5 Reasons Why Businesses Overpay for Credit Card Processing
There are numerous reasons businesses overpay on their credit card processing. Here are the 5 most common reasons.
#1.) Misunderstanding of how the fees are applied
With many different ways to structure credit card processing fees it is sometimes difficult to determine how the fees are applied. The three most common pricing structures are tiered pricing, ERR pricing and interchange plus pricing. Depending on the pricing structure that is in place for your business, there are specific rules that dictate how the fees are applied. It is very important to speak to your sales representative to review the pricing that has been set up. Additionally, it’s important to discuss how your specific pricing works and how the fees will be applied to your account.
#2.) Ignoring your credit card processing statement
The main reason most businesses ignore their credit card processing statement is the fact that the fees for the service are automatically deducted from the business checking account. Therefore, if a check doesn’t have to be written the statement tends to be overlooked. The credit card processing statement details all the fees charged for service over the course of the month and will also include messages from the processor as to rate increases and special updates. It is very important to review the statement each month so that you are comfortable with the fees that are applied. If there are any surprises or charges you do not recognize. Call your representative immediately and question the fee.
#3.) Confusing credit card processing statement
Traditionally the credit card processing statement is one of the most confusing statements you will receive for your business. To make matters worse some companies intentionally over complicate their statements to hide exorbitant fees. It is very important to understand your processing statement sections and fee layout. If you are confused by your statement, call your sales representation and ask them to go over the statement with you until you are comfortable.
#4.) Failure to review your credit card processing rates
Price increases for your account can be imposed by Visa and Master Card or by your processor. It is important to review your rates at least once a year and compare the pricing to what you were paying when the account was set up. Typically Visa and Master Card raise rates on a yearly bases and the increases are usually very small. If you are paying considerably more today than you were when the account was created, odds are that your processor is increasing your rates and you should ask why.
#5.) Unintentional downgrades
A downgrade is the process of a transaction being charged at a higher level due to criteria for the credit card sale not being met. For example on a debit transaction if the PIN number is not captured, the transaction will be charged at a higher (or more expensive) pricing level. Additionally, for a swiped credit card transaction the terminal may ask for a zip code. If the zip code is not entered the transaction will be more expensive for the business to process. Speak to your sales representative to understand the criterion that needs to be captured to ensure you are qualifying for the best possible pricing.