by Ben Dwyer Wells Fargo Merchant Services slips an opaque “Interchange Clearing Fee” into its interchange-plus pricing, adding more proof to the fact that interchange-plus does not guarantee competitive credit card processing fees.
It’s pretty clear from our Wells Fargo Merchant Services review that we don’t hold the company’s credit card processing services in the highest regard. We formed this opinion over many years of reviewing quotes, applications, and statements that push opaque, overly aggressive pricing.
One of our least favorite tactics in Wells Fargo’s arsenal of tricks is its “Interchange Clearing Fee.” As I’ll explain in detail below, this fee allows Wells Fargo to bring aspects of opaque tiered pricing (sometimes called bundled pricing) into the realm of interchange-plus pricing, which is generally regarded as a more transparent pricing model.
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What is the Interchange Clearing Fee?
The Interchange Clearing Fee is a surcharge that Wells Fargo Merchant Services applies to sales volume routed to interchange categories that it does not feel qualifies for the base markup.
It’s necessary to have a general understanding of interchange-plus pricing in order to understand how the clearing fee functions. We’ve explained interchange-plus in detail here, so I’ll just give a quick overview in this article.
Interchange-plus is a credit card processing pricing model where a processor passes the cost of interchange and assessments to a business separate from its markup. Processors typically apply the markup as a fixed percentage and fixed transaction fee.
For example…
A processor that offers a business “interchange-plus 0.25% and $0.10” is essentially telling the business it will pass the cost of interchange and assessments to the business and then make its markup by charging 0.25% of sales volume and $0.10 per transaction.
This is how Wells Fargo’s interchange-plus pricing functions, as well. However, the Interchange Clearing Fee adds an additional charge over the original stated markup.
We’ve seen the charge for the Interchange Clearing Fee range from 0.25%-0.50%. However, Wells Fargo is able to charge whatever it wants, so I assume it has been assessed at percentages outside of this range.
Wells Fargo applies the fee without justification to any interchange category that it does not feel qualifies for the base interchange markup. The lack of any detail that outlines the volume being surcharged is what makes this fee exceptionally opaque.
For example, Wells Fargo may assess the Interchange Clearing Fee on 80% of a business’s total sales volume, but no detail is provided as to why such a large amount of volume was surcharged. The Interchange Clearing Fee essentially functions the same as a “non-qualified” rate in a tiered pricing model: you can’t tell when it will apply, and it means you’ll pay more than necessary on some transactions.
The Interchange Clearing Fee at work
Here’s an example Wells Fargo credit card processing statement. In this statement, the business’s gross Visa, Mastercard, and Discover sales volume is $125,265. As you can see from the highlighted row, Wells Fargo charged an Interchange Clearing Fee on $56,396. That’s an additional surcharge on 45% of gross volume.
When this business came to CardFellow it thought it was paying interchange-plus 0.15% and $0.05. However, as we pointed out, it was actually paying interchange-plus 0.75% and $0.05 on half of its gross sales volume.
Here’s another pretty extreme example of the Interchange Clearing Fee at work. In the statement period shown below the business’s gross processing volume was $26,524. As you can see, Wells Fargo assessed an Interchange Clearing Fee of 0.20% on $25,139. Wells Fargo surcharged 95% of the business’s volume!
To make matters worse, Wells Fargo already charged this business interchange-plus 1.80% and $0.50 before adding the clearing fee. The additional charge of 0.20% brought the business’s total markup to 2.00% and $0.50 on 95% of its volume. This remains one of the most excessive abuses of interchange-plus pricing we’ve ever seen.
How does the Interchange Clearing Fee work?
The Interchange Clearing Fee increases a business’s processing charges by assessing a volume markup (a percentage) to a portion of gross sales.
As noted earlier, Wells Fargo does not disclose the interchange categories that are subject to the clearing fee. It’s reasonable to assume that Wells Fargo can adjust the interchange categories subject to the fee on a per-business basis. That’s similar to how processors route surcharges using an interchange qualification matrix under a bundled pricing model.
Should I pay the Interchange Clearing Fee?
No. There’s absolutely no reason for Wells Fargo to corrupt what is meant to be a transparent pricing model with its invention of opaque credit card processing fees, and it shouldn’t be rewarded for its efforts. An “interchange clearing fee” is not a required part of credit card processing fees.
Attempting to haggle over processing fees with Wells Fargo is a losing proposition. You may secure lower fees temporarily through negotiation, but Wells Fargo will just increase charges again. Alternately, they’ll invent new charges, such as the Interchange Clearing Fee.
If you’re stuck in Wells Fargo’s web, you should create a free profile here at CardFellow to receive truly competitive, instant processing quotes. It’s 100% private to avoid sales calls and emails. Additionally, you’ll receive certified quotes bound by our agreement with processors to ensure optimal pricing and terms.
