Credit Card Processing

The Dangers of Credit Card Processing Savings Analyses

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December 04, 2019

Comparing credit card processors? Be careful with savings analyses.

It’s a common situation – you’re considering a new credit card processor, maybe browsing a website or talking to a salesperson, when you’re offered a savings analysis. The website text or salesperson says that it’s free and will show you how much you can save by switching.

There’s just one problem. If you don’t know what you need to compare, it’s easy to be misled.


What is a savings analysis?

A savings analysis is a document that a sales rep or processing expert prepares to show the difference between your current processing costs and the costs quoted by another company. Analyses can be accurate to the penny or use “fuzzy math” to make savings appear greater than the reality.

Most often, these analyses are provided by the sales reps of a new company you’re considering. That doesn’t automatically mean that they will show you skewed information, but keep in mind that they have an incentive to present you with a document that shows big savings. After all, they want you to switch to their service.

You can also get an analysis from independent experts, like CardFellow. These analyses are not conducted by a processor. When possible, consider independent analyses.

Savings Analysis Format

There’s no standard format for a savings analysis, which makes it impossible to give specific details on how to read it. In most cases, the processor will display savings as a dollar amount and sometimes a percentage. It’s up to you to ask questions and push back on anything that seems too good to be true.

Look out for “qualified” rates – that’s a good indication that the analysis and your actual pricing are likely to vary.

CardFellow’s Format

When we do savings analyses here at CardFellow, we present a summary first and then the supporting detail. The main thing to compare is the processor’s markups. The lower the markup, the lower your total processing cost will be. We’ll show you your current markup and the markup from the new processor.

At CardFellow, we want to make sure you understand your options. When we do a savings analysis, we’ll go over it with you in detail, answering any questions you have and teaching you how to properly evaluate the savings so you don’t get burned by processors.

How Processors Manipulate Analyses

There are a few different ways that processors can manipulate analyses to make your savings appear greater. We covered some of the ways quite thoroughly in our article Debunking a Misleading Credit Card Processing Quote, which is worth a read. However, in general, the manipulation you’ll see could include:

Generous Interchange Assumptions

If you’re not familiar with interchange, you can read more about it in this article on interchange fees. For the purposes of understanding savings analysis manipulations, its not necessary to have in-depth knowledge of interchange. What you need to know is that there are hundreds of interchange categories, each with a different rate. Different categories apply to different transactions, but the processor doesn’t control when they apply. For that reason, multiple interchange rates will appear on your statement in any given month, but those interchange rates are the same no matter which processor you use.

However, some processors won’t use your real interchange mix when constructing an analysis. Instead, they will include only low cost interchange categories, ignoring the higher cost ones. But when it comes time to take cards, you will inevitably have some higher cost interchange categories as well. Since the processor didn’t include them, it makes your costs look artificially lower in the savings analysis than they will be when you’re actually accepting cards. This type of underestimating interchange is common, whether done intentionally or because the rep conducting the analysis doesn’t understand enough about interchange. Depending on how the analysis is structured, it can pad the savings a lot.

A Note on Square, Stripe, and Flat Rate Processors

Some types of credit card processors, called flat rate processors, provide statements without interchange detail. That makes it impossible to do a savings analysis with your actual interchange, because no one can see your actual interchange.

If you’re using Square, Stripe, or another flat rate processor, the closest you can get to a savings analysis is an educated guess from an expert that has access to average interchange mix data for your industry. Be careful of processors claiming to give you exact savings amounts if you’re on flat rate processing.

Note that it doesn’t mean you shouldn’t switch from flat rate – it just means that savings analyses will be more of an educated guess than they would be with other types of statements.

Unrealistic “Qualified” Rates

Another way that processors can manipulate savings analyses is by quoting “tiered” pricing. Also called “bundled” pricing, this model uses varying rates that the processor controls. Processors will often create three tiers (called “qualified,” “mid-qualified,” and “non-qualified”) but they can use more or fewer at their discretion. What happens is that the processor will decide which of your transactions it will charge at which rate, meaning they get to decide which of your transactions receive the “qualified” rate and which receive the “non-qualified” rate. The “qualified” rate is typically the lowest cost.

When it comes to the analysis, a processor using bundled pricing may quote more of your transactions at the low “qualified” rates… But then later charge more transactions at the higher mid-qualified or non-qualified rates. This has the effect of making the savings appear larger than what it will be in actuality. Your processor can change the qualification for your transactions at their discretion, making tiered pricing a shell game that’s best avoided.

Lowballing the Markup

One of the easiest ways that a processor may manipulate a savings analysis is to simply lowball their markup. We see this happen all the time when processors “match” rates. The processor will quote a very low markup without specifying how long those rates will be in effect, then immediately raise them. Alternately, they may only show you the “rates” and not include other markup fees that you’ll incur.

Keep in mind that what you see in a savings analysis is irrelevant if it doesn’t match the rates in the actual merchant agreement that you sign. Your contract is the binding document – anything you’re told prior to that doesn’t matter if it’s not in your merchant agreement. That means a processor could lowball you in a savings analysis and slip in higher rates in your contract. Be sure to carefully review merchant agreements before signing and don’t rely on verbal promises from sales reps.

You may be thinking, “But if a processor promises big savings and my rates go up instead, I’ll be angry and the processor will lose a customer. Why would they do that?” Simple. They think you’ll stick around long enough to make it worth their while. Many processors use contracts with hefty cancellation fees. They know that once you sign that contract, you’re either sticking with them until the term (usually three years) is up, or that you’ll have to pay to get out of it.

Promised Savings Didn’t Materialize – Now What?

Unfortunately, it’s all too common that processors promise big savings and instead the business’s rates stay the same, or even increase.

Your options are limited by your contract with the new processor. Is there a cancellation fee? If so, determine if paying the fee to get out of the contract is worth it. (If you’re significantly overpaying, it could be.)

But longer term, stop chasing savings and instead find a solution that you can keep over time. Merchant accounts with lifetime rate locks are ideal for this. It means that the processor can’t raise their markup rates on your account.

If you’re not yet a CardFellow member, consider getting a free membership and choosing a processor through our wholesale club. CardFellow members automatically get lifetime rate locks on merchant accounts when choosing a processor through our service.

Before You Hand Over Statements

I can’t stress this enough – get a quote in writing before you ever give a processing statement to a sales rep. They may tell you that it’s not possible to provide a quote without seeing your statement. This is not true.

To provide a quote, sales reps need to know your industry, average monthly volume, average individual transaction size, types of cards you’ll accept, and how you take cards. They do not need to know your current rates.

Why should you keep that info to yourself at first? You want the best possible pricing the processor can offer – not simply a little lower than your current pricing. If the new processor knows what you’re currently paying, they can simply make sure to quote a little less rather than coming in with their best deal.

Think of it like a salary negotiation – you don’t go in to a job interview telling the company what you currently make. Don’t give your current pricing to a processor until they’ve given you their best quote.

Looking for an independent, accurate savings analysis with no manipulation? CardFellow can help. Fill out our free business profile to get baseline quotes from multiple processors (remember – always get quotes before handing over a statement!) and then contact us to do your analysis.

Get started!

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Ben Dwyer

BY Ben Dwyer

Ben Dwyer began his career in the processing industry in 2003 on the sales floor for a Connecticut‐based processor. As he learned more about the inner‐workings of the industry, rampant unethical practices, and lack of assistance available to businesses, he cut ties with his employer and started a blog where he could post accurate information about credit card processing. As the blog gained in popularity, Ben began directly assisting merchants in their search for a processor. Ben believes in empowering businesses by providing access to fair, competitive pricing, accurate information, and continued support. His dedication to transparency and education has made CardFellow a staunch small business advocate in the credit card processing industry.

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