Interchange Clearing Fee – Wells Fargo Merchant Services
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. Our opinion has been formed over the years as a result of reviewing quotes, applications, and statements that push opaque, overly aggressive pricing.
A relatively recent addition to 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 at work
- How does the Interchange Clearing Fee work?
- Should I pay the Interchange Clearing Fee?
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. The processor’s markup is typically applied 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%, but Wells Fargo is able to charge whatever it wants, so I assume it has been assessed at percentages outside of this range.
The clearing fee is applied without justification to any interchange category that Wells Fargo 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 does in a tiered pricing model: you can’t tell when it’s going to be applied, and it means higher charges than necessary for some transactions.
The Interchange Clearing Fee at work
The following example is taken from a Wells Fargo credit card processing statement where the business’s gross Visa, MasterCard, and Discover sales volume is $125,265. As you can see from the highlighted row in the snippet, Wells Fargo is charging 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, this business was already being charged interchange-plus 1.80% and $0.50 before the addition of 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 the interchange categories subject to the fee can be adjusted on a per-business basis similar to how surcharges are routed 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.
Attempting to haggle over processing fees with Wells Fargo is a losing proposition. Any reduction in fees won through negotiation is very likely a victory that is short lived. Charges will be increased again in a short time, or new charges such as the Interchange Clearing Fee will be invented to drive costs once again.
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, and all certified quotes that you receive are bound by our agreement with processors that ensures optimal pricing and terms.