8 Secrets Credit Card Processors Don’t Want Business Leaders To Know
Credit card networks such as Visa, MasterCard, and Amex have been extremely successful in their push to get consumers to acquire and use more credit cards. As over 197 million Americans reportedly own at least one charge card, financial services are undoubtedly doing something right.
The enticements include increased levels of cash back, loyalty points, and extended warranties, to name a few. These perks, however, have resulted in steadily increasing processing rates for businesses.
The shift towards e-commerce has only accelerated this trend, resulting in many credit card processors and their sales agents not providing all the information you need to make wise processing decisions.
The resulting lack of transparency can cost your business a LOT of money that you don’t even know you’re losing.
At Delta Payment Solutions, we get processors to fight for our members’ business. So we insist on their total transparency with all our Delta Co-Op members; however, if you’re trying to go it alone, there are some secrets processors don’t want you to know that can be helpful for you.
1. Be wary of flat-rate fee structures
Overall processing rates are composed of interchange rates, which include processing rates tied to transactions, as well as processing rates not tied to transactions. There are over 700 interchange rates based upon which credit card company it is, who the issuing bank is, and how many card perks are given to the cardholder. In reality, the actual fees change depending on which card is used. If a processor or their sales agent is pushing a flat rate, they are absorbing the risk. Depending on what kind of credit card is being used, that might sound like a good thing. But the reality is they are in business to make money, too. To protect themselves, they must give you a flat rate that is high, charging you too much, just to be sure they do not, under any circumstances, lose money.
2. Push back on processing fees when not directly related to transactions.
Processing fees not directly tied to transactions are often unnecessary and exist solely to pad the processor’s bottom line. Statement fees, monthly fees, and PCI compliance fees are a few common ones that should always be challenged to either eliminate altogether or greatly reduce. But there can be a delicate balance. Sometimes it’s better to accept a fixed fee in exchange for a lower processing percentage. Complications like this are why you need experts to help you.
3. Do not accept excessive early termination fees.
Processors and their sales agents should earn their business every day with integrity. Your business should not be tied to long-term contracts where the processor has free reign to increase rates but forbids you from terminating a contract early without paying penalty fees and/or liquidated damages. Early termination fees should be at most $500 with absolutely no liquidated damages.
4. Do not accept a reserve on your account.
Reserves are put onto business accounts when the underwriter reviewing the application has concerns for a variety of reasons. This reserve can be as high as 15-20 percent of the monthly transaction volume of an account and can have a cap equal to or higher than the monthly processing volume. Many times, the underwriter simply doesn’t understand the data they have been given. Communicating with the underwriter early is crucial to address any potential concerns. If the requirement to have a reserve remains, other strategies can eliminate it, such as obtaining a cross-corporate guarantee from another related business or putting up a Letter of Credit.
5. Get a merchant portal with useful data you can understand.
Processors and their sales agents vary greatly when it comes to transparency. It is critical for your business to identify and recognize all account activity and to determine any current or future issues. The online portal provided by the processor is the merchant’s lifeline to this data. Unfortunately, a lot of processors and their sales agents want to keep merchants in the dark. Be sure to request a thorough tour of their portal along with detailed instructions on accessing the account.
6. Ongoing communication with your processor is critical.
You can’t simply set up a processor and forget about it. Communication is key to keeping the processing relationship working smoothly. The first step is to identify a key communicator in your company who will regularly contact the processor. This person, whose name should be on the account application, will receive all correspondence and should be made aware of this key role. Failure to keep tabs on the processor can result in increased processing fees. Regular communication also informs the processor of any activity spikes, increase in average order value, increase in high order value, or anything else that may cause the processor to reject future transactions or hold funds.
7. It pays to choose the right processor and sponsoring bank.
Most sales agents only represent one processor, which may also indicate a limited number of sponsoring banks. They attempt to fit their solution into every business model, which rarely works, as each merchant is different and unique in their processing needs. All too often, this results in merchants with a majority of card-not-present transactions choosing the wrong processor, thus getting hit with an abundance of unnecessary fees. That’s why Delta gets processors to fight to find the best possible fit for your business.
8. Provide as much information as possible during the application process.
It may feel simpler to hit the easy button when trying to find the right processing option. Unfortunately, many sales agents and processors market their services as “quick and easy”, but it comes with a risk. The less information provided during the application process, the higher the rates that you’ll get charged. Typically, the more information you’re asked to provide, the lower the rates will be.
The bottom line is this: Finding the right credit card processor on your own isn’t impossible. But it will take effort, countless hours you don’t have, to study the industry and learn what you need to get the best deals. Plus, you’ll likely need to evaluate at least a dozen processors to find the right fit for your business.
Or you can talk to one of our savings experts to learn how we work for you. We leverage our Delta Co-Op to get processors to fight for you, so you can keep your focus on what matters most—your business.
Experience the Delta Difference!