A business owner and manager review their coffee shop’s printed credit card processing statement

Your guide to the ‘Merchant Bill of Rights,’ credit card processing fees and more

Friday, January 20, 2023

Consumer rights are such a normal part of our everyday lives we don’t consciously think about them. We expect reasonable pricing, logical return windows and some type of recourse when we aren’t shopping in person and are misled about a product.

Why? Because Americans have been guaranteed these protections for generations. The Federal Trade Commission, which protects consumers from deceptive or unfair business practices, was created all the way back in 1914.

So if we’re comfortable as a culture with the idea that consumers deserve to be treated fairly … why don’t we talk more about the rights of small business owners?

Shouldn’t hard-working merchants have some kind of guarantee from their payment processors that they won’t charge outrageous monthly fees, mark up transaction fees without explanation, or use other unfair tactics to make it impractical for business owners to take debit card and credit card payments? We sure think so.

The entrepreneurial spirit shouldn’t be dampened by unethical credit card processors who aren’t upfront with their merchants.

Whether you use Heartland or choose one of our competitors, you deserve to know where every single penny goes for payment processing.

So what exactly is this Merchant Bill of Rights anyway? We can’t wait to show you.

Read on to learn:

A cashier standing behind a point of sale hands a customer their credit card back after a transaction

A new kind of credit card processing company

Heartland was founded in 1997 with a passion for supporting entrepreneurs and a unique vision — bringing radical transparency and fairness to an industry commonly criticized for shady practices.

Being entrepreneurs ourselves, we knew firsthand how difficult it could be to tell the difference between a rip-off, a fair shake and a great deal for payment processing. Small business owners have enough on their plates as it is. They don’t have time to become payments experts, too. We wanted to take that pain away and create something better.

We made a choice. We decided to go a different direction and forgo all the smoke and mirrors our competitors used to hide their fees. Instead, we empowered small business owners with information.

From the start, we traded confusing jargon for straightforward explanations of the types of fees customers could expect and where they came from (financial institutions, card brands and so on) so all of our customers knew what they should receive from a payment processor.

The more we discussed these ideas of fairness, transparency and respect over the years, the more obvious it became that we should make our internal code of conduct public for the benefit of small business owners nationwide.

And so the Merchant Bill of Rights was born. It was published in 2006 with the aim of becoming an industry standard adopted by all payment processors. It’s essentially a fair, respectable way of doing business that all payment processing companies could be proud of.

With the Merchant Bill of Rights, Heartland clients have something to hold us to — just like the terms of the agreement we ask them to sign. No other payment processing company offers this.

Other payment processors have been unwilling to join us in this commitment, but we’re as serious as ever about its 10 tenets. Why? Because small businesses deserve better.

Today’s business owners face more challenges than ever before. Only half of the roughly 600,000 small businesses started each year survive the first five years, and a mere 30% make it to the 10-year mark. No matter the statistics, these are resilient people, and we’ll do everything in our power to make sure they not only survive, but thrive.

From small business to enterprise, your rights remain the same

Small business owners access their processing statement online and discuss interchange fees
Transparent fees icon

Right #1
You have the right to know the fee for every credit card transaction ― and who’s charging it.

As the owner or operator of a small or mid-sized business, you deserve (and should expect) competitive pricing and the best value for payment processing, including debit cards, prepaid cards and credit card transactions.

Payment processing fees for card processing services are often the third highest expense a business incurs, following right behind labor and product costs. Card processing is complex, and many businesspeople are confused by what they are really being charged and who they are actually paying. That’s because monthly processing statements can be really confusing and are often automatically debited from your merchant account with little explanation.

Often, what initially looks like a good deal is not what it appears to be. A payment processor’s sales representative may quote you a low rate for a specific type of transaction to “make the sale.” But they deliberately neglect to point out that only a small percentage of your transactions qualify for that low rate. The remainder are charged at a fee that could be as much as double or triple that low rate.

Card brand fees icon

Right #2
You have the right to know the markup of Visa®, Mastercard®, Discover® and American Express® fee increases.

Credit card networks — Visa, Mastercard, Discover and American Express — typically adjust interchange rate categories and fees annually in April and October. When rates go up, many processors seize the opportunity to inflate them even more ― and then deceptively blame the increase on the card brands.

Shady fee markups like these are only a fraction of the undisclosed costs some processors charge. Retail and restaurant giants have the resources to recognize ― and avoid ― markups, junk fees and other unnecessary charges that smaller businesses may needlessly incur. Likewise, if you know which fees are legitimate and exactly what and who you are paying for each transaction, you’ll have much more visibility into your card processing costs.

Card brand fee reductions icon

Right #3
You have the right to know all Visa, Mastercard, Discover and American Express fee reductions.

Sometimes, annual fee adjustments by Visa, Mastercard, Discover and American Express include reductions in some card transaction categories. And, while other processors are happy to pass fee increases along to merchants, they don’t always pass the reductions through. Especially for small and mid-sized merchants.

In 2003, for example, Visa and Mastercard both settled a class action lawsuit led by Walmart and other retailers, which called for the return of billions of dollars of owed fee reductions. All the large merchants received their share of the settlement. But most small and mid-sized businesses didn’t because of a loophole in the settlement agreement that allowed processors and their middlemen to keep the savings.

Likewise, Visa and Mastercard often grant incentive programs for certain card types and categories of merchants ― such as small-ticket merchants. Say a restaurant has an average ticket of $40 and there’s a pre-set interchange rate for all swiped transactions that fall within the normal range of that average ticket. But, if the ticket drops below $15, Visa would issue a fee reduction of about $.05. Yet, few processors pass this fee reduction directly onto the restaurateur.

Fee reductions and incentive programs can significantly impact your profitability ― just like increases can. It is not fair to pay for the increases while being excluded from the decreases and incentives. It starts with awareness … and then insisting your processor passes the savings on.

Transaction middlemen icon

Right #4
You have the right to know all transaction middlemen.

The chain of events that begins when you swipe a customer’s card is fairly straightforward. At minimum, it requires four essential entities to process the transaction: a merchant bank, a card brand (Visa / Mastercard / Discover / American Express), a card-issuing bank and a processor. The processor provides access to the electronic systems that first authorize and settle transactions, and then convert them into money to be deposited into your bank account.

This simple process doesn’t change ― but becomes more expensive ― when non-essential middlemen are involved.

The bottom line is a lot of middlemen can be making money off of every single transaction. When too many entities are involved, it makes it hard for you ― and other owners of small and mid-sized businesses ― to understand and control your costs.

Large merchants don’t allow middlemen to be involved because they recognize the drain on revenue does not come with equivalent value. You shouldn’t allow these unnecessary drains on your revenue either.

Surcharges and bill-backs icon

Right #5
You have the right to know all surcharges and bill-backs.

Many processors hide arbitrary charges ― often classified as “surcharges” ― without disclosing them to merchants. These charges are pure profit to processors and their middlemen, and make transactions even more costly for you.

What’s worse is that these markups often appear on bills issued the month following the actual transaction with little or no explanation. And, they are debited directly from your account. These markups known as “bill-backs” or “enhancements” are often undisclosed and make quoted rates appear lower than they actually are.

Big merchants never pay these extra markups. Success is difficult enough for small and mid-sized businesses. You shouldn’t have to pay for inflated surcharges and bill-backs too.

Rate structure icon

Right #6
You have the right to get the best rate structure for your business

We all know that one-size-fits-all never really does. That’s why it’s so important for you to have access to all the facts about different pricing models upfront, so you’re empowered to choose the right pricing structure for your business. Depending on factors such as how many transactions you run on average, and what your average ticket amount is, certain rate structures can greatly advantage, or disadvantage your business. Some businesses value simplicity over other variables. It just depends. But it’s always a good idea to make an informed decision.

Let’s walk through the four pricing structures you’re likely to encounter when you’re shopping for payment providers.

Interchange-plus pricing aka “cost-plus pricing”

This structure is widely considered to be an industry standard. The descriptive name tells you what the processor does: charge a small fee in addition to interchange. This is usually a percentage amount (think 0.4% of the transaction amount) and a flat fee per transaction (such as $0.09). You’ll also have monthly fees associated with any services or subscription add-ons you get from a processor. This is the only pricing model that will spotlight every cost point, including the processor fees.

Is this structure right for you? For businesses that process a high volume of transactions ($5k-$10k per month), you may save money with this structure.

Tiered pricing

An older processing model, this type breaks transaction types into three groups depending on the card type and level of risk a transaction presents: qualified, mid-qualified, and non-qualified. Each group has a different rate.

Is this structure right for you? In theory, if you only accept cards in person (never keyed-in over the phone or online) via EMV-enabled card readers and don’t often accept corporate or rewards cards, you could save money by having mostly qualified transaction assessments at the most favorable rate.

Subscription or membership pricing aka 0% processing

This is a version of interchange-plus pricing where the processor charges two fees, a monthly membership fee for the service and a flat-rate transaction fee.

Is this structure right for you? Businesses with high transaction volume or larger ticket transactions may save money over interchange-plus pricing.

Flat-rate pricing

The name on this one gives it away, too. There are two types of flat-rate pricing. One, where the interchange and processing fees are bundled, and the other, where the processing fees are flat rate, and then they add interchange fees to that. Although, it’s important to note that there may be many different “flat rates” since most processors don’t offer a single flat rate. Square, for example, has at least three different rates based on whether you accept a card in person, over the internet, or by manually entering the card information.

Is this structure right for you? If you’re a smaller business and have a lower processing volume overall, it’s likely you’ll spend less on processing than you would under a different pricing structure.

Encryption and security icon

Right #7
You have the right to encrypted card numbers and secure transactions.

You’d never want your customers’ credit, debit and PIN numbers to be stolen by hackers. And with the right processor, you can put those fears to rest. Large payments processors prevent hundreds of thousands of attempted hacks every day with layer upon layer of state-of-the-art security, technology and techniques to safeguard sensitive account information.

Data security solutions are quickly evolving, yet not all processors guarantee encryption throughout the card transaction lifecycle. Many have not implemented the most advanced technology, and if they have, may not have made the financial investment required to completely protect their systems.

This puts every merchant at risk — especially small and mid-sized businesses that don’t have the internal resources of their larger counterparts to ensure their customers are protected. It also puts the millions of consumers who use credit and debit cards at risk … with possibly devastating consequences. Robust security and data encryption is a must, not an option.

Real-time transaction and fraud monitoring icon

Right #8
The right to real-time fraud and transaction monitoring.

Credit and debit card fraud costs American businesses billions of dollars every year. Thieves work overtime to find ways to steal from merchants. Often disgruntled or dishonest employees ― even some customers ― are masters at making money the illegal way ... and not getting caught.

As such, real-time fraud and transaction monitoring are critical to your business’ success. That’s why large merchants have entire departments and controls devoted to detecting and preventing fraud. They analyze patterns and transaction types in real time, identify suspicious activity and take quick action to counter it.

On the other hand, smaller businesses like yours need to rely on their processor to provide these services. Yet, many processors don’t provide them, leaving you exposed and vulnerable. You must recognize this risk and protect yourself against it by ensuring your provider is offering those critical security services.

Reasonable equipment costs icon

Right #9
You have the right to reasonable equipment costs.

When big companies buy equipment, they often solicit proposals from multiple equipment manufacturers to drive the best deal. As the owner of a small or mid-sized business, you may not have the time or resources to shop around for a payment device, so you probably turn to your processor for guidance. However, you might not get the deal you’ve bargained for ― and you most likely won’t even know it.

Most processors sell the concept of multi-year equipment leasing. Contracts span three to five years ― sometimes longer.

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It’s during the sales pitch that the deception comes in:
“My company [almost always a middleman] can save you $100 per month on your processing fees … and this new machine will cost you only $49 per month. You save $51 per month for as long as you use it.”

Yet, most new POS terminals cost only $250 to $500 and can easily be purchased at large big-box retailers or on the internet. With a five-year lease at $49 per month, that terminal ends up costing $3,000.

Thousands of dollars go to the independent contractor who sold the equipment as well as the sub-ISO and ISO middlemen who represent the processor and sold the lease. Add taxes and insurance to that ― plus a 10% fee (another $300) to gain ownership of the equipment at the end of the lease … and the result is … you’ve paid way too much for a non-cancellable lease.

To make matters worse, the $100 monthly savings on processing fees usually never appears, and if it does, the savings is wiped out with the next markup of rate changes by one of the other middlemen.

Knowing this simple fact can save your business a significant amount of money.

Real-time customer support icon

Right #10:
You have the right to real-time customer support.

With most Americans relying on credit and debit cards for their purchases, one minor problem that prevents or delays transactions at the point of sale can have devastating effects. Combine the ripple effect of customer dissatisfaction with lost revenue and it’s easy to see why live customer support 24 hours a day, 7 days a week, 365 days a year is critical for all merchants.

Large merchants are armed with internal systems and in-house support teams who can immediately respond to and minimize disruptions in service. Regardless of how big or small the problem ― whether it’s equipment failure, a connectivity issue or any other eventuality that can impact processing ― the last thing small and mid-sized business owners want is to be lost in an automated phone tree during an emergency. A simple phone call or on-site visit from knowledgeable support representatives can make the difference between a good day and a disastrous one.

But unfortunately, many small and mid-sized merchants don’t hear from their processor after the initial sale and are stuck with only online FAQ resources or community chat groups for support.

You should expect more.

Heartland customer calls support about their merchant account

We’re here to help you succeed

From side-gigs to livelihoods, the entrepreneurial spirit is the pulse of this nation. Doing everything in our power to help entrepreneurs forge ahead will always be our top priority.

If you’re concerned you’re overpaying with your current processor, or just don’t feel like they have your best interest at heart, let us know. We're happy to give you a competitive rate review or just provide a listening ear and straightforward information.

We’d love to answer any questions you may have about pricing structures, and which would be most advantageous for you. Perhaps Heartland is the perfect processor for you. Find out!


Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us