seen a Net plan for the average small business.

]]> By: Jason Bordeaux http://www.merchantaccountblog.com/archives/108/comment-page-1#comment-1058 Jason Bordeaux Fri, 03 Nov 2006 15:10:25 +0000 http://www.merchantaccountblog.com/?p=108#comment-1058 We refer to these plans as Net, Gross and Gross Plus. Net - Fees for interchange assessments are returned when the merchant issues a refund. As stated, this does not include the transaction fees but only interchange rates. Gross - Interchange fees not returned. Gross Plus - Interchange fees charged on credit transactions. The issuing bank and associations return all fees related to refunded transactions to the merchant processor. Merchants should choose to work with a merchant that passes on these credits. Always assure you are priced on net revenue! We refer to these plans as Net, Gross and Gross Plus.

Net - Fees for interchange assessments are returned when the merchant issues a refund. As stated, this does not include the transaction fees but only interchange rates.

Gross - Interchange fees not returned.

Gross Plus - Interchange fees charged on credit transactions.

The issuing bank and associations return all fees related to refunded transactions to the merchant processor. Merchants should choose to work with a merchant that passes on these credits. Always assure you are priced on net revenue!

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