Every Thursday at 1:00 pm Central Time, please join us for the USA Manufacturing Hour Twitter chat. Simply go to Twitter and search on the hashtag: #USAMfgHour and follow along! This week’s host was Adam Baker, owner of Schooley Mitchell in Erie, PA. Schooley Mitchell helps manufacturers across North America reduce operational expenses without impacting their people, processes, or culture. Adam began the chat by saying, “Welcome to this week’s #USAMfgHour chat. Today we’re chatting about credit cards and how they impact businesses. Introduce yourself, and let’s start out with a simple question – “what’s in your wallet?”
Gina M. Tabasso @gtabasso, responded, “Gina, a strategy, marketing & sales growth advisor with @MAGNETOhio the @NIST_MEP for NE OH. We help manufacturers grow all areas of their business. Too much garbage and discount cards and gift cards in my wallet and not enough $$$”
Dave Meyer @dave1meyer replied, “Hey #USAMfgHour pals! Dave Meyer of @bizzyweb here – we drive leads and business for manufacturers using CRM, Inbound Marketing, website design and much more. Let’s connect! And my wallet has some emergency cash and one card – almost all my payments are done with Apple Pay via my phone.”
Social Success Marketing @SocialSMktg answered, “Hello friends on Twitterverse & beyond! We’re team SSM, your friendly neighborhood B2B social media specialists. Excited about today’s chat. Thanks for hosting, Adam!”
NACL @NACL_IND responded, “Hi Adam! Thanks for hosting! Kelley from NACL here, looking forward to the chat. I believe this GIF sums up my wallet right now.”
Kooltronic, Inc. @kooltronic, replied, ” Mike M. from @kooltronic (a U.S. manufacturer of electrical enclosure cooling & ventilation products). Currently, I have 2 debit cards and 1 credit card in my wallet + ID, medical insurance, and some lint (ha)”
Brash Inc @be_brash said, “Hi everyone! Happy Thursday. We’re Brash, a product development firm with offices in Canada, the US & Europe. Looking forward to today’s chat!”
Nigel T Packer – Digital Customer Experience @NigelTPacker responded, “Good day Adam and everyone in the #USAMfgHour I am based in Wales UK and specialise in #DigitalCustomerExperience My wallet has cash in it (Not much).”
Welker replied, “Whitney Koch, MarCom Specialist with Welker. We mfr sampling & odorization solutions for #oilandgas. What’s in my wallet? My ID, grocery store card, debit cards, punch cards for some stores, and my insurance cards. (Notice no cash)”
Home Building Solutions LLC @BigelowBethany answered, “Thank you for hosting and the cat, Adam! I’m Beth with Home Building Solutions in Novi, Michigan. We specialize in custom home remodeling.”
Velavu @velavu_tech responded, “Jasmine from Velavu here! We help organizations develop tailored asset tracking solutions that simplify their daily operations. Looking forward to the chat”
Felix P. Nater, CSC @FelixNater replied, “Hello Adam! Interesting topic. Let’s Rock and Roll.”
Adam Baker continued to facilitate the discussion by submitting his own reply, “Excited to Host! Hi Everyone, I’m today’s host Adam Baker, with Schooley Mitchell. I get to see first hand the impact credit cards have on businesses (both positive and negative) and I’m excited to share a few insights. A fun “Did You Know?”: The Discover Card was invented by Sears! I have a wife and three kids – there is nothing left in my wallet!”
Adam went onto say, “There are over 1,500 different types of credit cards out there. Some of the things differentiate them are:
- Network (Visa, MC, Discover, AMEX)
- Issuing Bank (Chase, Capital One, Citi, etc.)
- Perks (Miles, Points, Cash)
What IS in your Wallet? If you found a Visa card issued by Chase bank in your wallet, you have one of the most common credit cards in America. But if you have an American Express card, it is the least accepted card in the world, thus one of the least common.”
Felix P. Nater responded, “Interested. Nevertheless, the American Express Card came to my aid during difficult times back then. Capability rules the day over here. But I know what you mean, Adam.”
Whitney Koch replied, “I do have a Chase Visa, though I leave it at home now.”
The discussion continued with the following Q&A:
Q1) Looking at your credit card, how do you think those credit card numbers get assigned to you?
A1) Welker: I always assumed they were randomly generated, though I know Visa, Mastercard, etc. have different starting number strains because online merchants can identify the type of card after I enter the first few numbers. Adam Baker: You’re right – that first number tells you what type of card it is. Nice job!
A1) Nigel T Packer: Since I stopped travelling so much, I have always used a debit card or cash. Adam Baker: you’ll find out later why you are a merchant’s dream!
A1) Gina Tabasso: stand in line? random? so the black market and thieves can’t find the pattern? Guessing. Adam Baker: Sometimes it really feels that way! But you are kinda right, one of the numbers is to keep fraud down! (the last number)
A1) NACL: Card type (Visa, Mastercard, etc..), issuer, then region? Adam Baker: Yes, part of it has to do with the card type and issuer! Great job!
A1) Home Building Solutions: Huh, never paid attention to that. Interested to find out! Adam Baker: Most people don’t – as long as it does it’s job, right? But hackers pay attention for sure!
A1) Pavel Stepanov: It has something to do with the credit card networks. Adam Baker: You’re right Pavel – that’s part of it!
A1) Social Success Marketing: I thought at first they may be random but then maybe not. I’m waiting for enlightenment.
A1) Dave Meyer: I know there’s a rhyme and reason, but danged if I know what it is!
A1) VirtuDesk: A1: We have no idea.
A1) The Host, Adam Baker, answered, ” Those numbers aren’t random:
- First digit signifies the system (ex. 4 = banking & financial Visa)
- Next five digits signify the bank that issued it (as well as the benefits it provides)
- The next several digits (up to the last one) are your account number
- Last digit is the “checksum”
Q2) While interesting, that seems awfully complex! Other than so they know to bill you, why do you think those credit card numbers even matter? That’s a lot of information in those numbers! Why do those numbers even matter?
A2) Dave Meyer: They matter to help eCommerce tell at-a-glance if the numbers are legitimate (checksum and issuers), and of course to maintain an ongoing relationship with payees. Adam Baker: absolutely Dave – imagine where ecommerce would be had we not had credit cards.
A2) Social Success Marketing: Hmmmm… I’ll just wait for your expert answer here, Adam. Adam Baker: If I had a nickel for every time I heard my wife say this, I could afford 1 piece of penny candy!
A2) NACL: To keep things organized? And to help ensure security of your card and protect your funds? Adam Baker: Yes, part of it is to protect your money (and more importantly to them, the bank’s money!)
A2) Nigel T Packer: Is it a confirmation code that matches something on the chip/magnetic strip?
A2) Welker: Do different cards (e.g., Visa, Mastercard) have different agreements with retailers? Maybe the numbers play into that.
A2) Home Building Solutions: Probably to track everything you do and base marketing off of that.
A2) Pavel Stepanov: So that it is easier to track and process transactions. This is also used to track credit history and credit scores.
A2) Felix P. Nater: This I did not know, but what else is new with my limited knowledge of the topic.
A2) VirtuDesk: Security purposes.
A2) Host answer: Those first six numbers help the processor determine which rate (of the hundreds out there) should apply to the transaction. The processing rate is a percentage of the transaction the business will pay for the privilege of accepting that credit card. Other processing fee factors: – How card was accepted (chip, swipe, phone, online) – Type of business selling item – Processing company
Q3) Who benefits from those credit card processing rates?
A3) Social Success Marketing: The bank is definitely one. Adam Baker: Absolutely – they use your money to lend to you and then charge the business you bought something from for accepting it…..what??!!
A3) Gina M. Tabasso: The credit card company. I have to bounce now to make some calls before offices close. Be well, all!!! #USAMfgHour Adam Baker: thanks for stopping by Gina! Have a great rest of the week!
A3) Ingor van Rooi #InspirationFromIngor @IngorvanRooi: Probably the processing merchant. Adam Baker: They definitely get a nice cut of the transaction. And ironically, it’s the only fee of the three you can negotiate.
A3) Digital Customer Experience: The Bank… always the Bank. Adam Baker: How come there’s never a bank error in my favor and I get to keep the money, like in monopoly?
A3) NACL: Banks and credit card issuers? Adam Baker: Yep, they are two of them!
A3) Home Building Solutions: I would assume the credit card company, they aren’t doing it for fun LOL! Social Success Marketing: Haha! You’re right, Beth!
A3) VirtuDesk: The bank.
A3) Welker: Banks? Definitely not the merchants.
A3) Pavel Stepanov: Of course, it’s the bank.
A3) Adam Baker, host, answered: Quite a few companies benefit from charging a processing fee. If you own a business, it can feel like everyone has their hand in the pot. The bank, the credit card company, and the processing company (whoever provided the terminal to process the card) all receive a piece of the processing fee.
- The bank that issued the card takes a cut
- The credit card company (ex. Visa) takes a cut
- The company that provided the card reader takes a cut
Q4) Some consumers are unaware that it costs businesses money to accept credit cards. Give me your best guess: If you purchased three widgets for $100 using a credit card, how much of that $100 transaction do you think the selling business receives?
A4) Social Success Marketing: I have no idea. Adam Baker: that’s a popular answer! second most popular – somewhere between 0 and 100
A4) Dave Meyer: It depends, but a solid guess would be $94 to $97. Cards with rewards/benefits tend to take more of a cut. Adam Baker: absolutely – the greater the reward, the more costly it is to process!
A4) Ingor van Rooi #InspirationFromIngor @IngorvanRooi: possibly about 2-5%…judging from the fees I pay for credit card transactions…maybe that’s why some businesses charge extra fees
A4) NACL: 97.3%? Adam Baker: I love the precision – you and I are gonna be good friends!
A4) Home Building Solutions LLC @BigelowBethany: I believe it’s around 2.5%. Adam Baker: that is a good spot – it can range, but 2.5% is pretty common
A4) Welker: I have seen some sites ask if I want to cover the processing fee during my purchase (typically for a donation), and it’s 3% in those cases. Does the type of purchase impact the fee?
A4) Nigel T Packer: It varies but I would say $95.
A4) Pavel Stepanov It depends on the terms of the agreement between the business and the credit card issuer.
A4)VirtuDesk: Waiting for the answer on this one.
A4) Adam Baker, host answered: It’s hard to say exactly, but they’ll get to keep somewhere between $95 -$98 of that $100 transaction. The processing fees take anywhere between 1.5 – 5% of the transaction total. Depends on the type of card and the benefits you receive, how the transaction was processed, and what you bought. But typically, the business will only receive between $95 – $98 of that $100 transaction. Somebody has to pay for those “free” airline miles, right?
Q5) Now that you know that the type of card impacts the processing fee, which card type do you think is cheapest to accept and which do you think is the most expensive? If accepting credit cards cost a business money, which cards do you think cost them the least to accept and which do you think cost the most to accept?
A5) NACL: Cheapest to accept – Discover. Most expensive to accept – American Express. Adam Baker: You’re spot on with AMEX. DYK – Sears introduced the Discover card? Welker, Inc. I think I remember learning that from my parents as a kid. Isn’t it interesting that women couldn’t get their own credit cards until like the 1980s?!
A5) Welker: Cheapest – Visa (It’s everywhere you want to be!) Most Expensive – Discover. Adam Baker: Visa tends to have very low processing rates. Discover isn’t as bad as AMEX – AMEX is almost a status symbol and charge businesses as such.
A5) NigelTPacker: A debit card is a lower cost but the best is Cash. You can even ask for a discount when paying in cash. #CashIsKing Adam Baker: yes – debit cards carry the lowest processing fees!
A5) Felix P. Nater: Adam, are intellectual responses acceptable? How about a Debit card used as a credit card? Adam Baker: That’s a great guess, but debit cards run as a credit card fall under credit card rates. When able, entering a pin will cost the business less money.
A5) Ingor van Rooi: The one that gives you free miles probably has the highest fees…I think
A5) VirtuDesk: Typically, credit cards with greater rewards and advantages typically have higher processing costs than cards with lesser incentives and benefits. So we’ll go for debit cards for the cheapest and premium credit cards for the most expensive. Adam Baker: ding ding ding – debit cards are the cheapest to process!
A5) Host answer: Kind of a trick question: Debit card transactions (with a PIN) cost a business the least to accept because they are considered less risky for the processor and their rates are capped by Congress (in USA). Generally speaking, American Express has the highest processing rates. Generally speaking, American Express cards are the most expensive to accept, which is why they are not wildly accepted overseas.
Q6 Okay – credit cards are expensive for businesses to accept, but what the heck does this have to do with manufacturing – what does credit card acceptance have to do with manufacturers???
A6) Whitney Koch: Are there different rules or fees for manufacturers who accept credit payments? Adam Baker: There are different fees – part of what determines the fee is what type of business is doing the selling. The risk of returns causes the processing rate to go up. So it may not be as high as the rate to buy clothes, but it won’t be as low as the rate to buy bread.
A6) Nigel T Packer: When purchasing and selling. Purchasing you get hit by the fees as they are added onto the price. Selling you are penalised with charges.
A6) @BigelowBethany: I’ll leave this for the manufacturers! The only thing I make is food haha!
A6) NACL: For quick payments it is sometimes easier to use a credit card. Plastic is overtaking cash/checks. As manufacturers, we have to be prepared to adapt.
A6) Pavel Stepanov: Payments, of course.
A6) Welker, Inc. @WelkerInc A6) Are there different rules or fees for manufacturers who accept credit payments?
A6) Host answer: B2B manufacturers often have high dollar invoices. If the manufacturer is paid with a credit card, they can lose quite a bit of revenue (remember our example – they pay 2 – 5%) For a $100K invoice the transaction could cost $2,000 – $5,000! More and more manufacturers are either being asked to accept credit cards or beginning to accept them to receive payment sooner. Because of the high $$ transaction amount, those processing fees can have a big impact on bottom line.
Q7 What is one thing you can do as a business customer to reduce the cost of processing a transaction with a manufacturer?
A7) Social Success Marketing: From what I gather in the previous answers, cash payments should be done more. Adam Baker: see, this is educational! Spot on!
A7) @BigelowBethany: Write ’em a check! Adam Baker: I mean, if you’re just thowin’ them out there! But yes!
A7) Welker: Pay cash?? Might get a lower price too.
A7) NACL: Ask what other methods of payments are accepted?
A7) @be_brash: Paying cash?
A7) Nigel T Packer: I have a chequebook and have not used it for over 8 years. Cash is the best as it is anonymous and can elicit a small discount from the seller. For business transactions I do online payments.
A7) Adam Baker, host, answered: Try to work with the seller to see if there is a way you can both meet your objectives. They may value receiving a quick payment more than saving the processing fee. By taking their needs in to consideration, you’ll build a great relationship. Avoid paying with a credit card if you can. Some businesses use credit cards because it extends cash flow. Speak with your manufacturer and propose a compromise that if they extend your terms to a Net 30 / Net 45 term, you’ll pay via ACH or check to reduce their loss.
Q8 What can Manufacturers do to reduce the cost of accepting credit cards?
A8) Welker: Negotiate with banks and processors to get a lower processing fee. Hire YOU to help them. Adam Baker: Hey, I love that answer! banks and credit card fees can’t be negotiated, but processor fees can absolutely be negotiated!
A8) Nigel T Packer: For international transactions Bitcoin? Adam Baker: That’s coming soon – it seems that Europe is better positioned for that right now – do you see the same thing?
A8) NACL: Charge a credit card fee to cover the cost?
A8) Host answer: If they absolutely need to accept credit cards, consider:
- ID what processing pricing structure they are in (flat rate, tiered, or interchange plus) and compare switching structures
- If accepting online / over the phone, get as much info as possible – zip, exp. date, sec code
There are quite a few opportunities to reduce the cost:
- Validate your on the best pricing structure
- If card isn’t present for transaction, enter as much information as possible
- Shop your processor – switching credit card processors is relatively simple
Wrap Up: Thanks for joining us today and learning more about the costs of credit cards. If you love a business, don’t use your credit card – use cash, debit (with PIN), ACH, or check. The banks don’t need your money, small business USA does! Thanks so much for the chat. Remember, when you use a credit card, the seller doesn’t receive the full transaction amount. That will drive up costs for everyone. When possible, use another form of payment and help keep manufacturing costs low in the USA!
Nigel T Packer: Thank you Adam! We have seen a big increase of cash transactions here in the UK over the last year. More people are reverting to it for budgeting. when the cash runs out so does the spending. Thank you for a great learning experience. Adam Baker: My wife and I did that years ago and it has made such a difference!
Welker: Thanks for this, Adam! Such useful information for consumers and businesses alike!
See you next week! See you all next week. If you have questions regarding credit card processing, please don’t hesitate to reach out. I can answer questions or run a full analysis and let you know what you could do to save money (or you may be in the best spot possible! IDK) If you are a business that accepts credit cards, Schooley Mitchell can provide a free analysis of your processing environment and show you where there could be savings – potentially hundreds of thousands of dollars a year. I’d be happy to chat!
Social Success Marketing @SocialSMktg Thanks again, Adam, for hosting. Learned a lot today, Adam! Thank you! Thank you, all, for joining the chat. See you next week! Same day, same time here on #USAMfgHour.
Anyone who champions U.S. manufacturing can join in on a new conversation each week on Twitter using the hashtag #USAMfgHour. The chat starts at 11 a.m. Pacific Time/2 p.m. Eastern. Share positive blog posts, helpful articles, news, important information, accomplishments, events, and more with other manufacturers and supporters from throughout the country.
Are you interested in hosting a #USAMfgHour chat? Contact the organizers: @Radwell_Intl @DanBiggerUSAMfg @DCSCInc @SocialSMktg