Credit Card Processing Myths...That Cost You Money

By: Ralph Prado - October  2001

Experts claim that the average American family can significantly improve their quality of life with a $300 per month pay increase. Therefore, it's no wonder more Americans start businesses in order to gain tax breaks and to make more money. For these same people, part of running a business comes with the task of accepting credit cards. Unfortunately, along with accepting credit, many business owners are losing $300 and more each month in merchant processing  fees, unnecessarily.

So, where does this credit card processing money go? Much of this profit goes into the hands of the processing companies and the representative. Due to a lack of knowledge by the business owner, merchant service providers make greater profits each time a credit card is used for payment.

The biggest and most popular credit card processing myth being told is, claiming only the "discount" swiped rate is the most important indicator if whether you are going save money or not. This is absolutely false. First of all, the discount swiped rate isn't a discount for a business owner. It's not a savings. Secondly, the discount rate is really made up of three numbers - the qualified, mid-qualified and the non-qualified - shown as percentages. These terms stand for the level of risk. The highest risk transaction is the non-qualified. A qualified rate is provided for swiped transactions where the credit card is physically present and passed through the machine for payment. Each of these percentages can vary from one merchant provider to the next. In addition, depending on how your statement is written, your fees may not be what you think they are.  

Therefore, there is no way to get a realistic quote on processing rates by simply calling around and asking "What are your rates?" The only way to receive the best merchant rate is to have a experienced professional - like myself - analyze at least, your past recent statements. By looking at what types and the number of transactions occurring each month, a professional can estimate future transactions and then offer the best rate based on the risk involved and costs associated with handling those sales. By accepting the lowest quote without a statement analysis is like gambling...with the house always winning.  If you're shopping around, get your statement reviewed before you sign an agreement and then discover you have ended up in the same situation all over again. 

If you are a new business owner with no past processing history, you may not get the very best rates because no history has been established yet. However, based on what similar businesses are doing, your rates can be set accordingly. 

Don't Fall For The Amazingly Cheap Advertised Rates

It's only natural that business owners search for better merchant rates by shopping around. However, buying a better merchant account service isn't as easy as contacting a wholesale warehouse. Plus, going by what you see and hear can potentially cost you more money too. For example, online you can easily locate advertised rates like 1.39% and .15 cents per transaction. Unfortunately, these number are really misleading. By making a phone call and probing such offers, the responsible advertiser will eventually confess that these rates are actually for debit sales, not for regular credit card sales. The normal rate should be 1.7% + 25 cents per transaction. This type of switch-and-bait scheme is even being done by well-known bank representatives. Sorry, but for legal reasons I can't say which institutions.   

Tip: Keep a close eye on the words used in advertisements for payment cards. Terms like Visa bank card or bank credit card are sometimes used to confuse you into thinking your getting a low credit card processing rate. In fact, they are advertising the DEBIT rate. Which for your business may not make a difference. Therefore, you may sign up for an even higher rate. Look at the contract and ask to see the Tier List that shows the fees. If they don't or won't provide you with the tiers within your contract, beware. Contact me and I'll show you what you need.

Confusion, lies and an over abundance of suppliers makes most business owners feeling frustrated. Getting approached by merchant salespeople is almost as annoying as receiving telemarketing calls in the 1980's. On top of it all, overpricing and charging for many services that can be accessed free of charge is quite common.

Just last week, a small business restaurant owner noticed I was in the credit card processing industry while looking at my credit card, as I was paying. She asked me how much it would cost to add a tip line to her receipts. I replied that it would free of charge and should only take about 15 minutes to install. Her jaw almost dropped to the ground. She couldn't believe it. She went on to explain that her representative asked for a $350 fee to add this feature.

I've Heard It All Before

Stories of overpricing are not surprising to me any longer. I hear about them every day. Of all the calls I receive daily, 30% of them contain some type of bad experience. Representatives have done things like change merchant application fees after the fact. Bad reps have sold credit card machines that are actually empty or filled with rocks. I'm not kidding.

So, what's a business owner suppose to do to protect themselves? For one, merchants should call the representatives processing company and ask to verify their relationship. Ask for the name of the nearest business reference or locate the nearest Better Business Bureau. Look to see if any issues were attempted to be resolved. As long as the representative or his company attempts to resolve problems, that's a good sign. Plus, get your past statements analyzed if you have any.

Ask a merchant salesperson as many questions as you can. There are never any dumb questions. Any legitimate representative will invest as long as it takes to educate you. The best type of sales people try to use simple terms and give definitions for the terminology. I for one try to help my clients understand how a sale will occur and how the money and transaction information flows from the credit card, through the machine by telephone, to the processor and eventually back into the bank account within 48 business hours.

As for me, it's important you understand what steps must be taken to avoid any delays and simple questions that can be asked of customers, so sales transactions don't create higher fees. By the time my customers get off the phone, they are 99.9% as equally educated as I am about credit card processing.

Proper training is important because you, the business owner, will be the likely instructor for your cashiers. Therefore, it's important to explain how you can save money and avoid unnecessary fees by following correct steps many of the other merchant companies hide. The unfortunate fact is, many competitors leave out easy instructions because skipping steps adds fees to a credit card sale.

Ralph Prado is a Credit Card Processing Expert with over 20 years of business experience. His expertise is in merchant account services and credit card processing equipment. Visit his website today to save money at http://www.creditmachines.com

Get Free Advice On Getting The Best Merchant Account Rates  Call Toll Free 1-888-604-3443 Today