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Old 12-15-2010, 09:19 AM   #1
Pawel Blaz
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Reduce your EFT cost! Quick tip!

We speak with many CF affiliates about their payment processing needs and promote savings whenever we can. Most of you know the huge cost benefits of ACH over credit cards, and since most members pay with a debit card converting them to ACH could save you hundreds of dollars.

Here’s my quick tip... Offer a free shirt with your logo for switching!

Quick math...
Average membership = $100 per month
Average CC cost = (100x2.5%) = $2.50
Average ACH cost = $0.45
Savings = (2.50-.45) = $2.05

That's $2.05 per month per member!

The shirt might have cost you $7 but the yearly saving are $24.60. Switch 10 members and thats a savings of $211.20 for the year.

Everyone wins - the member will be happy with the free shirt and you are saving money while getting free advertising every time your member is wearing your shirt.

Take it a step further and make the shirt "exclusive" and watch the people line up to get switched to get the shirt.

Let me know your thoughts.
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Old 12-15-2010, 09:50 AM   #2
Katherine Derbyshire
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Re: Reduce your EFT cost! Quick tip!

I'm not giving anyone access to my bank account, not even for a $10 t-shirt. From the customer side, the advantage of credit cards is the extra layer between the vendor and my funds.

Katherine
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Old 12-15-2010, 11:37 AM   #3
Pawel Blaz
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Re: Reduce your EFT cost! Quick tip!

Consumer protection is always a priority when processing any payment transaction. As a consumer it is as safe to provide checking account information as it is credit card information. ACH is basically processing the information from a check electronically. The member is not giving any additional bank access by providing the routing and account number rather than the debit card number.

As a consumer you are able to return any unauthorized ACH transaction by contacting your financial institution... similar to the process with your debit or credit card transaction. And just like credit card transactions there are rules merchants have to follow to avoid "chargebacks" or in ACH terms "Unauthorized Returns".

Simply there is no "security" benefit to the consumer for using one over the other.
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Old 12-15-2010, 11:56 AM   #4
Katherine Derbyshire
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Re: Reduce your EFT cost! Quick tip!

While in theory an ACH transaction may be just as safe, in practice I've found American Express to be a lot more responsive than Bank of America. Moreover, when the money comes directly out of my bank account, it's gone, and if there's a problem the burden is on me to get it back. When it's charged to a credit card, I have a chance to review the charge before paying it.

A credit card also gives me a lot more control over my cash flow.

And finally, canceling a debit or credit card is a lot easier than getting a new account number. Even if I trust you, I don't necessarily trust the security of your computer systems.

(All of these services, of course, are *why* credit and debit cards cost more. Oh well.)

It's your business, run it how you like, but realize that a $10 t-shirt may not be enough to convince your members that ACH is in their best interest.

Katherine
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Old 12-15-2010, 01:53 PM   #5
Pawel Blaz
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Re: Reduce your EFT cost! Quick tip!

I agree.

From a consumer perspective you want CHOICE... to have all available options so that you may choose the one that fits best for your needs and one that is most convenient for you. I agree completely.

From a merchant perspective you want to offer all payment options so that your customers have the ability to pay you in any way they can.

BUT... small business owners need to watch the bottom line so that their business stays open.

This is just a suggestion to promote savings for the business owner. As a consumer you do not have to participate. You can pay using your card and NOT get the free t-shirt. Its just another CHOICE for the consumer.
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Old 12-23-2010, 08:17 AM   #6
Shannon Mullens
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Re: Reduce your EFT cost! Quick tip!

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Originally Posted by Katherine Derbyshire View Post
(All of these services, of course, are *why* credit and debit cards cost more. Oh well.)
Actually, the reason credit cards cost more is because of the associated risk of both fraud and default. When you use a credit card, the financial institution is the one that pays the piper - and the risk that you won't pay them back is why they'd prefer to use debit. This is particularly true with interchange fees and income being what it is - that small percent that the merchant pays gets split between the merchant's processor, the Association (V/MC/Amex/Disc), and the issuing institution as applicable.

Many smaller institutions lose money on credit cards, but they offer them because of customer retention strategies. Larger institutions are going to break even, maybe make somewhat of a profit - though with recent regulations, that income is going to be greatly lessened. And in this economy, credit divisions of banks, even the large ones, are losing billions.

From an ACH/Debit perspective, there's no greater risk to you as the consumer in using an ACH versus a Debit card. Though as you point out, it IS much easier to be issued a new debit card than it is a new bank account. Responsiveness to dispute and chargeback processes is actually subject to a lot of regulations, but it does leave room for extended misunderstandings. And you're right, Katherine, it's harder to get that money back into your account. Admittedly it's easier with some banks than others, which is why I personally believe BofA to be the devil. But that's a completely different story.

Personally - and I'm scarred and extra-careful because I actually work in the credit/debit industry, and I see all the behind-the-scenes BS that go on in this kind of process - I always use my debit card as credit, I prefer credit to debit. But if you wanted me to use an ACH at a box, I'd do it if you asked based on loyalty and knowledge. If you said to me - "you know, we're trying to keep our costs low so that we can focus on training, could we run your payments as ACH instead of <debit/credit> if at all possible?" I'd switch. I am willing to do that for local businesses where I know the owners. I am willing to take a little associated risk on for those people I know to be entrepreneurs trying to offer a good product.

The T-shirt is nice, but instead of a gimmick, a little honesty would win me far faster.

ETA - God my job is boring. lol.
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Old 12-23-2010, 09:28 AM   #7
Olen Gifford
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Re: Reduce your EFT cost! Quick tip!

Quote:
Originally Posted by Shannon Mullens View Post
Actually, the reason credit cards cost more is because of the associated risk of both fraud and default. When you use a credit card, the financial institution is the one that pays the piper - and the risk that you won't pay them back is why they'd prefer to use debit. This is particularly true with interchange fees and income being what it is - that small percent that the merchant pays gets split between the merchant's processor, the Association (V/MC/Amex/Disc), and the issuing institution as applicable.

Many smaller institutions lose money on credit cards, but they offer them because of customer retention strategies. Larger institutions are going to break even, maybe make somewhat of a profit - though with recent regulations, that income is going to be greatly lessened. And in this economy, credit divisions of banks, even the large ones, are losing billions.

From an ACH/Debit perspective, there's no greater risk to you as the consumer in using an ACH versus a Debit card. Though as you point out, it IS much easier to be issued a new debit card than it is a new bank account. Responsiveness to dispute and chargeback processes is actually subject to a lot of regulations, but it does leave room for extended misunderstandings. And you're right, Katherine, it's harder to get that money back into your account. Admittedly it's easier with some banks than others, which is why I personally believe BofA to be the devil. But that's a completely different story.

Personally - and I'm scarred and extra-careful because I actually work in the credit/debit industry, and I see all the behind-the-scenes BS that go on in this kind of process - I always use my debit card as credit, I prefer credit to debit. But if you wanted me to use an ACH at a box, I'd do it if you asked based on loyalty and knowledge. If you said to me - "you know, we're trying to keep our costs low so that we can focus on training, could we run your payments as ACH instead of <debit/credit> if at all possible?" I'd switch. I am willing to do that for local businesses where I know the owners. I am willing to take a little associated risk on for those people I know to be entrepreneurs trying to offer a good product.

The T-shirt is nice, but instead of a gimmick, a little honesty would win me far faster.

ETA - God my job is boring. lol.
I 2nd that BofA statement!!!! Worst Bank Ever!
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Old 12-23-2010, 11:01 AM   #8
Shannon Mullens
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Re: Reduce your EFT cost! Quick tip!

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Originally Posted by Olen Gifford View Post
I 2nd that BofA statement!!!! Worst Bank Ever!
Only because First Union (which my grandfather called "The F-U Bank") got bought.
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