Credit Card Processing: Beware of ‘Rate Reductions’

Credit Card Processing: Beware of ‘Rate Reductions’

May 2, 2017 2:01 pm

In my expertise, most retailers really feel that their bank card account supplier is extra more likely to improve their charges or invent new charges quite than supply an unsolicited fee discount.

The rationale retailers really feel this manner is as a result of the business has proven this to be the case — loyalty has little worth. The truth is, a service provider who has been processing with the identical supplier for a number of years shouldn’t be stunned to seek out that it might be grossly overpaying for the service.

The bank card processing business is consolidating. A few of the bigger suppliers are shopping for smaller ones. This isn't essentially good for retailers as it could possibly result in much less competitors and extra deceptive techniques, particularly for retailers who now discover themselves locked into one or two suppliers by their software or gateway firm.

Hopefully, Sensible Ecommerce readers perceive although my articles that a “fee discount” doesn't essentially imply a “value discount.” Furthermore, bank card processing is just not an business the place the suppliers usually attain out to their retailers and supply an unsolicited discount in value. Retailers subsequently must be on guard if their supplier gives a “fee discount” as a result of it might find yourself being a price improve, particularly if one other firm has bought the supplier.

Beware Unsolicited Price Reductions

One tactic of an unsolicited price discount that I've just lately seen happens after a supplier is acquired. The brand new proprietor will ship out an addendum to its newly acquired service provider base providing a decrease fee. The addendum should have the previous supplier’s identify on it. On the floor, the addendum might seem like a price discount. However it may be the other.

I've had retailers contact me questioning why their processing value has gone up by hundreds or tens of hundreds of dollars per yr after their supplier was bought. The reason being as a result of the addendum typically comes with verbiage that gives a minor discount within the supplier’s low cost fee, for instance from zero.20% + $zero.10 to zero.15% + $zero.10. Nevertheless, deep within the new phrases and circumstances part, the service provider agrees to surcharges that may be greater than 1.00 % and that apply to over ninety % of the service provider’s gross sales.

Simply as importantly, the brand new phrases and circumstances might now have a liquidated damages clause that requires the service provider to pay the brand new supplier the typical income that the supplier makes on the account every month occasions the variety of months left on the contract. This may end up in paying hundreds of dollars to get out of a contract.

Service provider account suppliers usually don't attain out to their service provider clients to supply a real value discount until they're pressured to take action as a result of one other supplier is providing a decrease value or the service provider insists on a price discount.

Thus in case you obtain an unsolicited price-discount supply out of your service provider account supplier, each warning bell ought to go off. Deal with it as if you're receiving a suggestion from a brand new firm. Use the instruments and methodology in my “Negotiating Errors” and “Partnering with Credit score-card Salespeople” collection from 2016. In the long run, get every part in writing, utilizing concise verbiage that you could perceive, particularly relating to inflated charges, surcharges, and any value to terminate the contract.

Has Your Supplier Been Bought?

Most retailers have no idea if their supplier has been bought. Typically the service provider will discover that the client help quantity has modified or that the assertion has modified. These may be indicators that the supplier has been acquired. Nevertheless, it might additionally imply that their present supplier has merely moved the account to a different processing service.

Retailers ought to all the time know if their service provider account supplier has been bought as a result of pricing and phrases and circumstances might change after a buyout.

Retailers ought to all the time do a fast efficient price verify on their statements every month. To do that, merely divide the month-to-month value by the processing quantity. For instance, $1,846.fifty six in value divided by $ninety two,300 in month-to-month processing = 2.00 % efficient processing fee.

If the service provider finds the efficient fee all of a sudden jumps from 2.00 % to, say, 2.forty % or if the speed regularly will increase every month from, say, 2.00 % to 2.10 % to 2.20 %, then the service provider ought to use all of the instruments in my Sensible Ecommerce articles to find out the actual trigger and take the required motion.


  • Watch out for unsolicited fee reductions.
  • The bank card processing business continues to consolidate.
  • Use the instruments and methodology in my articles to know any supply.
  • Conduct an efficient price evaluation each month.

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