Payment processing is an aspect of operations that almost every business owner neglects. The problem is, it affects almost every dollar you accept. The payment processing industry is convoluted and little information exists to help business owners determine if they are being treated fairly. If you are reviewing your payment processor, make sure you are aware of the three most common misconceptions about the industry.
1. One Low Rate
Misconception: More often than not, when a payment processer pitches their services, they only quote one rate that may sound something like 1.29%. This leads the business owner to believe that this is the only rate that will ever be charged for all payment processing services.
Reality: There are many more rates and fees that are left undisclosed at rates higher than what is originally quoted. These rates are applied depending on the type of cards and how those cards are accepted. For example, a corporate credit card will always be charged a higher rate than a personal debit card; therefore, there will never be just one rate for all payment processing services.
What to do: Ask for EVERY rate for every situation, and get it in writing.
2. “Free” Equipment
Misconception: Companies that process payments will often tell business owners that they will provide card swiping equipment for “free” when they switch their processing services. They will often make this equipment appear to be worth much more than it actually is to make it look like they are giving the business owner a great deal.
Reality: Very rarely is anything free. That pricey card swiping equipment can be purchased elsewhere for significantly less than what most processors will charge you to purchase it. Because of high and undisclosed processing rates and junk fees, many small businesses end up paying for their equipment many times over, throughout the term of their contract.
What to do: First, make sure you actually need the equipment. If you do, research the costs to buy the equipment outright. This will help you determine what kind of “deal” you are being offered.
3. Junk Fees
Misconception: Fees, such as, statement fees, data security fees, batch header fees, monthly minimum fees, and a host of other junk fees are necessary administrative costs to keep payment processing services operating.
Reality: There are costs to maintain processing services. However, the majority of junk fees are typically not disclosed by the sales reps in the quote provided to the business owner. These fees are “junk fees” that are simply lining someone’s pocket, thereby cutting into the business owner’s profit. They are often used to make the rate charged seem better. If I charge you $100 in junk fees, but save $100 on rate, I haven’t really done anything for you. They don’t seem like much at first, but when you add them up it can make a difference.
What to do: Ask your processor to put EVERY fee they plan to charge in writing.
To learn about the most fair and transparent pricing structure available on the market today for payment processing, contact Steve O’Brien: 678-797-3774 or sobrien@henssler.com.
Disclosures:
All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing.
