The Difference Between Credit Card Processing Companies
By: J.R. Meadow - March 2007
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Credit card processing companies seem to most business owners as all being alike. They all claim to be able to help you accept credit cards and provide 24/7 telephone support with the lowest processing fees. At least, that's what it seems like.
However, just as there are different names for each credit card processing company, there are differences between the services they can provide and the quality in which they service your business. On the right hand side of this page I've listed every company that can help you process a Mastercard.
One thing you should really keep in mind is, the ability to accept credit cards is a benefit your business and allows your customers the opportunity to afford buying from you. Having a credit card processing service also provides the convenience of paying with non-cash payment alternatives. And in today's world, safety is what is driving people not to carry cash. Consider this if you sell high priced ticked items. Being able to accept credit cards or debit cards allows your business to avoid establishing a credit department. You don't have to handle financing or issuing lines of credit. Therefore, there is going to be a cost associated with accepting non-cash payments.
I stress this point because lately, people seem to have forgotten the importance of why businesses accept credit cards. People seem to forget that shopping for credit card processing services should not be handled like shopping for a hamburger. Of course, I realize that because we live in a fast-food driven society, business owners can get into the habit of shopping for credit card processing services without having good knowledge of how to shop.
For example, the #1 asked initial question is "What are your rates?" After I respond by giving people the discount rate, along with the monthly minimums, statement fees, authorization and batch rates they usually respond by saying, "Well, I just got some other quotes and they don't charge statement fees or authorization fees" At that point I really feel like rolling my eyes and sighing, but I can't. No matter how annoying this response gets, I have to keep focused on that fact that these business owners, are only untrained on what the true wholesale costs of credit card processing are. Therefore, they don't know that the false advertisements they've been fed are simply lies. What really gets my goat is that processing companies are allowed to advertise these tricks just to grab a customer.
To fight this type of credit card processing ignorance, and advertising, I have to use hard evidence. Therefore, to prove to these business owners that they have been misinformed, I refer them to the Mastercard Interchange Report You can download it for yourself by clicking on the link.
This report lists the Interchange Rates charged to MSPs (Merchant Service Providers) and Acquiring Banks. These are the fees that credit card processing companies MUST pay to the credit card companies. This is similar to banks paying the Prime Rate to the Federal Reserve for borrowing money. There are no freebies from Mastercard, Visa or any credit card company. Everyone has to pay these fees. They are essentially the bottom wholesale rates. So, when someone says they don't have to pay these fees, they have been duped. Processing companies have to cover their costs and they will make it up elsewhere by increasing something to make up the price difference they lose elsewhere.
This report, the interchange report, clearly shows that every MSP or Acquiring bank (companies listed to the right for example) have to pay, in essence, the wholesale costs for processing credit cards. Now, these fees have to be passed on to merchants, you the business owner. These fees are then called Discount Rates and fees that must be charged to cover the Interchange Rates charged by Mastercard or Visa. They have to make a profit in order to pay the light bill. In the report, if you are able to make a general sense of all the figures, you will see that there are in fact monthly minimums, authorization fees, batch fees, bank network fees, costs associated with processing credit cards.
So, when any company tries to make you believe that your not going to be charged fees, watch out! Because what's going to happen is the fees they claim you won't be charged, will be billed to you...but actually built into other less obvious fees. I caution you because, from experience, 9 times out of 10, companies that offer things for free tend to overcharge for services. I don't care how loyal you are to your bank or your processing company, if your money is important to you, don't fall for these free claims. Be willing to accept upfront, but fair, charges.
So What Choice Should You Make? Who Should You Work With?
Deciding who you should pick to help you manage your credit card processing service really needs to narrowed down to your consultant. Who is the person, the face or voice, that you can rely on and call on to help you negotiate your merchant account fees? That person is your Agent.
Who can you call on the weekend or holiday, evening or otherwise to get advice, not only on credit cards, debit cards or check acceptance, but also on simply how to increase your business sales? That person is an experienced Agent. Sometimes, unfortunately, picking your employees son in law who happens to work in merchant services isn't the best choice. It's going to come down to experience, dependability, accessibility and performance history.
Therefore, if you're one of the business owners who knows that all those so called "Lowest Merchant Rate" and "Acquirer of the Year," or "Free Credit Card Machine" offers are really just hype, perhaps your someone who needs to be talking to a straight forward consultant. Someone who's going to give you advice, even if it's not the news you want to hear.
If this is the type of advisor you want on your side. You might be the kind of business owner I want to work with as well.
If you need help saving more money while accepting credit cards, give me a call. To learn more about how to buy a credit card machines or open a merchant account correctly contact me at 1 (888) 604-3443.
*Be sure to read, Credit Card Processing Lies
Ralph Prado is a Credit Card Processing Expert with over 20 years of business experience. His expertise is in reviewing merchant statements and identifying profit on behalf of business owners. Visit his website today at http://www.creditmachines.com