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Timely Batching of Transactions Impacts Costs

by | Jun 2, 2009

A Simple Solution for a Costly Downgrade.

Merchants are constantly seeking ways to avoid expensive downgraded credit card transactions  – natch.  We all need to lower the cost of doing business.  There’s a variety of ways to keep costs down and this one is the easiest that I can think of.

Program your account to batch and settle transactions daily.  Period.

If you check the host of merchant provider blogs across any and all search engines you’ll see every 24 hrs – in some cases every 48 hrs.  Processors and banks operate differently so we suggest leaving the guesswork out of it and daily batching for all merchants.  In fact that’s how XBS programs our client terminals.  Terminals programmed to auto batch will only do so if there were transactions – so there will be no batch fee on transactionless days (let’s hope there aren’t too many of those!)

If the merchant does NOT batch as recommended by VISA/MasterCard – the result can be costly.  In tiered pricing models the transaction typically downgrades to non-qualified – the most expensive transaction rate you can possibly pay.   In interchange cost plus models (highly recommended by merchant advocates and XBS as the most cost effective pricing available to all merchants) the transaction goes to ERF (Electronic Interchange Reimbursement Fee) and the wholesale cost of the transaction rises.

Why the cost increase?  Time is money folks.  The longer the time between the transaction or purchase and your batching – the increased risk in fund collection.  No kidding.  What if your customer has a meal at your restaurant on May 31st and you batch out on June 3rd?  What if the customer card expires on June 1? what if the customer loses the card and cancels it?  how about your own cash flow – isn’t that important?  isn’t improving cash flow one of the reasons you pursued card acceptance to begin with??

Merchant knowledge of the significance of timely batching to transaction costs in credit card processing and/or a trusted provider is all that is required to avoid these downgrades.

We provide our merchants with cost effective tools and tips that make a difference.