Credit cards have opened the door to many convenient business practices today. From online payments to simplified returns, there’s no way you can avoid offering this service to your customers. But perhaps you weren’t aware of just how convoluted those credit card processing fees might be? It’s much more complicated than a simple fee-for-service.
This modern sales convenience has something lurking in the closet. You saw him when you first signed up for your merchant account. He was sitting in the corner of the room, quiet, innocent, a little hairy and seemingly unavoidable. When you signed your contracts, you promised to let him hang around. But that monster didn’t stay quiet for long. He quickly became a noticeable disruption. He got hairier, stinkier, and louder.
That monster and all of his gross flaws are your Credit Card Processing Fees.
Why Are There So Many Fees Tied To Your Merchant Account?
Paying for this convenient service is fair. But it is important to know who you’re paying and how much you are paying them to cut costs from these fees.
- The Issuing Bank: This is the bank that supplies the buyer with their credit card. They’re members of the Visa and MasterCard BankCard Association. Approximately 70% of your fees go to the issuing bank. (American Express and Discover receive 100% of their merchant fees.)
- Networks: Visa and MasterCard allow the authorizations and transfer of funds to be transmitted back and forth via networks. Networks take about 15% of your merchant account fees.
- Payment Platform: This allows a Virtual Terminal Gateway or Terminal Machine to access the network. They can then get the authorization codes necessary to approve or reject a transaction.
- The Acquiring Bank: These guys are the actual financial institution processing the credit card payment. They assume all the risk that comes with credit card payments. For example, if the customer returns a product and the company lacks the funds to supply a refund, the acquiring bank then assumes responsibility for refunding the customer. The acquiring bank is paid approximately 5% of your merchant account fees.
- ISO, Independent Sales Organizations: The ISO sells access to the acquiring bank to process payments. Acquiring banks can process payments without the ISO. The ISO cannot process a payment without the Acquiring bank. 10% of your merchant account fees will go to the ISO.
With all of these entities dipping their hands into the pot, it’s no wonder your merchant account statement is a monster all on its own. This monster is a master deceptor. He wants to make sure you have no clue what you’re looking at to guarantee you won’t question the numbers.
Ways to “Tame” The Credit Card Processing Fee Monster
You can’t get rid of these monsters completely. But you can teach them how to “sit” and “stay” – metaphorically speaking. By calling your current processor, you can address some of the issues below and reduce your processing fees between 3-5%.
Eliminate Junk Fees: There are a handful of fees in your statement that we refer to as “Junk Fees”. You are under zero obligation to pay these. But the trick is spotting them. Look for “Statement Fees”, “Monthly Funding Fees”, “Monthly Service Fees” or basically anything “monthly”.
Apply Surcharge Fees: You can also apply a surcharge fee to all credit card transactions. If your customers wish to use a credit card for added convenience, let them cover the merchant fees for you. However, 10 states don’t allow this and you risk a bit of backlash when you add a surcharge to your customers total. An expert can increase your savings without having to apply a surcharge if that’s something you’d like to avoid.
Rate Review: Your current processor will review your rate with you. This can sometimes reduce your rate by a few points.
Send out an RFP: You’ll send this to multiple credit card processors (including to your current processor). This can be effective but does NOT guarantee the lowest rates since all bids will be based on your current rates.
PCI Compliance: Ask your processor if your merchant account is PCI Compliant. If it is not, you are charged an extra fee for this non compliance every month.
American Express Statements: If you receive a statement directly from American Express, be sure that you are NOT charged the Monthly Gross Pay Fee or a Statement Fee.
Use Professionals: Have a merchant account audit performed by a consulting company. The company should not be a credit card processor or ISO, that way their analysis of your merchant account is unbiased.
Verisave Can Help You Reduce Your Merchant Fees by 25-35%
Yes, you can do this on your own and see a savings of around 3-5%. But with help from our merchant account audit firm, we can save your company 25-35%. That is a savings of thousands of dollars each month for most companies – money that could be put back directly into the company.
One example, a healthcare company, hired Verisave after realizing their client base used primarily credit cards to pay their bill. Instead of paying nearly 3% on every single dollar, Verisave was able to reduce their credit card processing fees by 35%. This lowered their overall processing rate to only 1.94%.
At Verisave, we assume ALL of the risk. You send us your merchant account statement and we send you a review – no need to pay for the man hours. There is no contract, no fee, and no obligation for this initial review. You’re going to be floored to see what you’re overpaying each month.