Find out the assumptions that keep your FEC overpaying for merchant services.
There are many misconceptions regarding merchant services that can cost your business significantly every month and year. But understanding all the ins and outs of credit card processing could be considered a full-time job. That’s why we’re introducing this three-part blog series to help you get to the root of the costs, which types of fees you have control over, how often you should be evaluating your program, and the most important considerations to scrutinize when you decide to dig in.
Let’s start by tackling the three biggest assumptions about credit card processing that can cost operators like you a lot of money - and what you can do about it.
No. 1: It’s too complicated.
Merchant services is a commoditized business that has a bad wrap for many reasons. Processing companies lack transparency, creating overly complex statements, making it difficult to manage what you don’t understand. But because your business cannot run effectively without processing credit cards, you are left feeling like you can’t do anything about what you are paying.
It’s important to understand that there are three main categories that fees fall under:
- Interchange: cost of doing business, paid by the merchant to the issuing bank. Typically, this represents the largest component of the processing fees.
- Network Fees: paid by the merchant to VISA, MC, Discover, American Express for card acceptance.
- Processor Fees: charged by the processor for their role within the transaction process. Generally, a transaction or per item fee but can also include monthly and annual fees for various reasons.
Interchange and network fees are usually fixed and set by card brands and issuing banks. Other factors that can impact costs are the type of card being used, meaning a debit or credit card, and how the card is processed. Unfortunately, these are things outside of your control as it isn’t feasible for you to restrict the cards you accept based on how much you’re paying per transaction. The best bet is to understand how the processor fees might be impacting you since this is where you have some control and potential negotiating power.
No. 2: It’s out of my control.
Many merchants have been conditioned to believe that the rates they are charged are the standard industry rates everyone pays, and there is no way to influence them. But as we just discussed, that really only applies to the interchange and network fees. Many processor fees vary greatly depending on the provider. However, these quickly amassing fees may be mitigated with the right partner and a streamlined approach.
You’ve likely been approached by sales reps from different service providers promising to slash your rates without offering you transparency into all the processing fees. When you’re in the market for a provider, be sure to go with a reputable company and ask the right questions to fully understand all of the variables contributing to what you are paying. Some great fee-related questions to ask a prospective partner are:
- What is the pricing model being offered? (flat, tiered, or interchange plus)
- What are the additional fees that are not part of the rate?
- What is the minimum monthly payment?
- What kind of contract options are available?
- What are the early termination penalties, if any?
- What happens if I close or sell the business?
No. 3: It’s not that much money.
Ever heard the expression, pennies make dollars? Well in some cases, you could be paying a whole lot of dollars unnecessarily. Merchants often believe that the rate they were provided is all they’re paying, but that’s rarely the case. Many factors combine to become the overall effective rate truly reflected in your statement. In addition to the network and interchange fees, processor fees can be assessed for things like:
- Account fees - annual or monthly
- Risk mitigation
- Sending statements
- PCI reporting
- IRS reporting
- Online system access
- Customer support
Two facts remain related to your rates: 1) they’re probably more than you think, and 2) they’re always changing. It might be time to review your current program to see what your credit card business is really costing you.
So what’s the bottom line?
As part of our continued commitment to our clients, we have done the work to demystify merchant services to uncover where hidden fees and rate creep are impacting you. And we can offer you a streamlined in-house payment processing program, CenterEdge Payments.
If you would like us to perform a free cost analysis to help show you where you might be overpaying, please contact our CenterEdge team today. Our team will analyze your set-up and share how CenterEdge Payments might offer you savings and benefits or provide you with important insights to discuss with your current provider.
To take advantage of your free cost analysis, contact us today.