Guarantee ECC vs. Straight ECC
Guarantee programs charge a discount rate of 1.8% or more, where-as straight ECC with Verification will start at around $0.25 cents a transaction for very large merchants, but shouldn’t exceed $0.50 for the average merchant.
By using a verification service, the number of potentially bad checks that you accept will be greatly reduced.
Guarantee services always use a verification system to reduce their exposure to bad check losses. Guarantee services also cover their costs by charging checkwriters a returned check collection fee.
If you are already using a check verification service, then you can easily determine if a guarantee program will save or cost you money; Just add up your yearly check volume, and divide by your total returned check volume for the same period. If your annual returned check volume exceeds the Guarantee Discount Rate, then you will save money by using a guarantee service. If you have been able to collect on some percentage of you bad checks, then you should take this into account in your equation. If you haven’t used a verification service in the past, you should count on seeing your returned items decrease substantially.
The largest merchants, multi lane grocery stores, typically NEVER use a guarantee service. They know that by using a verification service and attempting to collect on returned checks, they will reduce their bad check losses to below 1% of check volume. This is why you are better off using a non-guaranteed ECC service that provides both verification and electronic re-presentment collections.
Advantages of ECC to Merchants
- Merchants typically get paid one day sooner.
- Settlement can be centralized in one bank account for chains of stores.
- Reduces paper check handling costs, such as “going to the bank”.
- Returned checks are reported sooner, increasing likely hood that collections will succeed.
- Returned items are collected on automatically without merchant intervention.
- Returned check charges may be eliminated.
- Verification stage reduces acceptance of potentially bad checks.
- Reduces risk to merchant due to loss or theft of paper checks.
- Services with Online Reporting increase the merchant’s efficiency; reporting and tracking can be done much more accurately when check information is captured and stored in a database accessible to the merchant 24 hours-a-day, seven days-a-week.
- With electronic check conversion, consumer payment behavior patterns are not affected: the only change is in how the items are processed.
- Customer response to electronic check conversion has been neutral or positive.
- The total cost to process paper checks through the traditional system is around $3.50 per check, which is much higher than with electronic check conversion.
Next Section: Returned Check Collections (RCK) >>>
