Credit Card Refund: Your Processor is Stealing Your Credits
If your business has bundled credit card processing fees your processor is pocketing your fee credits every time you issue a debit or credit card refund. Luckily, plugging the cash flow leak is as simple as getting interchange pass through pricing instead of bundled.
You don't have to worry about losing money on credit card refunds if you found your processor here at CardFellow. We don't allow processors to structure pricing in such a way that allows for this hidden charge.
- Interchange Charges & Credits
- Bundled Pricing Allows Processors to Intercept Refunds
- Pass Through Pricing: Patching the Leak
Interchange Charges & Credits
Visa and MasterCard use interchange fees to determine how much you pay an issuing bank each time you accept a credit or debit card transaction. Interchange is also used to determine how much money you get back when a customer returns the product she purchased.
You should be able see the evidence of fees being returned in the form of interchange credits on your monthly credit card processing statement. Interchange credits will look similar to the way they're shown on this sample taken from a business we recently helped here at CardFellow.
If you don't you see any credits on your statement, and you know you issued refunds during the month; your processor is pocketing your fee credits.
Bundled Pricing Allows Processors to Intercept Refunds
If you're not receiving credits, your processor is using a bundled pricing scheme, and your statement probably looks something like the one below.
This is a sample statement from another business that we helped here at CardFellow. Before finding CardFellow, this business's processor was using bundled pricing, and as you can see, there's very little detail on the statement.
On a bundled pricing model the processor essentially pays interchange fees on behalf of the businesses they service. They then charge those same businesses ambiguous qualified, mid-qualified and non-qualified rates. In effect, bundled pricing positions the processor between interchange and the businesses they serve.
Interestingly enough, this position also makes it possible for a processor to intercept interchange credits. The illustration below shows you the flow of interchange charges and credits.
Pass Through Pricing: Patching the Refund Leak
In order to receive interchange credits on refunds you need to find a processor that offers interchange pass through pricing. Unlike bundled pricing, pass through pricing allows interchange charges and refunds to flow directly to your business.
The processor sits on the sidelines and makes money by charging a low, fixed percentage and transaction fee instead of general qualified, mid-qualified and non-qualified rates.
The following illustration shows you how interchange pass through functions. As you can see, the processor isn't sitting in the middle of everything manipulating fees and intercepting credits.
If you're in the market for a new credit card processor, sign up for free here at CardFellow and receive multiple interchange pass through quotes instantly. We'll also help you choose the best processor from the offers that you receive.