Merchant Credit Card Processing Fees Explained: Part 3 of 3

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This is the final post in our merchant credit card processing fees explanatory series. You can read the first and second posts about the differences between interchange fees and qualified pricing, as well as other differentiators that affect your merchant credit card payment processing fees. Continue below for our final piece of advice when it comes to understanding the fees you are being assessed by your processor.


Avoid Leases for Low-Cost Equipment and Software

The equipment or software required to process credit cards for a small business can typically be purchased for as little as $100 to $400.  Some merchant credit card processing salespeople will try to talk you into leasing the software or equipment.

Our advice? Avoid.

The only one who benefits from this type of lease is the salesperson who gets a fee for selling you the lease. A lease on a $400 piece of equipment usually carries a high cancellation fee and can wind up adding an extra $1,000 or more to the actual price of what you leased. If you get a free terminal or free software, make sure you understand the terms as these usually have high cancellation fees.

Which leads us to our next point…


Always Read the Small Print

Carefully read all applications, forms and contracts mailed. Read all of the small print. Work with a merchant credit card processing company that will help you understand the small print (there’s no point in reading it if you are not going to understand it). Find out if you’ll have to pay any penalties if you want to change processors or stop accepting credit cards.

Many merchant credit card processing fees and providers include a penalty clause in their contracts (known as cancellation fees) that kick in if you want out in less than three years.   Be sure all fees listed in the contract are the same as what you were quoted.  If there is ever a dispute, the issue will be decided on the basis of the printed contract, not what you say the salesperson told you on the telephone.

Check to see under what conditions the company can terminate your account and whether there are monthly minimums or maximums.  Be on the lookout for any hidden fees, and understand the terms for certain incidentals like Retrieval/Chargebacks, ACH/DBA Change Fee, or a Voice Authorization Fee. Look for fees such as PCI Compliance or IRS 1099-K reporting fees.   These should be at-cost or, in most cases, provided at no cost to most small-medium sized businesses.

You should also understand what happens with the fees charged by credit card brands.  Make sure they are “passed through at their current rate”, meaning there is no additional markup or profit for the processor.  These are normal interchange fees that the card networks update and change regularly and you want to understand how these affect your rates.

The Bottom Line: How Do I Avoid Paying Too Much on Merchant Credit Card Processing Fees?

Our final advice is this: find a provider that you can trust and do some research to ensure they have a good reputation and have support staff to help you in case you run into any issues.  Ask your potential processor for a list or referrals and be able to back up their referrals with your own research.  The hard work up front will provide you with a great relationship as your business grows.

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