clearing the house of credit card fees

Combining ACH networking technology with an established loyalty program can divert customers from paying with plastic.

by Michael Ferrari

Cash, in its green, paper form, is being phased out. Customers are relying more and more on credit cards to make most of their transactions. And why shouldn’t they? Cash can be cumbersome to have in a wallet, especially when being toted in large amounts. Credit cards are small, simple, and thanks to constantly innovating point of sale technology, can sometimes get a customer out of the store as quickly if not quicker than cash. Throw in the rewards that are dangled in front of a cardholders nose, and its no wonder that reports show over 50% of all c-store transactions are being paid for with credit cards.

With this high frequency of credit card usage comes a wave of fees that could drown out a retailer’s profits. But now the c-store industry has found an innovative new way to lure customers away from using their credit cards while still offering them convenience and rewards: ACH debit cards.

Automated Clearing Houses (ACH) are payment networks used to collect payments by tapping directly into a customer’s checking account. The technology is used for direct depositing, e-checks and similar programs.

“Processing transactions through an ACH network is a lot cheaper than regular credit card costs,” Pat Lewis, partner of Oasis Stop ‘N Go told “But one of the major challenges has been getting customers to acquire and use this alternative instead of reaching for their credit cards.”

Retailers like Lewis have overcome the challenge by combining ACH networks with the loyalty card program that’s already been implemented. By merging the two, customers can use their loyalty card as a debit card, which withdraws directly from their checking account. The ACH Debit offers the customers a quick alternative to credit cards while still giving them rewards thanks to the loyalty program.

It’s been reported that over 50% of the credit cards being used are rewards-based cards, making it difficult to veer customers from using another form of payment. Offering quick debit service with loyalty rewards is a sure way to convert credit transactions into cheaper debit transactions.

“You can change a customers shopping behavior if you reward them with something,” said Lewis, who has implemented the ACH debit concept to stores’ Kick Back Rewards program. “With this program, our stores can return some of the cash we’ve saved by putting it through our loyalty rewards platform.”

To learn more on ACH Debit and other ways to offset credit card fees, check out the upcoming issue June 2007 issue of Convenience Store Decisions.


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