Merchant Services: Changes to the Industry in 2014 with Chris Trout of Cutting Edge Bank Card Services

credit card processing orange county, ca

Chris Trout, your credit card processing expert in Orange County, CA

Chris Trout
Cutting Edge – Bank Card Services, Inc.

Account Representative
1322 Bell Ave., Ste: 1L 

Tustin, CA 92780
Cell (949) 378-4783
Office (714) 258-7751
Fax (714) 258-7751
Cutting Edge  – Bank Services

Chris: Our next Presenter went to the University of California Irvine. He’s done everything in his life from Lifeguard. He worked at Abercrombie & Fitch, believe it or not. He has worked construction. He has taught English abroad. And he finally found his way into medical device sales to end his career. Well, he thought he was ending his career and he hated that job so much that when he put his three-month notice in, and the last day was up, he cartwheeled out the front door, never to look back.

Those experiences really shaped him, though. And I hear he likes to play poker. Your next Presenter is me.


Female Presenter: Can we see that cartwheel?

Chris: Oh, yeah!

Male Presenter: Can we see you do a cartwheel?

Chris: I’m wearing business pants. I don’t know if I…


Chris: Maybe. Maybe. You know, I actually found the job I’m working in now- I was waiting on the boss of the company in an Italian restaurant I worked at off and on for years and years and years. And I had just gotten out of the medical device gig, and I knew I wanted to be in sales. I knew I wanted to do something more helpful, but I never wanted to go that route again.

We had a joke in the industry, “What’s the difference between a neurosurgeon and God?” Well, God doesn’t think He’s a neurosurgeon.” So it was just the strong personalities, the lack of compassion for the people below him. If it weren’t for nurses, nothing would get done at hospitals. These guys, understandably, they spent 10, 12 years in college hitting the books, so the social skills aren’t quite always there. And it really showed when you worked for them.

Well, you have personality. They did not. They always say you judge a man by how he treats someone who can’t do anything for or to him, and it was kind of true. They called me Mike Bay for two years. They didn’t even bother to learn my name, and I was there in the OR with them twice a week for two-and-a-half years.

So I knew I wanted to get into an industry where I could help people, and I found this job. Now we call it Bank Card Services, because it’s not just credit cards. Everybody has a debit card. There’s a big proliferation for prepaid debit cards. The new ones are called Rewards Cards, and I’d really like to about those, because they have absolutely changed the industry. And unfortunately as business owners, you are taking the brunt of that.

To get those miles, to get everything that they offer you with the cards, somebody has to pay for that. And if Visa, MasterCard, and American Express had it their way, nobody would ever carry a balance. Because they don’t know if they’re going to get that money. That’s why they hit you with these ridiculous interest rates. They want you to pay it off every single month, because they’re getting their money from Texaco, from Wal-Mart, from Target, every time you swipe that card.

Hands down, what is the cheapest card for business owners to accept? Can anybody tell me what the cheapest type of card to accept is?

Female Presenter: ATM.

Chris: ATM card, precisely. 100% ATM card. That money is already in there. We know you already have that money. We are legally mandated to only charge you so much. In fact, with the Dodd-Frank Bill, they actually tapped it at just a flat rate. But that’s only when you punch in your pin number, because we know how very secure that’s going to be.

This one’s going to throw you. What is the most expensive type of credit card for a US business owner to accept?

Audience: American Express.

Chris: Close, not true. Reward is close, not quite there. Corporate cards. Corporate cards are the most expensive cards for you all to accept. And as a small business owner, I have a little corporate card that I use for my own dealings. We aren’t the problem. The problem is Merrill Lynch, some peon who takes the card to the donut shop and buys five dozen donuts. And then the corporation says, “Whoa, whoa, whoa! We didn’t authorize this charge.” And because it’s credit, the credit card companies just say, “Okay. We’ll take care of it. That charge is off your bill now.” Well, that’s why they have to charge you 3.5% to take a corporate card. Those are the most expensive.

I’m glad you brought up American Express. American Express is its very own animal. I have American Express. I absolutely love them. I will never get rid of my American Express card, but a lot of places don’t accept it, because they have one flat rate they always accept, and it’s not variable. A lot of places don’t take Discover. Discover is owned by Visa and MasterCard. Visa and MasterCard was having a good year and they just bought Discover outright.

But the thing about Discover is that every single Discover card is a rewards card. So there is no base rate. There is no debit card. Every time you take a Discover, the customer who’s using that is getting points, getting miles, getting goodies, getting telescopes. I don’t actually know what they do with their cards. So Discover can be more expensive than American Express, and a lot of times it is. It’s the same with corporate cards.

And I don’t want you to just, you know, look at every card and say, “No, I’m sorry, we don’t take that,” because Visa and MasterCard has said, “If you accept one of our cards, you must accept all of our cards.” So you have no choice. When Visa’s got those rewards cards now, Chase, Visa, those things are expensive to take. There’s nothing you can do, because you want to take the Visa debit cards.

So really, what you’re trying to do is look at all of these numbers put together and find the lowest effective rate you can. The lowest effective rate is going to be buried on what your average ticket size is, how many charges of that size, and what type of card your clientele are using. I mean, if you’re a paintingcontractor, I think you might get a lot of other contractors or real estate agents paying you with their corporate card. That’s going to be more pricey that if you’re Swiss Miss Donuts, and you’re taking debit cards all day, every day. So that’s kind of an issue.

But the one thing about rewards cards is, as a business owner, you do want to accept them. Last time I spoke, I talked about a terribly named book, but it’s just filled with great information, called “How to Be Smarter, Richer, and Better Looking Than Your Parents.” And they found out that these rewards cards pay back the customer an average of $25 a month. But the cost of using those cards, each customer that uses that spends about $165 extra dollars a month that they wouldn’t use if they weren’t using their rewards cards.

So it hurts to accept these as business owners. There’s not a lot you can do about it, because that’s the way everything is moving, and every time you turn on a football game, nine out of 10 commercials are for some credit cards, some prepaid Chase card, something like that, and it’s just the way things are moving. In fact, I have a friend how was bartending for 10 years. He had a drawer in his house just full of cash. And we used to just make fun of him, like, “Why would you do that? Go to the bank right now.” And every single time we went out, he’d pull out his Visa Card. He never brought cash with him anywhere we ever went, every bar, every restaurant, every time we went out, he paid with his card. Because it was more secure. Like I said, when it’s credit, they’ll just take that charge off, and that’s why they charge you those rates to accept their cards.

I think I’ve hit on just about anything, but does anybody have any questions?

Male Presenter: How about Square?

Chris: Square is a very funny animal, and they have absolutely changed the industry. Now they charge one high rate and they actually charge 2.75% for any old card you take. Now they’ve realized rewards cards are so prevalent that they charge 3.5% for rewards cards. And they charge you more because they would have to pay for it.

Oddly, it’s actually fairly cheap because of the amount of fraud they open themselves up to. Please pardon what I’m about to say, but call girls can use Square. And then a client can take that $5000 charge, call American Express, and say, “I am not authorizing that charge.” And that charge is then null and void, and Square is on the hook for it. So to make money, Square sells your information. Square sells your macro information. Everything they’re mad at the government and NSA for keeping track of, when you use Square, and you let somebody use their Square, you’re authorizing them to do the exact same thing. And they use your macro information and they sell it to investors and advertisers.

And the other thing about Square is, on those good charges, say you do a big job and you do get a nice payday for $7000. Well, Square is now going to “investigate” that. And they’re going to hold your money in Escrow. And while they’re “investigating” that, they’re investing your money. So as a business owner, if you really start having a good month or a good year, Square is going to hold onto your money while they “investigate” the claim, and they’re going to invest that money and make themselves a profit.

Another thing about Square is their customer service is atrocious because they’re a foreign held company. By going through an actual bank, we are a processing bank called Elavon, and that is US Bank. Of course they don’t call it that, because banks all are subsidiaries and everything like that. But we go through US Bank and a small part of why we have to charge you is because we’re using a bank to guarantee your money in one to two business days. We’re getting you your money, because you’ve earned it and that transaction has gone through. We are getting your money as soon as possible, whereas Square is going to investigate, invest, and do other things to keep you from getting your money.

Male Presenter: Don’t you have a Square-like product?

Chris: We absolutely do. We have a Square-like product, but what you’re getting is the backing of US Bank, and it’s just like having any of the other mobile merchant devices. But oddly enough, they’re cheaper because they’re piggybacking off of your cell phone’s wireless network. Now one thing about ours is, “Oh, it’s $15 a month.” Yes, it is, but we heavily encrypt it. I mean four-star encryptions so that your customers’ private information isn’t able to be snatched out of the thin air.

And that’s another thing, thank you for bringing that up, another part of that $15 is what’s called PCI compliance. Everyone remembers Target was ripped off for a million credit card numbers? They have to prove that they are taking security precautions with all of your private information, and it costs about $100 a year to do that. I’m sure for Target it’s much, much more than that. But then that guarantees you against $100,000 of fraud and liability claims as a merchant owner.

So we don’t even give you the option. We just say you’re getting the PCI compliance, because it’s very cheap, it’s around $100 a year, it’s part of your contract, and it’s just going to be on there. But then we make sure you do the questionnaire, you know how important it is keeping those card numbers secure, not storing them in a file cabinet that’s never locked. It’s a really easy kind of questionnaire. But by doing that questionnaire, you’ve proven to the company that you’re taking cardholder information seriously and they give you $100,000 worth of insurance on that with no deductible.

Female Presenter: I just thought I heard yesterday that the credit cards are coming with a microchip, and then you have to have a new debit card machine that will be able to read that.

Chris: It’s absolutely going that way. We are well behind the rest of the planet. Oddly enough, what happened first was, Americans all started using credit cards. We came up with the technology in the 80’s to accept them. Europe didn’t get into using cards until maybe 10, 15 years later when there was greater security and greater protection. So they use a different with a chip. Well now, nobody in America wants to foot the bill to change out all the cards, and all the readers and stuff like that. It’s coming, but because everybody’s fighting over it right now, it keeps getting pushed back.

Female Presenter: Okay.

Chris: As of last year, it was at the end of 2015, and I guarantee it won’t be any time before that. They just keep fighting and pushing it back.