I think in general Heartland is a decent company but the bar or who they hire does not seem to be too high. Therefore, they sometimes have real inconstancy between their corporate voice/message and how their reps do business.

I completely understand what you are saying. The main problem with this situation was not that Heartland was quoting a passthrough rate. There’s no debate that passthrough will beat the majority of 3 tier, ERR or other rate structure accounts. The problem was that the merchant legitimately thought he was getting .4% for his processing.

This may or may not have been a problem with the specific rep and the merchant may just have heard what he wanted to, but nowhere on the proposal did it actually state that this was in addition to interchange, or there were any additional charges.

I think I probably could have chose my own wording more carefully here, but based only on the information on the proposal, I still stand by what I said in this post.

Having said that, I think you are really off on this post. It sounds like Heartland quoted them an “interchange plus” rate which will end up saving the merchant considerable money. Most merchant accounts come with a very low “qualified rate” but really hit the merchant hard on the “mid-qual” and “non-qual” fees. Heartland may have had a higher “base” or “qualified” rate than your guy, but when it came to rewards, corporate and business cards there rate was probably much lower than yours.

I say this because when I review a merchant account with rate tiers 95% of the time I can save that merchant considerable money by proving them a “straight pass through” or “interchange plus” price model.

So you have forced me to side with Heartland on this one. However, please keep up the great content on your blog; you are doing a great job.

The statement showed:

1.64% = $.10
.09% + $.10
$5.00 statement fee

I told him to keep this deal because it was just above cost.

A few months later he comes to me with another statement from heartland
and it has a quarterly billing fee of $40.00 added to it.

He called heartland and they told him it’s their profit !

Heartland made a full disclosure to the merchant, and I can prove it.

Whether or not heartland made a full disclosure is irrelevant. The simple fact that the merchant thought they were going to pay .4% for their credit card transactions undermines any claim to full disclosure in my book.

Now, who’s responsibility is it to ensure that the fees are understood? Obviously it is the business owner’s. But, it is assumable that a business claiming full disclosure is going to adequately explain to a business owner what they will be paying, especially in an instance like this where a non-standard pricing structure is used.

Next point: The Bankers who make up the Board of the Visa / MasterCard Association are responsible for structuring Interchange … which they do to their benefit.

So, the core of the conversation in the posts above mine needs to be directed back to the foundational question of “who gets paid what?”

The first party to be paid is the Card Holder, believe it or not. The Card Holder gets paid a hefty portion of the Interchange pie. The American consumer currently takes home …. [pause for effect] 44% of “Interchange.”

Yes, the bankers and card issuing banks that control Visa / MC structure interchange in their favor. It doesn’t add to their credibility that those same banks collect interest on their customer’s credit cards, which provides far more revenue than credit card processing. With that in mind, the reward / cash back / airline card programs that contribute to consumers accounting for 44% of interchange are essentially marketing so that card issuers can get more cards to consumer. It’s hard to say that consumers are responsible for this either. They never really requested it, they were just offered it. In the end, the businesses that accept cards are the ones who ultimately suffer from interchange prices wherever they are derived from.

Last sentence: Armed with the right answers to these two key questions, you will have a new perspective on which of the sales reps made the best offer to this specific merchant.

Again, ideally this would work perfectly, but this can only be accurate assuming that the person signing up for the account has the knowledge to understand what they are getting into. Ask the majority of business owners new or not, if they know what interchange category their transactions falls into. Ask them if they know what a pass through rate is. Even simpler, ask them to explain where they fit in looking at Visa or MasterCard’s interchange tables. I’ll bet that most cant do it, even with the information sitting right there.

Heartland made a full disclosure to the merchant, and I can prove it. Most any store with more than 50 locations has graduated from a bundled billing structure which lists fee categories called “Mids and Nons.” Mids and Nons are the true mystery categories, not comprehended fully by the merchant. For any merchant who does fully comprehend the meaning of “Mid” or “Non” would want a better payment structure on the offer table.

The further down the rabbit hole one travels in the payment processing industry, the better grasp one gets on how exactly all parties to a transaction get paid. Let me explain that statement. Diamond Management & Technology Consultants posted a report in pie-graph format in the November 06 edition of Digital Transactions magazine. The graph was called “What Interchange Pays For.” Quite interesting. Before we cover one of details from this graph, it is illuminating to hear how field reps “fully disclose” what Interchange is, and what Interchange does. Reps tend to toss the word “Interchange” around as though it were some mystical code that only the elect have passage to understand.

Next point: The Bankers who make up the Board of the Visa / MasterCard Association are responsible for structuring Interchange … which they do to their benefit.

So, the core of the conversation in the posts above mine needs to be directed back to the foundational question of “who gets paid what?”

The first party to be paid is the Card Holder, believe it or not. The Card Holder gets paid a hefty portion of the Interchange pie. The American consumer currently takes home …. [pause for effect] 44% of “Interchange.” That statement there should cause several people to go back to the books and do some more research to re-establish some of their fundamental understandings of this industry. We’ll leave the rest of the pie for you to discover in your research.

Last point before the conclusion: Let’s get personal. Check your own personal mail box at your own house. I am willing to guess the only card offers that stay in your hand any longer than the 5 seconds it takes to put them in the shredder are the ones that say real bold on the envelope “Earn 5% Cash Back” or “Get Free Gas” or “Earn Points, Trips, Tickets, Trucks, all kinds of Toys.” You still laugh and shred the offer. But consider this statistic; 53% of all Visa cards issued in the year 2005 were tied back to some sort of Rewards Program.

Now, when deciding which rep provided “merchant A” with the most accurate information about the reality of how the card payment industry is going to effect that merchant’s bottom line … ask yourself these questions:

1. According to your understanding of the payment industry, what % of an average Sit Down Restaurant’s total sales volume will fit nicely into the Interchange categories of: Rewards 1&2, Standard, Corporate, Commercial, Signature, Small Ticket, World, Merit 1, Elite, Travel, or the other Interchange categories besides “Retail?”

2. Look at your own paycheck and residual spreadsheet to answer this one. What percent of your personal take home pay is derived from the categories called “Mids and Nons?” Better yet, does your Processor disclose to you how many basis points of margin both you and they making in these mystery categories?

Last sentence: Armed with the right answers to these two key questions, you will have a new perspective on which of the sales reps made the best offer to this specific merchant.

Visa interchange is 1.54% + $.10 per transaction. This means that Heartland is going to charge them 1.94% and ($.14 - $.20) per transaction, MasterCard: 2.04% and ($.14 - $.20).

1.94% & $.20 across $5000 (333 transactions) = $97 + $67 = (~$164 Total in fees per month).

Our agent would have been charging ~$147 (1.68% & $.20).

The point of the post was not ever to make a price to price comparison, even though our agent would have been cheaper, (especially after MasterCard is thrown in). It was to point out a deceptive business practice, which is exactly what it is.