Intuit uses opaque tiered pricing and excessive downgrades to inflate credit card processing fees.
Based on the countless Intuit merchant account statement analyses we have done here at CardFellow, we have found Intuit's credit card processing charges to be 40% - 50% greater than the rates businesses receive in our free marketplace.
Intuit is best known as the maker of the popular Quickbooks accounting software, and as the provider of the GoPayment mobile processing application. If the company's credit card processing keeps going as it is, Intuit will also become know for exorbitant credit card processing charges and excessive downgrades.
- Quickbooks Credit Card Processing is Expensive
- Opaque Pricing
- Excessive Downgrades
- Save Money by Switching from Intuit
Quickbooks Credit Card Processing is Expensive
Intuit's popular Quickbooks accounting software makes it possible for users to process and record a credit card transaction in one easy step, but this convenience comes with a very hefty price tag.
Intuit knows that competition from other credit card processors will drive processing costs down, so the company designs Quickbooks so it will only work with Intuit's own credit card processing service. By eliminating competition Intuit is able to charge excessive fees.
Quickbooks enables Intuit's exorbitant fees, but tiered pricing is what makes it possible for the company to advertise rates that appear far more competitive than they actually are. To understand how Intuit uses tiered pricing to conceal high rates we first need to look at the wholesale cost of credit card processing.
Interchange fees are the rates charged by banks that issue credit cards. Interchange fees are the same for all businesses and processors, and they represent the lowest possible rate for a given transaction.
If you've strolled through the blog here at CardFellow, or better yet, used our service to compare credit card processors in minutes, you know there are two basic forms of credit card processing pricing called interchange plus and tiered.
Interchange plus eliminates hidden credit card processing fees and is relatively inexpensive because it separates a processor's markup from the interchange fees charged by banks. Intuit only offers interchange plus pricing to large businesses with substantial processing volume.
Instead, Intuit uses opaque and expensive tiered pricing. Tiered pricing allows Intuit to charge its customers based on its own rates called QUAL, MQUAL and NQUAL while paying interchange fees to banks behind the scenes.
Each one of Intuit's pricing tiers has a corresponding rate. For example, QUAL, MQUAL and NQUAL may carry rates of 1.60%, 2.60% and 3.60%, respectively.
With full control of rates Intuit is able to dictate the pricing tier to which a business's credit card transactions are routed. For example, Intuit may route a regular consumer credit card to the QUAL tier and a reward credit card to the NQUAL tier.
When Intuit processes a transaction at the higher MQUAL or NQUAL pricing tier the transaction is said to have downgraded. While it's true that downgrades happen at interchange (how Visa and MasterCard classify a transaction), in the case of tiered pricing, many downgrades also occur at the processor level (Intuit gets to downgrade any transaction it wants).
Unfortunately, Intuit has failed to disclose its ability to influence downgrades on the company's Web site.
Intuit & Excessive Downgrades
Intuit makes more money when it routes a transaction to MQUAL or NQUAL because these tiers have higher rates than the lowest QUAL tier.
When talking with a prospective customer it's not uncommon for a salesperson to claim that the QUAL rate will apply to most transactions, and only a small number of transactions will downgrade to the higher MQUAL and NQUAL rates.
The countless analyses of Intuit merchant accounts statements that we have done here at CardFellow prove the exact opposite is true. In most cases, Intuit downgrades an excessive number of transactions to the higher MQUAL and NQUAL rate tiers.
In the following examples we will look at actual Intuit processing statements sent to CardFellow by companies that used our free marketplace to get instant credit card processing quotes. Each company reduced credit card processing fees more than 50% by leaving Intuit.
Intuit Excessive Downgrades: Example #1
The snippet below is taken from an Intuit merchant account statement for a medical office. Before switching from Intuit and lowering its fees by more than 50%, this business was using Quickbooks to swipe virtually all credit and debit card transactions.
Intuit priced this business with rates of 1.60% QUAL, 2.60% MQUAL and 3.60% NQUAL. Total Visa processing volume for this month was $31,550.03, but Intuit only considered $2,735.02 as QUAL. Intuit downgraded a whopping 90% of gross Visa sales volume to the NQUAL pricing tier!
We checked every conceivable reason for such excessive downgrades such as card type, software issues, delayed batching and more. We later found that Intuit was simply downgrading virtually every type of transaction except those involving a swiped debit or core (non-reward) consumer card.
Intuit Excessive Downgrades: Example #2
This next example of excessive Inuit downgrading is taken from the statement of an online business that also used CardFellow's free service to lower fees by over 50%. Like the business from example #1, this company was processing transactions correctly and should not have experienced this many downgrades as a result of interchange qualification. The excessive downgrades were caused by Inuit routing the vast majority of transactions to the NQUAL pricing tier.
As you can see, Intuit downgraded a staggering $62,460.29 to the NQUAL rate. That's 69% of gross sales volume!
Save Money by Switching from Intuit
Despite Intuit's best efforts other processors are able to offer credit card processing for Quickbooks through software add-ons called plug-ins. Plug-ins are often proprietary and have varying degrees of effectiveness. Some may require double-entry, while others boast functionality that is virtually identical to the native Quickbooks processes.
It may take a little extra homework on your part to weigh the Quickbook plug-in options available, but your wallet and working capital will thank you.