Top Ten Industry Insider Tips & Tricks

Did You Know?

1. Most of the expense a business pays is a result of Interchange expense. The main difference between pricing is related to the profit built in above Interchange. All providers big and small have the same Interchange costs.
2. Many providers in the industry offer attractive rates based on only one segment of your payment acceptance. For example, a popular ploy is to offer a rate of 1.15%. Sounds good, except for the fact that this is only valid on Check Cards which will, on average, be less than 15% of your card acceptance volume.
3. Frequently, the sales reps you are dealing with are agents that float from provider to provider. These reps are selling with no validation whatsoever. They have not had background checks, contracts or any other requirements placed on them. These individuals come and go, selling your contract to the highest bidder. Know who you are dealing with before handing over your information and voided check. Many people with criminal backgrounds are involved in the merchant acquiring business. This business is can be eerily similar to the mortgage broker industry.
4. Beware of excessive BillBack, Downgrade Surcharge, Non Qualification fees. These fees are assessed in situations where you accept a card or payment that is not common for your business type. For example, your business is a retail ice cream shop set up to sell ice cream face-to-face with customers. A customer calls in to order a large amount of ice cream to be delivered to a school. You accept a credit card number over the phone for the order, charge the customer and deliver the ice cream. Because you did not have the physical card in hand to swipe, this non face-to-face transaction will process differently and you will pay more for this transaction. The key is not to pay excessively more for these types of transactions. Also, try to conduct face-to-face transactions whenever possible.
5. Watch the terminal equipment. When offered equipment, make sure the pricing or lease cost is in line. It is simple to Google pricing for equipment. When leasing, figure out the total cost of the equipment by the end of the lease. It is not uncommon for merchants to pay thousands of dollars for equipment worth hundreds. Also be aware of free equipment offers. Nothing is free. Again, all providers have the same Interchange costs. The price of the equipment is built in somewhere.
6. Examine the termination fees in the merchant processing agreement you are asked to sign. Cancellation fees of up to $500 are common for terminating your contract early. This is standard with most providers. More importantly, beware of the provider's lost revenue fees that calculate what would have been the value of the contract over time. These types of cancellation fees can add up to thousands of dollars.
7. Know when your contract is expiring or has expired. Many contracts automatically renew or roll over. Your business may have the ability to shop around and not even realize it.
8. Examine your monthly statement carefully. Make sure you are being charged what you agreed to and make sure extra fees are not being randomly added. Unfortunately, it is not uncommon for annual fees, upgrade fees, enhancement fees, etc., to be added on to your account without notice. Although notice is legally required, many unscrupulous businesses (see #3) in this industry will add these fees and only remove them if you complain. They play the odds. If they charge 1,000 merchants and 15 complain they are way ahead of the game.
9. Understand what you are actually paying. You will find a complicated array of expenses related to a merchant account. Understand what your effective rate for processing a sale actually costs. A quick way is to take the difference between the amount sold and the amount you were funded divided by the amount sold. This is your effective rate.
10. Know your own business. Understanding how your business operates on a day to day basis can help you make better decisions when it comes to payment acceptance. Accepting pin-based debit transactions can be great, but that depends on the average size of a sale. New technologies can also help reduce costs and increase efficiency. New terminal types like hand helds or Internet based terminals can help you reduce processing costs. For example, many businesses dedicate a phone line for a dial terminal. By choosing an Internet based terminal, you can eliminate that monthly phone line expense which quickly helps pay for the terminal.