Santa Barbara Cash Register Blog

Why is daily settlement (batching/end of day) important?

Sep 2, 2020 9:18:22 AM / by Craig Saling posted in Merchant Services Payment Processing

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Settling your transactions on a daily basis helps you avoid costly interchange-downgrades.

To set the stage – there are two distinct portions of any credit card transaction. The first is known as the authorization, which happens in real-time, when you swipe/dip/key the card into your system. You’ll receive a real-time response from the card-issuing bank of “approved” or “declined”. The second step is known as the capture, when the sale is fully processed and sent to the processor to finalize.

The act of “settling” or “batching” your transactions references the capture step above, and is when you capture all of your day’s sales. When you process sales throughout the day (either through a terminal or a payment gateway), those transactions are authorized in real-time. Those authorizations will build-up throughout the day, waiting to be sent to Dharma for processing. Then, once per day, transactions will “settle” or “batch out” – that’s the process of taking all of those built-up authorizations and sending them in for processing. If you use a payment gateway, this happens automatically. If you use a standalone terminal, you can choose to have this happen automatically, OR you can opt to manually settle out.

So – what happens if you don’t settle out on a daily basis, or on a day where you had authorizations? The answer is that you risk getting a “downgraded” interchange rate – essentially, you’ll pay more for the sale!

The card associations (Visa/MasterCard/Discover/AMEX) have very specific rules about how interchange fees are calculated. One of the common requirements to gain access to the lowest possible interchange fee is that you must settle any given sale within 24 hours of authorization. This makes sense when you think about it. If you’re a customer and you see that a company has “authorized” your card, you likely expect to see that sale complete shortly. So, assuming that sale processes same day, the customer would likely be satisfied. BUT – if you wait, and settle the sale say a week or two later, that same customer may be confused! They may ask themselves, “didn’t I pay for this sale weeks ago?” Then, they may take one more step, which is to dispute the sale with their bank, and initiate a chargeback. Chargebacks are costly, and are to be avoided at all costs!

As you can see above, the card associations want to incentivize you as the merchant to keep chargebacks minimized, and keep your customers happy. To do this, they offer the lowest rates for settling within 24 hours. If you don’t settle within 24 hours, you’re subject to higher interchange fees – typically in the range of 0.25% – 0.50%. For this reason, we always recommend settling on any day you process sales. If you have any questions about this, don’t hesitate to discuss with your Account Manager!

There are two other specific reasons to settle regularly:

  • The earlier you settle transactions, the faster you get paid! If you forget to settle and wait a day, Santa Barbara Cash Register or our processing partners won’t receive your transactions, and therefore we can’t pay you.
  • Authorizations expire! It depends on the issuing bank, but most authorizations will ultimately expire between 3 and 8 weeks from the initial authorization. Once expired, you can’t retrieve an authorization. You’ll be required to generate a new transaction.
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What is a good interchange plus rate?

Aug 26, 2020 1:42:35 PM / by Craig Saling posted in Insider, Merchant Services Payment Processing

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Asking the question “what is a good interchange plus rate?” is like asking the question “how much does a car cost?” Neither question can be answered accurately without first knowing several supporting details.

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The True Cost of Paper Checks vs ACH

Aug 3, 2020 1:17:32 PM / by Craig Saling posted in Merchant Services Payment Processing

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The True Cost of Paper Checks

paper-checks-ach

Estimates suggest your business could be spending $24,540 annually just processing paper checks.

Since 1865, checks have played a pivotal role in the United States payment system. Checks were the only non-cash option for the first 100 years of its existence, until credit cards were introduced in the 1950s. As payment technology has evolved, the need for checks has diminished — but the costs have remained. Here are three ways paper checks could be costing your business more than you realize:

  1. Money – According to NACHA, it costs on average $1.22 to process a paper check, which accounts for manpower and various other costs. Overall, checks are “a burden on the economy,” according to Vipal Monga, a reporter for The Wall Street Journal. Bill.com estimates that paper checks cost business up to $24,540 annually in terms of employee labor, materials, bank fees and postage.
    Paper checks pose costs for customers, too. If your business receives mailed checks for recurring payments, your customer is paying for the check, postage and envelope every time a payment is due.
  2. Time – Checks eat up everyone's time. Customers spend time writing them at checkout or prepping them to be mailed out. Businesses spend time waiting for checks in the mail or chasing down customers to collect check payments, driving to the bank to make deposits, and then verifying the deposits at a later date. If a check bounces, you must track down the customer to resolve the issue, and guess what? That’s more valuable time taken away from your day. In total, Bill.com estimates that approximately $1,280 in labor costs are associated with paper checks. Checks also add more volume to post offices’ workflows, incurring costs for the government and taking up time for its employees.
  3. The Environment – Checks impact the environment just like paper receipts do. The production of checks requires trees, water and gas, and it expels greenhouse gases. Ultimately, once a check is processed, it is destroyed within 90 days of acceptance, simply contributing more waste to landfills.

ACH: An Alternative to Paper Checks

A cheaper and environmentally friendly option is ACH processing, which can cost as little as $0.25 per check to process. In contrast to Bill.com's $24,540 estimate for paper checks, ACH checks cost just $1,680 annually — a 93 percent reduction in costs. Though the growth of ACH was initially slow, 19 billion ACH transactions are now processed annually. Why? Because beyond its low cost and green technology, it’s convenient.

For one, processing ACH payments through Virtual Terminals allows for faster deposit verification. Most providers that do ACH check processing offer next-day funding, which means you’ll get your money deposited into your account within a day. That’s much quicker than the typical seven to 10 days it takes for paper checks to clear.

ACH processing sends quicker alerts of rejects or NOCs, so there’s less time between the initial payment and notifications of delays. You also gain the ability to collect hands-off recurring payments. Instead of collecting mailed-in checks, you can set up a custom schedule to automatically bill your customers’ accounts. With the ability to store accounts on file, you can also re-charge your customers for one-time transactions.

Instead of using duplicate checks to create a paper trail of transactions, ACH payments allow you to produce a receipt that is stored in the cloud for quick reference. The receipt can be emailed to the customer for her records, and a signature can be captured in-person or remotely to ensure that the transaction has been authorized.

Instead of using duplicate checks to create a paper trail of the transactions, ACH payments allow you to produce a receipt that is stored in the cloud for quick reference. The receipt can be emailed to the customer for their records, and a signature can be captured in-person or remotely to ensure that the transaction has been authorized.

Start accepting ACH payments today.

 
ACH check processing to not only save your business time and resources, while reducing your environmental footprint!

 

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PCI Compliance

Feb 18, 2020 1:23:29 PM / by Craig Saling posted in Merchant Services Payment Processing

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Intro to PCI Compliance

When it comes to a growing business, the safety and security of your and your customers’ sensitive information and data is likely top of mind—especially when it comes to payments.

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Interchange Plus Pricing is not always perfect.

Jan 17, 2020 12:37:20 PM / by Craig Saling posted in Merchant Services Payment Processing

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As more information becomes available about credit card processing and more people with superficial knowledge write about the topic, interchange plus is often touted as the be-all end-all to opaque billing and high credit card processing charges. This is a dangerously expensive misconception.

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Tiered pricing or interchange plus?

Jan 17, 2020 12:14:17 PM / by Craig Saling posted in Merchant Services Payment Processing

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Understanding how credit card processing fees are determined and how different merchant account pricing models work can save your business hundreds of dollars a month in transaction costs. One of the first questions you’ll ask is “Which should I go with, tiered pricing or interchange plus?” Tiered pricing is never in your best interest, but don’t just take my word for it. In this article, I’ll lay out the differences so you can see for yourself.

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