Merchant Processor Scams and Tricks You Should Know
The payment processing industry is fraught with borderline scammy activities. From tacking on hidden fees to spouting off misleading marketing statements, you will see it all. This post sheds light on some of the most common tricks and scams that payment processors run on merchants. Educate yourself on these scams to avoid getting ripped off.
#1 Misleading Rate Quotes
The best way to avoid misleading rate quotes is to stay away from payment processors who use tiered pricing (i.e., those that use qualified, mid-, and non-qualified categories). You’re much better off going for processors that charge a flat rate or those that use interchange-plus and membership pricing.
Certain processors may initially charge a low rate, but raise your fees overtime. Some providers even have text in their agreements stating that they can raise their prices at their own discretion. And often, this means a major rate hike within the first three months.
#2 Hidden Fees
Hidden fees are a real thing in the payment processing world. Some credit card processors may tell you that your rate is 1.2% “no matter what.” What they don’t tell you is the fact that they also have surcharges that they legally don’t have to put a rate next to. Your effective rate at the end of the month is closer to 3% when adding in the surcharges. This is a deceptive sales tactic.
Pay close attention to your payment processor agreement or proposal. Don’t just sign on the dotted line without reading the fine print. Keep an eye out for verbiage that gives the payment processor permission to charge additional fees. You can typically find these fees in a section called “Surcharges” in your statement. The processor won’t put any rates next to the charge — just a dollar amount next to it.
If you need help analyzing your proposal or statement, Payment Wholesaler’s specialists can evaluate your documents for free and provide unbiased advice on how to lower your costs.
#3 Equipment Leasing
Leasing your credit card terminals is bad idea and providers that push you to do it do not have your best interests at heart.
The cost of leasing a payment terminal typically costs $30 to $100 over the course of 2 to 4 years, which can add up to several thousands of dollars over the course of the lease. Since you can purchase a new terminal for a few hundred dollars, choosing to lease equipment means you’re literally paying thousands of dollars for a device that’s worth a fraction of that.
Sure, you don’t pay anything “up front” but you’re paying a whole lot more in the long run.
There are a number of things you can instead of leasing:
- Purchase equipment upfront. It costs more out of pocket — at first. But your long-term savings compared to leasing are tremendous.
- Reprogram your current devices.If you have existing equipment, see if your provider can help reprogram your devices.
- Rent the equipment.If you cannot afford to purchase upfront, you can go for a short term rental until you have the funds to buy new equipment.
#4 Unreliable Sales Representatives
This one is pretty simple: a salesman from the credit card processing company may hound you until you sign up and tell you everything you want to hear. Once you hop on board, you’re locked in a contract and can’t get a hold of your representative, while they are making a residual percentage of every dollar that you process.
Choose a payment processing company with strong values, and ideally one that has sales and customer service working in-house.
Let Us Help You Save
Need help deciding on the right payment processor? Send us your credit card processing statement or proposal. We’ll analyze it, run the numbers, and make recommendations on how you can save.
You can’t eliminate swipe fees completely, but you can lower them. If you’re looking to cut your credit card processing fees, Get in touch with Midwest Merchant Services. We’ll review your statement and recommend ways to help you save.
As one of the top-rated credit card processors in the market, we’re able to save merchants $450+ a month in payment processing.