4 May 2020
Just between you and me, are you concerned that you are paying too for your Merchant Account? Every business owner knows that you must accept credit and debit cards. But does it need to be complicated and frustrating not knowing what it costs?
The most common thing I hear is about hidden fees. Visa, MasterCard, Discover, American Express, the card processors and the Big National Banks that control the electronic payment world have made it extremely complicated. Some expect to keep everyone in the dark.
The number of things that can go wrong can not be counted, but most of the problems you will face with your processing will fall into these areas. If you see any of these signs in your processing, get trained expert advice. Avoid local agents as training is normally limited.
1. Expensive Leases on Common Processing Equipment
Leasing a standard desktop credit card terminal may seemed to make sense in the moment. The reality is that the one-time cost of a terminal may save you thousands of dollars. That small monthly fees
sounds attractive. When you do the math, you will see that 48 months multiplies the cost to a huge number. Most, if not all leases, are non-cancellable.
You will hear agents tell you that the lease can be transferred and make it sound amazingly simple. While true not easy to do. And the agent is not motivated to transfer a lease when he can write a new one and get paid again.
The processors know all the reasons why you shouldn’t lease, so they come up with reasons to lease. It reduces upfront costs (at a huge cost down the road), it is a tax write off (as a business owner is a small tax write-off worth the cost of long-term cash flow), your terminal is protected in case it breaks or quits working (if your terminal is not working the processor is not making money so shouldn’t they make sure your terminal is working). The sad part of leasing is that if you choose to keep the terminal at the end of the 48 months you will still owe more than it would have cost you to buy it upfront.
Processors also try to convince you since you are in a lease that you can not shop for rates or change processors until the lease is completed.
Neither of which is true. The lease is a third-party agreement (even if your leasing company has a name sounding like your processor) and has nothing to do with the actual processing. You can and should
regularly do rate comparisons. Sometimes the banks and big processors do across the board rate increases to improve their profitability.
2. Your Processor Locked You into A Long-Term Contract with a High Cancellation Fee.
This is an early warning sign if you have a high cancellation fee if
you choose to change processor within the contract period. All
contracts have Early Termination clauses. While a reasonable
cancellation fee is agreeable to give the processor the opportunity to
correct any issues and do a side by side rate comparison, any thing over $300 is unreasonable.
Watch for contracts that have liquidated damages and loss of
revenue clauses as the terms for early termination fees. These terms
can spell thousand to millions of dollars of cost to terminate.
Processors who have unreasonable Early Termination Fees (ETF)
normally have poor customer service and higher rates. This is to
maintain control of your account when issue arise.
Some will tell you that they have “no contract” meaning they do
not have a lease. The Card Brands require a contract and the standard
length is 36 months. Never let an agent tell you there is “no contract.”
And if they tell you there is no cancellation fee, ensure that it is either
spelled out on the contract itself or is on a document provided by the
processor. Never just accept a verbal agreement as the agent is bound by the written contract just as you are.
3. You are Using Your Local Bank
When you sent up your business account, they will offer to set up
your merchant account at the same time. They have credibility because they are “The Bank.” But banks are not in the business of credit card processing. They make money by storing, saving, investing, and lending money.
Banks have set hours they work. They are not available during the
hours most businesses will need customers service for their merchant
account. Banks will partner with an agent who marks up their cost so
that the bank makes money offering this service. Banks are offering
convenience and seldom the best service or the best rates. Big banks
have high overhead that they must attach to their services.
By law banks cannot require bundling services to get your business.
This means they can not require you to have a merchant account to
have a checking account or to get a loan. They may however try and
use the we have your other business doesn’t it make sense to give us
your merchant account? Will they lower your other rates if you give
them your merchant account, would be a good question to ask them?
By working with a trained dedicated agent, you will be eliminating the
extra fees and will find better customer service. You will have a
support team that is available 24/7 rather than a banks toll free number that is available during business hours. 9 times out of 10 you will see an immediate improvement when you move from your local bank to an expert agent.
4. You Are Using Square, PayPal, Stripe or Quick Books
These services provide simplicity. Simplicity comes at a price.
While their pricing started out as rock bottom competitive, they have
now had to gradually increase pricing because of investor pressure.
Like banks, these types of processors have huge overhead and have to sacrifice on customer service.
As technology innovations take place in the market place the
ability of these services to pivot in the direction the market goes will be limited. Without a customer service team, they will not be able to
implement these changes rapidly.
Risk management will be another area that causes these services to see pressure. They are currently suspending their formerly
core businesses and, in some cases, putting a hold on any funds they still hold for reported to be as long as 360 days and in some cases holding merchant funds totally tens of thousands of dollars.
Not having a method to have direct communications when a problem
arises shields them as they grow but puts their merchants at risk. No
one can measure the cost of poor customer service.
5. Hidden Fees and Semi-Annual “Rate Adjustments”
The cost of Visa, MasterCard, Discover, and American Express plus
the fees charged by the card holders banks are the same for all
processors. Every processing company though is different, and they
charge different fees for their services. Some though take these fees to new levels. Add in that most field agents are lightly trained and seldom see a merchant statement from their processor.
If you can not get an explanation from your agent or his office as
to what a fee is and why it is charged, you have every right to be
suspicious. The hard cost can be found online. If you would like our
team of experts show you exactly where to find interchange fees.
Be aware of non-compliance fees. Some processors will not tell
you when you have rules that you are not following. It is always more
profitable for them if you are charged for a fee that costs them nothing. They have little to no motivation to ensure that you maintain
Other things to be aware of are outdated equipment and a lack of proper equipment. Without modern equipment you may not be able to take advantage of lower rates and better terms. Also take look at the model of pricing you have as it may be better for some merchant but not so good for your business.
If you have read this far you feel that you are experiencing one or more of these problems or maybe another problem that we have not
addressed. You should consider changing processors because it is an
industry that should be based on trust and not just a 36-month
contract. Waiting can only either make the doubt worse or it could
even cost you a lot of money. Things you should do at this point:
- Review the contract of your current processor. One of the
services our team of experts provides free of charge are both
statement reviews and merchant account contracts. The fine
print is the part that most read. Each processor has a standard
contract that they use for merchants. Our team has worked with
most of the contracts in the marketplace.
- Review if you have free equipment or If you are leasing equipment.
Let our team have a copy of any lease agreements and they will
give you the options you have to get better deals on it.
Remember for some business models programs like Cash Customer
Rewards will provide a pricing model for your business that allows your
cash customer to pay one price while your card paying customers are
charge the cost of processing on their transactions. This will eliminate
100% of the cost to you as a merchant.
Cash Customer Rewards or a cash discount program is a great program
for most merchants as it allows more cash to remain in the business.Customers appreciate the transparency these types of programs
provide. Your customers are already using this pricing model at gas
stations, utility companies, and with local, state and federal
governments. And probably the most common place they see these
fees is when they use an ATM.
Schedule a 15-Minute Discovery Call with out Team of Experts. In a lot
of cases they simply offer advice in how to reach out to your processor
and get you better pricing. In some cases, they will suggest changing
processors, whether it is our processing or someone else’s.
We know if we treat you right that you will recommend us to your
friends and area businesses to our services.
Thank you for taking the time to read this report.