Debit card merchant and usage fees

10 10 2011

FYI. As of this month, merchants will now be paying higher merchant fees for debit card transactions. The cost of transactions has jumped as of October 1, 2011 as merchants must now pay the maximum allowable fees under federal law for purchases under $15; 21 cents to 24 cents, instead of  6 cents to 7 cents per transaction. What does this mean? These fees may end up coming out of your wallet.

Debit cards have been under hot debate lately. At issue is the fee that retailers pay to banks to process electronic debit card payments, otherwise known as interchange fees. Previously, interchange fees were set by the payment card networks, such as Visa and Mastercard, as part of the contracts that allowed merchants and their banks to use the networks to process electronic payments. The networks argued that interchange fees helped pay for the electronic processing, fraud prevention and convenience that go along with accepting a debit card payment. Merchants used to pay interchange fees of about 1 to 2 percent of each transaction, or about 44 cents on the average purchase. Now, the credit card networks have eliminated the interchange fee rate schedules and the merchant discounts on small-dollar purchases and set all rates at the maximum allowed by law.

And if you think you might fair better opening a merchant account with a small regional bank, you might ask further into their policies. Apparently, banks with less than $10 billion in assets are exempt from the debit card swipe fee limits, but that doesn’t mean that they’re not opposed to charging fees. Thus, these small banks can charge higher interchange fees for using their cards, particularly as they’re finding it harder to generate loan income otherwise.

What about all the press on the ‘customers’ of banks paying more for using debit cards? That’s true too. Banks are now charging ‘activity fees’ for accessing your own money, the New York Times recently ran through a few banks’ fees as well. Check out the new debit card swipe fee rates in effect.

  • Chase: $3/month service fee on debit card use.
  • Wells Fargo: $3/month “debit card activity fee” charged to GA, OR, WA, NM and NV customers a part of a test program.
  • Bank of America: $5/month for debit card use, starting in 2012. Cancelled as of November 1, 2011!
  • SunTrust: $5/month for debit card use, starting in 2012.
  • Citibank: No fee, as it would be a source of irritation for its customers.

President Obama is blasting Bank of America for charging fees. Banks are trying to defend their position. Retailers are on the road to discriminating against debit cards. And small businesses may end up scrapping credit card transactions all together in favor of cash. Regardless, accessing money this days costs money. Finding the most efficient way to do so is the name of the game, but at what cost to your business?

Photo courtesy of BizMology.

Business Lunch: Pumpkins

6 10 2011

October has set upon us, Halloween is just around the corner, it’s pumpkin season.

But pumpkin farmers are a bit wary this fall. Unfortunately, those on the east coast have experienced a season of drenching storms from Hurricane Irene causing farms to throw away waterlogged pumpkins molding faster than usual. Scorching hot temperatures this past summer also sliced the Texas pumpkin production in half. For most of the nation, the hot dry summer ripened crops early and the rains in the early fall drenched them. Simply put, pumpkins will cost more this year. And because of the wet fall, they’re not going to last very long either.

All the more reason to embrace the the spirit of supporting local. We’re lucky in Washington to have local farms selling pumpkins and businesses thinking seasonally.

Celebrate the season and support your local farmer! Particularly how weather dependent this season has been, local farms certainly appreciate your support. Make the time to visit a farm, get in the dirt and have fun ‘picking’ your pumpkin. It will make you smile every time you walk up to the front door.

Photo courtesy of The Telegraph, it’s a 1,647 pound pumpkin found in Shoreline, WA.

Business Lunch: Food Truck Consulting

4 10 2011

Find an obstacle, create a way to lower the barriers to entry. That’s what Matt Cohen of Off the Grid did. Originally wanting to start a food truck business serving the ramen noodle dishes he learned to prepare in Japan, he encountered obstacles when trying to obtain permits to operate his business. Like many cities trying to engage in and regulate the food truck revolution, he ran into city bureaucracy that made it more difficult for him to move forward. Instead, he built a for-profit food truck business that supports a rapidly expanding network of about 100 mobile food vendors at weekly events around the Bay Area.

Reshaping the way food trucks operate, Off the Grid is a soup-to-nuts, vertically integrated operation, assisting mobile food vendors with everything from location scouting to social media tricks to truck aesthetics. His consulting arm has even won the hearts of the city as his clients receive expedited permits. Off the Grid also works with the local Parks Department to open spaces for food truck events, creating even more business for its clients.

In Seattle, operating a food truck business is just as tough. However, this year the Seattle City Council recently voted in favor of new rules, which allow food trucks to sell beyond private lots. For a breakdown of these new, more relaxed, regulations, see this Seattle Times article. Prior to this new regulation, I also wrote about food truck business models.

Time and time again, we’re confronted with obstacles that challenge our vision or progression forward with an idea. The real challenge is possibly refocusing and changing direction. Sometimes the obstacle itself may present an unmet need, as it did with Mr. Cohen. While it may be frustrating to shift gears, the process of thinking through alternatives might highlight a profitable avenue for both you and your customers. It may just become your win-win cash cow.

Photo courtesy of Off the Grid.

Business Lunch: Food Wine

29 09 2011

Shouldn’t wine always go with food? That seems to be an obvious question, but wine is not always presented or produced with that goal in mind. Sure, varietal and terroir are important, but wine making for the express interest of pairing with specific food? Lettie Teague’s latest post in the Wall Street Journal, “The World’s Best Food Wines,” made me think twice about how to value wine. And it made me think even harder about valuing products and services sold by businesses.

The article talks about how Italian wines are bright with acidity and have an edge of bitterness, both complimentary with food. It also talks about the fact that the Italians make wines to go well with food. Drinking the wine with food is the end goal. I love this focus.

When I think of Italians drinking wine, I think of a Tuscan landscape with a family around a dinner table with wine. It’s a cultural mindset. Applying this to a business concept, is your business focused in the sense that it offers a product or service that fits naturally within your customers’ lifestyles? What are those lifestyles anyways, and are there any constraints against them? It’s a shift in thinking, but how much easier would it be to market your business if there was a seamless fit?

Photo courtesy of the Wall Street Journal.

Business Lunch: Beans

28 09 2011

Beans. Last week PepsiCo announced that its participation with Enterprise EthioPEA (USAID press release), an initiative that aims to dramatically increase chickpea production in Ethiopia to improve both the economic and nutritional security in the country. PepsiCo also has a vested interest in the project that goes beyond just helping Ethiopians; the company wants more of a chickpea supply for its products, including its Sabra hummus product.

As PepsiCo receives relentless attacks for profiting on sugary drinks claimed to contribute to obesity in our country, it’s a no brainer that it decided to invest in a mutually beneficial initiative to improve its ‘healthy’ products revenue. This partnership improves the Ethiopian food inventory and agricultural practices while increasing PepsiCo’s short and long term financial goals.

Shrinking the scale and applying this program to small business, think of the mentorship and coaching opportunities between employers and employees. What’s the ‘chickpea solution’ to provide a mutually beneficial relationship that improves employee skill-sets and productivity while increasing revenue potential?

Photo courtesy of Daily Perricone.

Price Matters

28 09 2011

For all the statements about product mix and customer service, in this economy, price matters. And for small businesses, price really matters. Customer culture these days encompasses all forms of comparing, contrasting, searching online, hemming-and-hawing, and pretty much analyzing a purchase to death sometimes. What to do?

Well, doing research can help get your bearings. Research what your competition is doing. Research the worth of changing prices. Also, try taking the focus off pricing and research options beyond price changes to improve your margins or consumer behavior. Here are a few resources for each:

Researching your competition:

Researching the worth of changing prices.

Researching other options beyond changing prices.

These resources should help you to gauge where your business stands on price and how much that rank matters. In the end, you’ll likely understand your business much more thoroughly, which isn’t a bad thing either. Because your pricing contributes to your business’ brand, it’s important to know your reasoning behind it – and your reasoning behind changing prices if that’s the route you wish to go.

Photo courtesy of Mediabistro.

Introducing Business Lunch: Canal House

26 09 2011

I’ll admit, I’ve been away a bit. As I say to all bloggers (and blogging hopefuls), maintaining a blog is the biggest challenge to having one. Regardless, it feels good to be back. I have great ideas, I’ve been inspired by great minds, and I’m eager to share them with you.

In this post, I introduce ‘Business Lunch,’ a new category of posts as part of my blog. As with everyone, we’re all busy, but eager for information in a short format. This post series does that. I was inspired by a blogging series by the Canal House ladies who provide an almost daily dialogue on what they eat for lunch. My tastebuds not only flair upon knowing what Christopher Hirsheimer and Melissa Hamilton make for lunch each day, but my mind is continually impressed with their discipline to practice and hone their culinary craft. And that’s just it, the opportunity to finesse a strength is key.

So with this Business Lunch series, I’ll include frequent tidbits of information that apply to small business interests and business professionals in short form. (You might also be interested in my Spotlight on Business series highlighting the success strategies of noted businesses, stay tuned for new spotlights coming up.)

Like a fresh ripe tomato with a bit of mayonnaise on crusty bread, sometimes the most successful pairings work best in a simplistic form. Cheers to lunch and information sharing ahead.

Photo courtesy of the Canal House.