Are You Getting Taken Advantage of by Credit Card Processors?

I would say that the merchant services industry is competitive, and even cut throat in some cases. Many merchants have been taken advantage of by credit card processors’ ads of low teaser rates and costly equipment. I was working on a very large merchant account this past week and felt that the proposal we put together was honest, fair, and was beneficial to the merchant. I got a call from the prospective merchant saying that they had a quote from another processor that doubled their savings. With the small margin in the account, the savings they promised seemed too good to be true. After reviewing the quote, I noticed that the processor offered the same rates as I did. So how did they get double the savings?

I then noticed the sales agent wrote, “We will save you X amount of dollars by educating you on how to make your non-qualified EIRF (Electronic Interchange Reimbursement Fee) qualified.” What they did was take the non-qualified transactions and told her they would be qualified, so she would pay less Interchange fees on those transactions.

This situation happens often, and merchants are not always aware of what to look for or who to trust. There is no way this merchant services provider could guarantee what interchange category each card will fall into.

Here are some tips to ensure you are being treated fairly:

  1. Keep in mind that your merchant account is under a contract and is enforceable by law. These contracts are long and not always easy to understand. Make sure that you ask for your full terms and conditions. Many sales people will give you the merchant application, but not the terms and conditions that are associated. Online applications are also binding contracts with your electronic signature.
  2. Make sure you ask for all hidden fees to be disclosed. Look for fees such as merchant club fees and supplies fees. Some processors will have adjustment fees, network fees, PCI Compliance fees, standard fees and annual fees. A good way to avoid being surprised by these is to see sample statements or get references.
  3. Look out for bait and switch practices. Processors will entice you with a low rate, but this rate is generally for a specific type of card. Make sure you know exactly what you will be paying for all your card types.
  4. These days a lot of processors are running free equipment programs. These terminals are not always free and could end up costing you $1000s in the end. Some come with a hefty annual fee and others are simply a placement. If your placement terminal is not returned in new condition, you can be liable for 3 times the cost of the equipment.
  5. Make sure you are not signing any long-term contracts that have a large cancellation fee.

I think as time goes on and merchants become more educated, these types of sales agents will be weeded out. If not, merchants should not give up on the fact that there are good honest companies out there.

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