Fees, Fees and More Fees.  Is Your Business Getting Ripped Off?


It’s that time of month again…your business just received its monthly merchant credit card processing account statement.  If you are like most business owners, this time of month causes all kinds of emotions and instantly puts a cold chill down your spine.  Why?  Because you know that you are getting ripped off, but often feel that there is nothing you can do about it because most statements are designed to be confusing and can’t even be deciphered by the savviest of business owners.

The credit card processing industry (also known as merchant services) has become an industry rife with fraud, deceit and flat out ripping off small and medium size businesses.  Don’t take our word for it, just look at your monthly merchant account statement.  What do you see?  That’s right - fees, fees and more fees.  None of those fees are usually defined and often times are completely fabricated and have nothing to do with the real cost of actually processing a credit card transaction.

Spending the next five minutes reviewing your merchant account statement could save your business thousands of dollars a year.  Let’s start with something that is not usually the most obvious; a pricing model known as “tiered pricing”.  If your business has tiered pricing almost 100% of the time you are overpaying for credit card processing services.  You will know if you are on tiered pricing if you see any of the following terms on any of the pages of your merchant account statement: 

  • Qualified
  • Mid-Qualified
  • Non-Qualified

A tiered pricing model is not how the actual credit card brands (Visa, MasterCard, American Express and Discover) price Interchange rates, which is the actual direct wholesale cost charged to processors before profit markups.  Tiered pricing is a model that was made up by the credit card processors to extract more profits from your business.  If your business is on a tiered pricing plan the first thing you will want to do is immediately ask your processor to put your business on an “Interchange Plus” pricing plan.  Interchange plus is exactly what its name infers.  It’s the Interchange rate (direct cost charged by the card brands) plus a profit margin for the processor and/or sales agent.  Under this model you will see exactly what the “plus” part of the cost is and you can decide if it’s fair pricing for the service provided.  Keep in mind that the “plus” portion of the pricing plan is completely negotiable and is 100% profit for the processor and/or sales agent and is in no way part of the actual cost to process a credit card transaction.    

Next, while you are reviewing your merchant account statement please look for some of the following fees:    

  • Setup Fees
  • Cancellation Fees
  • Application Fees
  • Site Inspection Fees
  • Equipment Reprogramming Fees
  • Customer Service Fees
  • Credit Check Fees
  • Statement Fees
  • IRS Fees
  • Regulatory Fees
  • Welcome Kit Fee
  • Technology Upgrade and/or Update Fees
  • Annual Fees
  • Semi-annual Fees
  • Liquidated Damages Fees
  • Early Termination Fees (also known as Early Deconversion Fees)
  • Minimum Monthly Bill Fee
  • Help Desk Fees 

The above list of fees is just a short example of literally hundreds of various line items that you may see on your merchant account statement.  If you have any of the above fees on your statement, then that is a second indicator you are likely overpaying for your credit card processing services.  Oh, by the way, all of the fees listed above are 100% made-up by processors and/or sales agents and are pure profit.  All those fees can be eliminated and your customer credit card payments will process just fine.  

Finally, we just briefly wanted to talk about a third item to look for on your merchant account statement and sometimes on a separate monthly statement.  Please look at the statement(s) for any items relating to equipment or terminals.  Often times processors and/or sales agents will either offer “free” equipment or equipment rentals or leases to entice you to sign-up for processing.  As we all know, nothing is free, especially in the credit card processing industry.  If your business has “free” equipment and/or terminals there is a very high probability that your business is overpaying for credit card processing services.  Lastly, if your business is either renting or leasing equipment then it is 100% guaranteed that you are significantly overpaying for credit card processing services.  Processors and/or sales agents love it when merchants rent or lease equipment because they often make thousands of dollars in pure profit for equipment that typically costs them between $200-$250 wholesale cost.  It’s the gravy train that never stops. 

Hopefully this article was helpful to you and now you feel more empowered as a business owner to navigate the dark space of payment processing.