A New Year For Credit Card Processing

“The sharks are in the water, and circling your boat!”

As we move into the new year, there’s a collection of salespeople gearing up to contact you. They are rehearsing their lines. They are getting their “evasive yet sounds like we know the answer” responses ready for you. They are writing their scripts for their phone support people. In short, they are getting ready for a full attack. These people I’m speaking of? Of course, I’m talking about your friendly neighborhood credit card processing representatives.

As the new year approaches, credit card processors will reach out to you with all sorts of slogans and sayings designed to lead you to signing with them. “We’ll give you a free gas card if we can’t beat your current rate,” or “Sign with us and we’ll give you a free credit card terminal” are pretty common pitches. Maybe your salesperson will reach out to you and tell you how the economy is starting to show an upturn, which will almost certainly impact your need to offer credit card processing. More than likely though, your representative will approach you as they always do. They’ll offer you some ridiculously low rate like 1.19% that looks good...until you get your statement and realize that rate only happens with the all the planets align perfectly for a transaction.

I thought that I would take a couple of minutes for this week’s blog and help you “cut through the nonsense” that will be spewed at you in the coming weeks. As a small businessman like you, I sell a product and I purchase products...so the last thing I want or need to hear is a slick sales pitch. In fact, that’s the quickest way to get me to avoid buying. I’m sure I’m not alone in this. Therefore, forget all the lines you will hear and just cut to the chase with your potential credit card processing provider (who, I hope, will be INTEGRAL Merchants Group!). Here’s some key points to ask:

1. Is your program “Interchange Cost Plus” or a “Tiered” Program? For most businesses, you want Interchange Cost Plus. With this program, you as a merchant pay the true cost of interchange for each type of card you swipe, plus a small markup for the processor as the cost of doing business. The major credit card companies set the interchange rate for every type of credit card they offer, so this has no vary to it from processor to processor. Whether you are processing with INTEGRAL Merchants Group or Chase Bank, the Interchange Rate for each credit card type is the same. With a “Tiered” program, each credit card type is placed into a “tier”. Think of it as a bucket. Each “bucket” has a steadily increasing rate to it. Many times, with a “Tiered” program, the credit cards you take qualify as a higher rated card. Tiered programs look great in the pitch you will get from a salesperson. When you hear that magical “1.19% rate”, you are almost always looking at a tiered program. Unfortunately, what they aren’t apt to tell you is that would be the rate for a debit card used as a debit from their home processing bank. What does that mean? It means you will rarely get that rate...if ever.

2. Do I have to lease my equipment? If the answer is yes, then you are going to overpay. Think of it this way. If you are getting some brilliant credit card rate like 2.2% on ALL of your transactions, but you are spending $79 a month to lease your credit card terminal to process your cards, are you REALLY getting that good of a rate? I would tend to think not. Credit Card Terminals can be purchased for around $300, give or take. Depending on what you want with it, they can cost more (ie: wireless machines and whatnot). But it’s a one time cost vs. a never ending expenditure which raises your overall cost of doing business.

3. What are ALL of my costs? This is another sneaky trick that gets played out far too much in the field. Many times, a credit card processing salesman will go out and work you up a great rate and have you convinced that you are signing a great deal. However, once you sign and get your first statement, the numbers won’t add up. Sure, the “rate” will be as advertised. However, there will be a slew of add-on fees associated to your statement. Setup fees, PCI compliance fees, terminal fees, statement fees, gateway fees, etc. For most processors, many of these fees are part of the cost of doing business. For most salespeople though, they are all too willing to leave that out of their estimate to you. Again, if this isn’t fleshed out in advance, then you just won’t know the true cost you are paying for processing.

4. Is there a cancellation fee? For many people, they sign a bad deal and they quickly figure out just how bad it is. Then, the next company comes along to change them to their processing at a much better rate. They are all set to go, but a problem arises...there’s a big cancellation fee to leave this processor. Cancellation fees can range from $250-$995 or even more in some circumstances. It truly can be the anchor that holds you into a bad deal for the length of your contract. Be aware of this. Also, if the next processor comes along and you already have a cancellation fee, tell them to pick up the cost of the fee. If they REALLY want your business, they will be more than willing to do so.

There are many more tips and tricks that will help you find the right processor in the new year. These are just a few. At the INTEGRAL Merchants Group, we look to set up our customers on an Interchange Cost Plus Program each and every time. It’s our goal to help you keep more of YOUR money from sales. Feel free to contact us at (888) 645-9425 if you are ready to get a “true” rate quote.

Chris Akin
Partner, INTEGRAL Merchants Group