5 Great Ways to Get Ripped Off by Credit Card Processors
We're always talking about how to lower credit card processing fees. So, this post keeps things interesting by taking a break from the norm to discuss five sure-fire ways to get ripped off by a willing credit card processor.
1 - Get bundled pricing.
Bundled pricing is what you want if you're a fan of hidden surcharges and paying (way) too much for credit card processing.
Type the term "credit card processing" into your favorite search engine and you'll see tons of ads for "rates as low as (insert unrealistic rate here)." If you take a look at the current interchange fees, which are the lowest possible rates for all processors, you'll see that the advertised rates are lower than actual cost.
How can processors offer such ridiculously low rates? It's simple: They're not telling the whole story in their ads. They're only posting the rate that they charge for qualified debit card transactions. A debit card charge is lower than a credit charge, so processors advertise the lower debit rate.
Fall for this trick and you won't realize that you're being hit with "mid-qualified" and "non-qualified rates" on your transactions until you get your first processing statement. And the mid and non-qualified rates are often in the two and three percent range or higher.
Stick to strictly interchange plus pricing like the kind offered here at CardFellow, and you never have to worry about mid-qualified and non-qualified surcharges.
2 - Sign an agreement with an early cancellation fee.
Agreeing to an early cancellation fee is a great way to get ripped off by a credit card processor.
Cancellation fees are usually several hundred dollars or more, and some are even based on the processor's lost profits. In the case of the latter, the cancellation fee could run you thousands of dollars.
There's nothing worse than having to stay with a processor that's gouging you on rates because the merchant account cancellation fee makes switching unfeasible. That's why we don't allow processors to charge cancellation fees here at CardFellow.
3 - Skim the fine print, and don't check to make sure you have all the information.
Who likes to read fine print? It's boring, and it never makes sense anyway. Skimming the fine print of a merchant service agreement is an excellent way to get ripped-off.
It's not fun, but reading the fine print on your merchant account agreement is a must. You're sure to find at least one or two skeletons buried somewhere in that size four font. Don't be afraid to ask questions about anything that sounds strange. If the sales representative stutters over an answer, think twice before signing the agreement.
Many merchant service agreements are more than forty pages long including supporting documentation. Take First Data, for example. The part of First Data's merchant account application that you sign is three pages long, but the guide that describes the service and your responsibilities is more than thirty. It's not uncommon for sales people to "forget" to include those other thirty pages.
If the merchant service agreement makes reference to a section or piece of information you don't have, clarify the missing details with the sales rep before moving forward.
4 - Lease a credit card machine.
Paying $3,000 over four years for a credit card machine that can be purchased outright for $200 is certainly a stellar way to get ripped off by a credit card processor.
There's never a good reason to lease credit card machines or PIN pads. That's why we don't allow processors to lease equipment here at CardFellow. Many credit card machines cost less than $300 to purchase. It's a wonder how some companies are still getting away with leasing them for thousands of dollars.
A credit card processor that's trying to lease you a credit card machine simply does not have your best interests in mind. Take the hint and dump them quickly.
The only time leasing may be a financially viable option is when your business needs a robust, customized point of sale system that costs tens of thousands of dollars to purchase outright. If this doesn't describe your situation, don't lease credit card equipment.
5 - Go for the free stuff.
Think about it — did the credit card processor have to pay for the machine? Any processor willing to give you a machine that they paid $100 for must be making enough on your processing fees to make it worth it.
That "free" credit card machine will end up costing you a lot more over the life of your merchant account.
There are many ways that processors can mislead you and take advantage of your business by overcharging. If you do the things on this list, you're almost certain to pay more than you have to for processing.