Top 8 misconceptions about merchant services providers

Bats aren’t blind. You can’t see the Great Wall of China from space. And Einstein didn’t fail math.

Ever noticed the “word on the street” is usually a little off? Despite the many things that pass as fact, misconceptions are everywhere in our world. And the small business world is no exception. Especially when it comes to merchant services providers.

As a small business owner, you’ll likely reach a point when you need to work with a merchant services provider — companies that provide services you (the merchant) need to run your business, like accepting credit cards, debit cards, electronic payments, mobile payments and more.

You need to successfully accept payments in order to keep your business going. So deciding who to trust with making that happen as your payment processor is a big decision.

Unfortunately, thanks to a few bad actors, there are a lot of misconceptions clouding the reputation of merchant services providers that may have led you to believe you can’t expect much from whichever provider you settle for.

We’re here to tell you that you can expect more — and you shouldn’t let bad information stop you from finding the good ones. Whether you want to start accepting credit cards and are thinking about working with a merchant services provider for the first time, or you’re considering a switch, this article is for you.

Keep reading as we bust the eight most common misconceptions about merchant services providers and uncover the reality behind them, so you can separate the good from the bad and make smart choices with accurate information.

1. Rates alone should influence my decision

“What’s your rate?” is probably the first question that comes to mind when evaluating a provider. You want to know what you’ll be charged — and the rate you get quoted upfront is no doubt a big part of that. But the fee structure behind it is just as important.

You deserve to work with a provider who will give you full transparency when it comes to pricing. But we want to be clear — while we are saying fees should never be hidden to make rates seem lower than they actually are, we aren’t saying you should expect not to have any.

Fees often cover things like customer support, security features, protection in case of a data breach, add-ons to your point of sale system and more. It’s tempting to gravitate toward the most affordable-looking option on the market. But if you save big up front, what will it cost you in the quality of your equipment? The caliber of customer support? The level of fraud protection? Chances are in the long run you won’t actually be saving at all.

Here’s an age-old adage to drive this point home: If something seems too good to be true, it probably is. Suspiciously low fees might mean low-quality services. (But don’t fall into the trap of paying high fees for services you don’t need either!)

It’s all about finding the right balance for your business. Before you sign your name on the line, make sure you have all the facts about three things: 1) the pricing model, whether it’s interchange plus pricing, tiered pricing, subscription pricing or flat-rate pricing, 2) what fees are included and 3) what services are behind those fees.

2. Providers just take my money

Have you heard the one where the merchant services company overcharges and takes all the money for themselves? While there may be some unethical players out there, that’s not typically the case.

For every credit card transaction, money goes to:

• Credit card issuers

• Credit card brands

• Payment processors (merchant services providers)

• Third-party services or payment gateways

Your total processing costs will vary based on factors unique to your type of business, provider and rate structure, but in general here’s what the breakdown of processing fees actually looks like:

Bottom line? Your provider shouldn’t be taking all your money. If they’re charging sky-high monthly fees, marking up transaction fees while deceptively blaming the card brands, padding interchange to take a cut for themselves or are happy to let you pay for fee increases while failing to tell you about decreases, then they’re not being a good partner and you can do better. Go with a credit card processor who has a reputation for transparency — not for shady undisclosed fees.

Ready for better service and clear pricing?

3. Statements are impossible to understand

Ever look at a merchant statement and think it might as well be in Greek? Littered with phrases like pass-thru interchange, network acquiring processing fee and discount rate, deciphering the meaning behind the jargon on your own can feel like a herculean task.

But that little statement holds a lot of important information that’s vital to your business, including:

• The entire cost of processing throughout the month

• Total deposits

• Fee summary and breakdown

• How your sales volume has changed month to month

• Card types you’ve accepted by sales volume

• … and so much more

Your merchant statement can even show you what your merchant services provider is actually charging you. If you’re currently working with a provider and want to see for yourself how the pie gets sliced, you can use your statement to calculate your effective rate. Simply take your total processing fees and divide them by your total deposits (aka your sales volume during the month).

The number you get is the overall percentage you pay for processing payments. From there, your statement should let you see exactly how much goes to card brands, issuers and your provider with a line-by-line breakdown of who receives each type of fee.

In case no one has told you: You don’t have to settle for a provider who will purposely leave you in the dark to keep you ignorant of who and what you’re actually paying for each transaction. You deserve full visibility into how your processing costs break down. Partner with a merchant services provider who will show you how to read your statement and help you understand all the data it contains, so you get an accurate monthly look at what you’re being charged — and how your business is performing.

4. Accepting credit cards is too expensive

While accepting credit cards does come at a cost, there’s no reason to go cash-only. Yes, interchange fees will always be part of the deal. But the right merchant services provider will do everything they can to help you lower costs and make accepting credit cards more affordable, including:

5. All transactions cost the same

Another important thing to note is that each transaction you process at your business may not cost you the same amount. Some will be more expensive than others, depending on a whole bunch of factors:

• Which card brand was used?

• Was it a card present transaction or card not present transaction?

• Was the payment made in-store or was it an ecommerce/online payment?

• Was it keyed in?

• Was it made on a terminal with EMV capabilities?

• Was it a debit card payment or was a credit card used?

• Was it a rewards-based payment or gift card?

• Was the transaction batched on time?

• How much card data was included in the transaction?

Wondering what makes a transaction risky? It comes down to the circumstances of the transaction (card not present is riskier than in-person), how the payment was taken (keyed in over the phone is riskier than physically tapping or dipping a card in an EMV-certified terminal) and the type of card that was used (credit cards are riskier than debit cards).

Sometimes transactions are downgraded for reasons other than risk. One such case is rewards cards. This type of transaction comes at a higher cost to the card brands since they have to pay for cardholder rewards like cash back and air miles. As a result, they charge the merchant more to offset the cost.

When choosing a merchant services provider, be sure to go with one who will help you understand the difference between the costs for each cashless transaction, so you know exactly what you’re being charged and don’t encounter any surprises on your statements.

6. Accepting credit cards isn’t safe

We won’t sugarcoat it, the possibility of a data breach is scary. But merchant services providers can help protect your business against fraud by equipping you with support and technology that ensure you can accept credit cards securely.

The best merchant services providers will:

Security solutions are evolving every day. But not all merchant services providers are evolving with them. When comparing your options, ask if they offer the four security pillars we just covered above. Making sure your business can safely accept credit card payments without high risk should be your merchant services provider's number one goal.

7. All providers are the same

We’ll wager you’re careful about which doctor you select to be your primary care provider. Or which daycare you pick to watch your children while you’re at work. Or even the groomer you let give your dog a haircut.

That’s because not all doctors, daycares or dog groomers offer equal levels of service. The same goes for merchant services providers.

It’s true, there are some unethical providers out there who won’t honor your rights. And there are some who just plain won’t have everything you need. But like we said at the beginning, there are good merchant services providers who will meet your business needs and give you the transparency, fairness and respect you deserve.

Here’s a recap of what to look for in merchant services providers and what to avoid:

Every provider has different specialties, core values, products and services. For example, some providers outsource pieces of their business like their customer care. Depending on what your preferences are and what you’re looking for, certain providers will be more suited to your business than others.

Be sure the one you choose aligns with your needs, offers everything you’re looking for and has a reputation for honoring your rights and being a good business partner. If they don’t, you can likely find a different one that will be a better fit.

8. Contracts are a nightmare

If you aren’t happy with your current provider, don’t let yourself stay stuck in a bad deal. While the thought of breaking contract might make you want to break out in hives, you likely won’t have to agree to anything too horrible beyond early termination fees to get out of it.

Despite what you might have been led to believe, there’s always a way out. In fact, competing merchant services providers often have the ability to buy out your contract. As always, consult with your legal counsel about your cancellation options.

Need a nudge? What’s waiting on the other side of a contract that’s no longer serving you might just be better pricing, better equipment and better service. Speaking of…

Ready to grow your business with a merchant services provider you can trust?

If misconceptions about merchant services providers have been holding you back from making the leap, we hope this helped you get the facts you need to move forward and choose the right provider with confidence.

If you’re still looking for a payments provider, we’d like to throw our hat in the ring.

One more thing — while we wish publicly committing to your rights was an industry standard, we’re currently the only payment processing company who offers this.

If you think you might be interested in learning more about partnering with us, you can get free pricing information on our products with zero commitment. If you like what you see, we’ll connect you with tailored product recommendations. The best part? You can get pricing, explore our solutions and check out online — all without having to add a phone call to your day if you don’t want to.

Contact us anytime if you have questions or want to speak to one of our representatives about the payment processing services we provide and the transparency you can expect.

Disclaimer: The information provided in this document does not, and is not intended to constitute legal advice; instead, all information, content, and materials available are for general informational purposes only. Information provided may not constitute the most up-to-date legal or other information, and readers of this information should contact their attorney to obtain advice with respect to any particular legal matter, in the relevant jurisdiction. All liability with respect to actions taken or not taken based on the contents here are hereby expressly disclaimed.

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Heartland is the point of sale and payments 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