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April 4, 2018

Is Your Credit Card Processor Honest?

credit card

Accepting credit cards in your business is a requirement in today’s cashless society. In fact, we are seeing an uptick in the use of contactless payment methods such as Apple Pay, Samsung Pay and even Fitbit Pay. With these payments, a simple tap on the keypad of your phone or fitness device and the payment is done. While this is convenient for your customers, the near elimination of cash and check payments means the cost of processing these transactions continues to rise. Like accepting credit cards, the cost of processing credit cards is also a requirement for merchants.

This is why, now more than ever, it is important to monitor your monthly statements. Having someone with experience you can trust is just as important. Chosen Payments reviews hundreds of statements each month for prospective clients. As much as we would like to process for every merchant in America, we probably tell as many as 30% of our prospects that they are getting a great deal and they should stay with their current processor. Unfortunately, for the other 70%, at least 50% of them are being gouged by unscrupulous processors who know that most merchants don’t know how to read a processing statement and have no idea what they are reading.  In fact, of the 50% that are being nickled and dimed to death by fees, excessive charges and high rates, they are paying thousands, not hundreds of dollars too much. Are you in that 50%? How long has it been since your last review? Chosen Payments offers a free credit card processing analysis and if you are being treated fairly, we are honest enough to tell you the truth.

We find that many times, merchants are paying high rates simply because the sales rep didn’t do his homework. Like most things we purchase in life, the more you buy the cheaper it is. We found one instance where a merchant completed an application in 2005 to begin accepting credit cards. The application said the annual volume of credit cards processed would be $150,000 with the average transaction of $2,000. In reality, this merchant is really processing $1,150,000 per year. This merchant was also paying 3.95% for every American Express transaction. At first glance, it appeared from this merchant statements that he was being charged 2.1% for processing MasterCard and Visa cards. On closer inspection, this was only the “discount” rate. That money goes to the issuing bank. So, if you charge $100 using your Wells Fargo Visa, $2.10 goes to Wells Fargo. What wasn’t made clear is that on top of the 2.1%, there is also an “interchange fee” that goes to the bank that processes the transaction. To quickly summarize this, when it was all said and done, this merchant was paying an “effective rate” of 4.27%. The effective rate is the total of all fees from all cards collectively added together and added into the total dollar amount of your credit card transactions.

Along the way, processor implemented “addendums” or modifications to the contract that the merchant never looked at. He just trusted that the processor would do him right. Instead, these documents gave the processor to modify rates at any time without discussion. This is one reason that Chosen Payments provides a lifetime rate guarantee for your peace of mind.

One thing you need to know. No credit card processor can alter the discount rates and interchange rates paid to the bank. The only controllable item is the “mark-up” or the fee for serving as your processor. Some credit card processors may give you free credit card processing equipment. It’s not really free. You are paying for it, one way or the other because the manufacturers of terminals don’t give them away. Shy away from any long term credit card processing contracts. Dishonest processors use this to lock you in to their unethical fees and rate hikes. Here is another important piece to this puzzle. In this example, the merchant was quoted 2.1% for all Visa transactions as the “discount rate” and then had to pay interchange fees on top of that. The interchange rates fluctuate based on the particular type of Visa. For instance, a Visa GSA card has an interchange fee of only 1.2% while a Visa Commercial Corporate card has a 2.25% interchange rate. You should always pay the actual interchange rate and enjoy the savings. Many credit card processors will try to hide this information and bilk you out of money.

Don’t end up being in the 50% of merchants who think they are getting a great deal and really are getting burned. The merchant I referred to earlier was spending nearly $30,000 a year on credit card processing fees. He’s now averaging $16,000 a year. Today is a great day to have your credit card processing fees analyzed by Chosen Payments. If your processor is charging you a fair amount, we will be honest enough to tell you so.

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