Choosing a credit card processing service is one of the most important decisions you make as a business owner. Your merchant account is an important part of owning and running your business successfully.
Much like applying for a loan, a merchant account is a type of business banking account. They’re underwritten and approved, and subject to monitoring and oversight for the life of the account. It isn’t something to be taken lightly. Or left in the hands of some uneducated, fly-by-night sales agent just out to make a buck.
In this article, we’re going to highlight a few mistakes merchants make when choosing a credit card processor. In addition, we’ll cover some points merchants might not think about when they’re looking at a credit card processing quote.
The biggest mistakes merchants make with credit card processing…
Not thinking about their merchant service provider (MSP) as a business partnership is one of the biggest mistakes business owners make. Merchants will work with their provider for the life of their merchant account. You shouldn’t just be looking for someone who can sign you up, and as cheap as possible, thankyou.
You need a provider who possesses a deep understanding of, and has extensive experience in, the payments industry. One who can promise a reliable network and cares about their customer service. Remember, your MSP isn’t just getting you great rates. They’re your avenue for revenue should be focused on your success. They’re there to provide you with a service intended to not only help you conduct business but also to build your business. It’s their job to assist you in staying relevant in the payments marketplace and provide payment options that satisfy your customer’s changing expectations.
When you look at your MSP as a business partner, you’ll automatically gravitate to the one who also looks at your partnership as a long-term business relationship. When you have this, you can see how all the following will just naturally fall into place.
Speaking of relationships… Don’t just go directly to your bank!! I know you love your bank. As a merchant who already has a business bank account with “your bank”, it may seem like the best option to go to them for your merchant account.
That couldn’t be more wrong. Now hear me out, I’m not just being biased here. The truth is, the part of the bank that handles merchant services is not that nice little local branch where the teller knows your name. They are much bigger than that. It’s a standard in the industry for big banks to charge 33% more, on average, than independent service providers charge.
These banks are not as flexible with their rate structures as independent service providers. They must consider shareholder’s interests, profit margins, and generally higher overhead. Banks rarely provide their own customer service, so don’t think they know you. They rely on the 800 number provided by the actual processing or acquiring bank. And you won’t get a dedicated account representative. Every time you call, you’ll get a different person who doesn’t know your business.
It’s not just about the rates! But when it is… demand Interchange-Plus pricing.
Don’t be tempted to just take the lowest initial offer or quote. Most of the time this is just an introductory rate or teaser rate, anyway. Introductory rates are low rates that are only good for a certain amount of time. Once that initial period ends, the bank will raise your rates to whatever they want. This is not a sustainable credit card processing solution.
Besides, it doesn’t matter how low your rates are if you can’t count on your money. How reliable is their network? Can they promise dependable deposits? Do they provide transparent reporting?
It is also important to consider whether this sales guy will be around when you need him. How is the customer service? Are there other supportive products that they offer such as chargeback management software?
As you’re probably beginning to see, finding a merchant service provider is about a lot more than just your rates. You need to be sure you’re getting the full package.
Choose the right pricing structure.
But at some point it IS about the rates. And one of the biggest mistakes we see is merchants getting talked into a bill back method or tiered pricing structure. The only truly transparent pricing is called Interchange-Plus pricing.
When sales agents talk you into any other pricing, tiered, bill back or any other term, you’re not getting the most transparent, fair pricing. That’s because it’s very difficult to differentiate between the base rate and the mark-up.
What is Interchange Plus Pricing?
Everyone from that big bank to the independent service provider starts with the same base prices. This base rate is called Interchange, and the card brands and card issuing banks set the rates. Not the processor. The processor starts with the Interchange rates and adds their “mark-up” for providing you with credit card processing services.
When they write a quote based on Interchange Plus, it very clearly shows you exactly how much the mark-up is in addition to the Interchange fees. That is why we call it “Interchange + Plus”.
Tiered pricing, however, bases the rate on which tier the card type falls in. There are three pricing tiers, Qualified, Mid-Qualified, and Non-qualified, and each card type will fall into one of these tiers. There are hundreds of card types, each with their own base interchange rate. Qualified tier is priced the lowest, with rates going up for the Mid and Non-qualified tiers.
The problem is the processor gets to decide which cards fall into each tier, qualified or non-qualified, not you. They can actually decide that 90% of card types you accept are Mid or Non-qualified. That will put them into the higher rate tiers. But they can still tell you that you’re getting a great rate for “qualified” cards. And maybe you are! It’s just that none of your card fall into that tier.
This is just one example of how Tiered Pricing can be deceptive. If you want the most transparent pricing, you must insist on Interchange Plus.
Falling prey to bogus “fees”.
Additional fees are another important factor when it comes to your overall rate, or effective rate. There are always additional fees you will pay on top of processing rate and mark-up.
Many merchants make the mistake of overlooking these fees and/or thinking that fees are not negotiable. These extra fees can add up and send what seemed like a great rate through the roof. And guess what? You’re not just stuck with them. Merchants are often so focused on “rate” that they forget to pay attention to the other fees. And that means costly charges can often be overlooked.
What are these additional fees? Many providers will try to charge the merchant extra for things like start-up fees, monthly maintenance and cancellation fees. It’s imperative to remember that these are all almost always negotiable. Remember that old saying: “If you don’t ask, the answer is always NO”.
Some extra fees can be pretty bunk. So make sure your processor is transparent about these and ask to get them lowered or eliminated. Better yet, look for a processor that only charges what they have to (hard costs) and doesn’t try to hide extra fees.
Choose your credit card processor wisely.
Be picky about who you decide to trust your baby with. Being able to accept payments and have those payments funded to you is an integral part of your success. Therefore, you shouldn’t settle for less than you deserve in a business partner.
The payment processing world is more complex than ever. There’s constantly changing technology, increasingly stringent compliance requirements, and growing government regulation. The Payment Card Industry (PCI) is continually updating security standards that must be met when transmitting payment card transactions.
To make sure you are getting a transparent, well-educated service provider, demand that they are an ETA (Electronic Transactions Association) Certified Payments Professional.
Merchants don’t have to know everything, but they should expect their credit card processor to. There is no formal education or educational requirements for the payments industry. The ETA CPP is the only certification program available to the payments industry. But it is voluntary.
When you demand an ETA Certified Payments Professional, you are getting a professional who is dedicated to his industry. It means that trustworthiness, knowledge, and experience are advantages you can expect.
ETA Certification is viewed as a symbol of excellence in the credit card processing industry. Certified Payments Professionals agree to conduct themselves according to the ETA Code of Conduct or risk a disciplinary process. Applicants must have a deep knowledge of the industry’s operations, compliance, risk, and security to pass the rigorous exam. They must also complete continuing education.
Partnering with an ETA Certified Payments Professional means you’ve found an advisor who’s dedicated to professionalism, knowledge, security, and integrity.
Scattering merchant account apps to see where they land.
Another mistake we see all the time is merchants submitting multiple applications for approval. Just scattering multiple applications all over the place and seeing who comes back with the best deal is not a good tactic! And believe it or not, it could cost you a good merchant account.
Many times multiple applications submitted through different independent service providers end up with the same acquiring bank’s underwriting. This ends up resulting in a red flag that can get the application declined. It’s always better to find the best service provider who offers the fairest rates, ongoing support you need, and apply once with them.
We’d like to invite you to place your credit card processing needs with Bankcard Brokers. You will soon find that you are working with an organization dedicated to ethical, professional, and dependable service levels.
Bankcard Brokers has always taken pride in the fact that we insist upon operating with the utmost transparency, service, and credibility. All our merchant account advisors are ETA Certified Payments Professionals. We know that to earn your business for the long haul; we have to provide more than just the best rates. Though we try to do that too!
Call us today and “Experience the Bankcard Brokers difference!”