Advice on Avoiding Poor Credit Card Processing Sales Tactics

Merchant Warehouse |

November 25, 2010

Many experts claim that the average American family cannot dramatically improve their quality of life by simply accumulating more money with their daily jobs through raises and benefits. Especially in today’s volatile economy this seems less and less likely. So it is no mystery why thousands of Americans are starting their own businesses.

Starting a business allows you to gain tax breaks while you set about to make more money. One of the first things you will do is get a merchant account, even a third-party one if you have to, to capture all the business being done with credit cards. Most people pay that way now. However, many merchants are actually losing income and profits due to following the misguided information they receive from credit card processors. This has become a fast growing phenomenon that merchants need to have some industry knowledge to avoid.

When a merchant starts to lose revenue, every expense in the company comes up for review, and they may begin to wonder exactly what they are paying credit card processing fees for. So, where in fact does the bank credit card processing money go? Well, much of the profit goes into the hands of the processing companies and their representatives.

What to Watch For

Merchant service providers make greater profits every time a credit card is processed incorrectly. Tiny mistakes that are caused by the lack of training cause higher fees to occur. This is the reason that a lot of merchants are having a problem with credit card processing companies that falsely advertise their so-called great rates and low fees. Here are a couple of hints to take note of when choosing a processing company.

First, you’re told about a discount rate. Well, a discount rate is not a discount for the merchant and it is not a savings by any means. Think about it for a second. Don’t you ever wonder why people put up such a fuss when a mortgage agent quotes a charge of 2% in fees these days? However, most business owners don’t bat an eyelash when the merchant account agent strolls into the store and offers the tiny 1.89% discount rate you will receive. What is the reason for this? Could it be that the word discount makes you feel at ease? Do you think that it’s a necessary evil to sacrifice a percent of your hard earned money to provide a convenience for your customers who prefer to use credit cards rather than cash?

What’s Behind the Rate?

One of the more popular myths being advertised is that the “discount” (swiped) rate is the only fee a merchant will pay. Usually, if you shop around a bit you will find that you’re going to be given a certain percentage rate and that authorization fees will also apply, as if it is one easily calculated figure. This is totally false. Your discount rate is really made up of three levels – the qualified, mid-qualified and the non-qualified rates, all charged as percentages. These terms represent the level of risk, in fees, that a company will pay per transaction. The highest risk transaction type is the non-qualified rate, which includes the bulk of Internet, phone and other “card not present” situations.

On the other hand, a qualified rate is charged for swiped transactions where the credit card is physically present and passed through the machine for payment. Also, each of these levels of fees 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 actually are. Have you read the entire agreement? Does it sound like what the salesperson was telling you?

How to Handle “untruths”

So, in fact it virtually impossible to get an honest quote by calling a company and asking them what their rates are. The only way to ensure that you receive the best quality merchant rates and fees is to have a good accountant do an audit of your statements to see what and how you are being charged. Also, you need to have all of your information available to you. This means that you will need to contact your processing agent in order to obtain it. They are required to give you any information you request.

Don’t use the word “lie” and don’t accuse anyone of anything. Chalk it all up to aggressive marketing and ask questions, a lot of them. Take the time to learn about the rates and fees that are going to directly affect your business. You must have knowledge, meaning current and relevant data, when dealing in these types of situations that are crucial to your businesses success or failure. Making the wrong choice for a credit card processing provider is like taking a gamble on your business. There are a lot of companies that will try to outsmart you but if you have your wits about you, there is no reason that you can’t be the winner of the games that they play. But you have to know the rules, and you have to have the facts.
Finally, remember that when you are a shopper, sales people want to sell you and will tell you whatever they can get away with. But that is where you can exert some control over the information you are getting – don’t let anyone get away with making untrue claims or promising the impossible. It is up to you to draw the line between “sales talk” and “reality.”