Is your card processor playing hide and seek with fees?

Friday, August 30, 2019

Some payment processors intentionally make their credit card processing statements hard to understand in order to “hide” what you’re being charged. It’s important to be able to understand your statement and to where your processing fees are going. When trying to read your statement, make sure you can answer the following questions:

  • How much are my fixed costs?
  • What are my processing charges?

Each of these components is crucial to ensuring that you understand how much you’re paying. Take a look at the following example to learn more.

Fixed Costs

The sum of interchange fees charged by credit card issuing banks, and fees charged by credit card companies, are the industry’s version of non-negotiable fixed pricing. These pass-through costs are the same for all processors. They are mandated and charged to merchants for the privilege of accepting credit cards. See below for an example of the fixed costs being charged.

While all merchants must pay pass-through interchange and fees, you can minimize the amount you pay. Pass-through interchange pricing is influenced by six factors: business type, transaction size, regulated debit or not, card type, transaction method and settlement timeframe. Merchants only have control over two of the six factors: transaction method and settlement timeframe. Ensuring you are doing both correctly helps you minimize interchange fees and can potentially help you mitigate penalties from potential “downgrades.”

For example, when a customer’s card is not present, and you are keying in information manually, be sure to verify all prompts. Not doing this puts the transaction at a higher risk and increases the fee charged by card networks. Also remember to batch on time. If you are late, you are assessed a penalty by card networks for the increased risk of fraud. This will result in additional downgrades.

Processor Charges

Processing charges should be clearly identified and easy to find. In the example below, the statement clearly breaks out the fees it collected from the merchant, totaling $3,705.06. This reflects charges above your fixed costs. By seeing all of your monthly fees conveniently disclosed under “Processing Fees,” you can quickly assess what your business was charged.

As an added level of transparency with statements, Heartland provides a clear processing summary with all fees fully disclosed. The first page of the statement provides an overview of processing activity. An example is provided below.

  • Total deposits from the card networks, including Visa, MasterCard and Discover ($2,759,724.61)
  • Pass-through interchange and fees collected by each of the card networks ($44,321.07 + $10,936.60 + $861.38)
  • The processing fees Heartland is charging ($3,705.06)

If you find yourself struggling to read your statement, it might be time to consider a new processor. Also, don’t overlook other advantages a processor brings. For instance, what is the reliability of your processor’s equipment? Do they offer a breach warranty? Can they seamlessly integrate payroll and analytics, as well as give you fast access to potential business loans? Access to these value-added services can also reduce your total operational costs and make it simpler to manage and grow your business.