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How We Saved a Merchant $1,000 Per Month Without Lowering the Fees

I had a very interesting phone call today that I wanted to share with you. A merchant sales professional in Florida reached out to me concerning a large merchant account he was working to close. This particular merchant processes $185,000 per month. When the sales professional sent the statement to several processing companies for analysis, […]


I had a very interesting phone call today that I wanted to share with you.  A merchant sales professional in Florida reached out to me concerning a large merchant account he was working to close.  This particular merchant processes $185,000 per month.  When the sales professional sent the statement to several processing companies for analysis, they all sent back savings estimates ranging from $50 to $150 per month with bare minimum pricing and hardly any residual.  The merchant was already priced very low.  The call to me came after this sales professional used our instant quote tool.  While entering the same processors and programs with higher pricing and better profit margins, our tool found $500 to $700 in savings for the same merchant.  The sales professional was naturally confused, so he sent me the statement along with the proposals to take a look.

This particular merchant had a statement which appeared to be on Interchange Plus pricing with about 8 basis points of mark up.  However, the interchange table was not itemized on the statement.  It simply showed $3,400 in interchange costs with no explanation.  All the processors to whom he sent the statement assumed that this number was correct since they had no way of checking it.  Using an algorithm in our database to create the correct interchange cost rather than starting with the existing statement, our tool was showing that the interchange cost should have been about $2,500.  In other words, the interchange on the statement was off by roughly $1,000 per month!

How is this possible?

First, I questioned the average ticket size.

  • If the average ticket size would have been significantly higher than the standard average ticket size for this merchant type, I would have assumed that this merchant runs more rewards cards than our algorithm predicted. If that was the case: (1) He could have used the statement wizard to adjust the average ticket size. (2) The interchange algorithm would have increased the amount of rewards cards to arrive at the correct interchange cost.
  • However, the average ticket size in this case was close to the prediction of our algorithm for this business type. So I knew the interchange fees we predicted were correct.

Therefore, the next question I asked was about MOTO.  I asked the sales professional how they process credit cards.

  • I learned that a significant number of transactions are called in over the phone. The staff enters them on a standard VX520 terminal with no CVV code, no billing address, and no card holder name.
  • Because of our IQ tool, we just identified a $1,000 cost saving for the merchant.To realize the savings:  (1) the merchant needed to be set up with Authorize.net or another online payment gateway.  (2)  The staff needed to collect all of the card holder data.  (3)  The staff needed to be informed of the cost savings of taking payments in person versus over the phone when possible.
  • This should bring their interchange fees down to the average for their industry. 

Here are a couple lessons for you to take into the field:

#1 – Never assume that the interchange on the statement is correct or represents the future interchange.  Many processors mark-up interchange; others haven’t educated the merchant on how to process cards correctly.

#2 – When dealing with MOTO (Mail Order, Telephone Order) transactions, keep in mind that data is king.  The more data submitted with the transaction, the lower the interchange cost and the less likely the transaction will be “downgraded” as a result.

#3 – Stop focusing all of your attention on the mark up.  Taking someone from 8 basis points to 5 or 6 is probably not going to get you the sale.  Even if you make a sale, the profit just isn’t there.  Instead, when you are dealing with a larger merchant, use a tool like our instant quote tool to look for significant savings in the interchange costs.  If a merchant is processing over $30,000 per month, you may find additional savings of $100 to $1,000 per month just by helping the merchant understand how to process cards correctly or by identifying intentionally deceptive mark-up fees that the processor has added into the interchange table.

I think we can all agree that the chances of closing this deal went up significantly as a result of understanding interchange and recognizing that the interchange rate on the statement isn’t always correct.  If you would like to learn more about our instant quote tool, you can CLICK HERE to get a 30 Day Free Trial.

Have a great day in the field!

James Shepherd

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