Business Tip Series: 3 Secrets on Saving on Credit Card Fees (Part 2)
Introduction: At L4SB, we’re blessed to have many great clients in many industries. Some of our clients serve the business-to-business market, just as L4SB does. When appropriate, we may permit a client to publish a blog article, if we feel the information is relevant and helpful to our website audience and clients. The following article was produced by Electronic Money Company, a L4SB client. L4SB asked Electronic Money Company to produce a blog article that we could publish, to help our respective business clients better understand credit card processing and perhaps how to save money. L4SB has no relationship to Electronic Money Company, other than providing legal services. L4SB makes no recommendations or opinions as to the information contained herein. We have split this article into three parts. This is part two, and part one is available here.
Secret #2 – The Secret of the So Called “Hidden Fees”!
These are possible, extra surcharge fees for the processor. They are not usually included in a rate comparison, so look them over carefully on the processor’s application.
- Monthly Fee – All processor have monthly cost they have to cover to minimally service a merchant account, but it is usually marked up.
- On File Fee or Statement Fee – Another name for a monthly fee for servicing the account.
- Extra Transaction Fees – These are transaction fees on top of the interchange rate and transaction fees.
- Batch Fees – There is a cost to the transaction to settle the batch at the end of the day, but it is also marked up.
- Gateway Fees – If you process via an e-commerce site or a mobile app, there is a monthly cost for the gateway connection and many times also another transaction fee. This is usually marked up by the credit card processing salesman.
- PCI Compliance – These fees are mandated by the industry to give guidance to merchants on how to prevent fraud, of which we all need to be vigilantly aware. The United States has more fraud than the rest of the world all together. There is a required annual PCI fee and an additional monthly fee if you don’t fill out the required annual survey, where questions are asked of you in regard to whether you are following good security practices to prevent fraud. Some processors also sell breach protection with an add-on fee to the annual PCI compliance fee. Data breach protection is something you should consider adding to your business insurance policy.
- Monthly Minimum Fee – Some processors add an additional fee for the processor to cover his cost of servicing your account even if you do not have any transactions.
- Annual Fees – Surcharge for the processor.
- Maintenance Fee – Surcharge for the processor.
- Regulatory Product Fees – A fee to cover the processor’s cost to report your credit card volume to the IRS. This fee is negotiable.
- Chargeback Fees – There is some cost to handling the servicing of any chargebacks, but again it is marked up.
- Technology Fee – A fee to recover the processor’s cost for investing in better technology or to make more money.
- Customer Insights – An added marketing program which carries a cost but can also be marked up by the processor. You may not even be using this program and it can be removed.
- Facebook Marketing Program Fees – Again this is a program that carries a cost and could be useful to a merchant. Again it is marked up for the processor to make money.
- EMV Non-Enabled Fee – A charge for not having the capability of taking EMC chip cards. Since you are not following best practices against fraud, the processor adds an extra fee to cover more risk.
- Monthly Club Fees – A monthly subscription fee that allows you to order all the paper you want for your terminal. This fee also sometimes allows a replacement terminal should the need arise. There is some cost involved here but it is also marked up.
- Other Fees – There are many more names for more monthly fees.
- Termination Fees – A fee for ending your agreement before the term.
- Liquidated Damages – WARNING!!! – These are fees in the fine print of the 30+ page terms and conditions, a copy of which should be given to you by the card processing salesperson. Liquidated damages means the processor will continue to charge you all their surcharge fees they would normally be collecting from you should you terminate the agreement before the end of the term. This can be an unbelievable amount of money!
Many times these fees are not listed on the credit card processing salesman’s comparison. They are only on the application. Many times they are denoted in very small print. So ask to review the application. Review every fee listed. Liquidated damages is buried inside the terms and conditions! Beware of salespeople who handwrite in, “No termination Fee.” Many times in the fine print there is verbiage saying that the salesperson is not allowed to waive the termination fee or liquidated damages fee.
Understand that the processor does need to make money. They are servicing and managing your merchant account, watching for fraud and managing deposits for you. They assist with chargebacks, provide technical support and answer questions about your merchant statement. Just be careful that you understand how much you are paying your processor to do this for you and what kind of service they are giving you for that surcharge payment.
Please continue reading the 3rd and final of the 3 secrets, entitled Secret #3 – The Myth About the Effective Rate.
This article was produced by Electronic Money Company, a L4SB client. They are a merchant account processor based in Albuquerque, NM, and work to provide not just competitive credit card processing rates, but to provide a personal, honest consultative experience for their clients and customers.