To better understand credit card processing costs, let’s dissect the bill which includes three main components. The first is interchange. Interchange is the direct cost of credit card processing, and the rates are set by the credit card companies, so cost is the same for every provider.
The second is the markups. Some providers have basis points, or a discount rate, but regardless of the term, there is a percentage added on top of interchange in order for traditional providers to profit from your business’ volume.
The third is ancillary fees. These are all of those line-item fees and hidden charges on your statement, and can be anything from batch fees, statement fees, PCI compliance and monthly minimums, all the way to customer service fees.
To add insult to injury, you’re locked into a long-term contract with a hefty cancellation fee. If your provider is doing their job right and servicing you as they should be, why do they need to lock you into a contract?
The industry has been without change for the last 20 years. The merchant services you sign up for are a black box; there’s a lack of transparency and a general lack of customer support. However, there are newer companies that take you direct to the credit card companies so they remove percentage markups from your processing fees. So when you take a look at your merchant statement, look to see what you are paying above interchange – this is the money you’re losing that goes right into the pockets of your provider.
When you shop around for a new provider, there are a few main negotiation and clarification points you should discuss. First, make sure you understand all of the fees they want to charge, and understand the term details. If they want to charge you anything over interchange, look elsewhere for a provider that offers direct cost payment processing.
Second, ask about contracts. You shouldn’t be locked in long-term, and you shouldn’t have a big cancellation fee. Some companies are completely contract-free, so it is worth exploring your options to find them. Lastly, ensure that you get the direct contact of a customer service representative, so that when you have questions you need answered, you can ensure you have a real person you can call when you have questions – not an automated answering service. When it comes to merchant services, there are certain things you shouldn’t have to sacrifice – not the least of which include your hard-earned dollars.
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