Accounting

It has become an annual rite of spring for many merchants that accept credit cards – the dreaded VISA and MasterCard April rate adjustments. Businesses are notified every year of these impending changes, but are never fully aware of how it will impact them until they see their first billing statement with the new categories and rates. For merchants who have accepted credit cards for some time, these changes are unpleasant but expected. In 2007, however, even the most experienced of Business to Business (B2B) and Business to Government (B2G) merchants have been thrown for a loop.

With dozens of new corporate and purchasing card categories and processing rates more than 10% higher in some instances, B2B and B2G merchants are scrambling to find ways to control costs. For some of these businesses, especially those that have high ticket-low margin goods and services or are contractually obligated to provide goods and services at a fixed price, these changes have drastically affected forecasted profits. Because MasterCard and Visa assess the same rates regardless of the merchant processor, it is becoming evident to many B2B’s that they not only need to explore other service providers but also more efficient processing methods.

One method of lowering rates is to perform “Level 3” or “Tier 3” transactions. Merchants who pass level 3 data merely enter a line item detail of the goods or services purchased. This method of processing cannot be performed on a standard credit card terminal, as it requires the use of one of many software programs. While there is a cost associated with purchasing these programs (usually between $500.00 and $1000.00), the benefits can far outweigh the price. VISA Purchasing Cards are assessed a rate of over 30% lower for Level 3 transactions, for example, and large ticket federal government purchased are assessed rates that are well over 40% lower than normal fees.

Depending on the merchant profile, there are multiple other ways to reduce fees. Large ticket merchants can register for the VISA or MasterCard large ticket programs. Other merchants may also qualify for a special B2B rate that is based on their merchant category code. Regardless of the business profile, there is always a financial incentive to enter the correct AVS information to qualify for the lowest rate offered by both MasterCard and VISA.

For all B2B’s, it is crucial to find a merchant processor that understands the industry and is invested in helping their customers achieve the lowest rates. The best rate for processing credit cards incorrectly is always higher than the rates that can be achieved when processing in an efficient manner with a knowledgeable partner.

Jason Bordeaux works with the business development team at Wind River Financial, a Madison, Wisconsin based specialty merchant processor. For more specific information about Business to Business and Business to Government merchant processing, Jason can be reached at jbordeaux@windriverfinancial.com To learn more about Wind River Financial, visit http://www.windriverfinancial.com