A brief introduction – my name is Andy Mechammil, and I’ve worked for many companies in the payments industry over the span of 15 years. I have learned many tactics and gimmicks that favor the payment processor, but not the merchant. I’m here today to uncover the truth.
Cancellation Fees & Long-Term Contracts
Any legitimate payment processor tries to keep their clients based off of good service and competitive pricing. Those who offer plans with lengthy contracts don’t care about customer satisfaction. Once you’ve signed the dotted line, you’ve given away any leverage that you had… the ability to walk away.
Rates and fees can change at any given time, and often without the ability for you to take counteraction. Don’t ever sign a contract; there is no shortage of payment processors willing to offer merchants their services on a month to month basis, including SoCal Merchant Services.
Gimmick Rates & Tricky Sales Tactics
Sales tactics are everywhere, and the merchant services industry is no different. If you find a payment processor offering something too good to be true, it probably is. Don’t set yourself up for headache and disaster by falling for gimmick sales tactics. Believe me when I say that there are plenty out there. We, in the merchant services industry, know that the general population doesn’t understand fee structure. Unfortunately, many sales offices use it to their benefit. Don’t let such tactics and nice-sounding sales lines that begin with “Rates as low as…” reel you in, because in the grand scheme of your total fees, it means absolutely nothing. It holds no value.
Lease Offers on Terminals & Equipment
If you take away just one piece of information from this article, please let it be this: if someone is offering you a lease agreement on terminals and/or equipment, don’t walk away – RUN away. This is, by far, one of the most outrageous tactics I’ve witnessed in sales offerings.
On average, newer terminal models with advanced features range anywhere from just $180 to $500. When you lease a terminal, it’s just another contract; a contract entirely separate from your merchant services contract. A standard contract term is 48 months, and can range anywhere from $20/mo to as high as $70/mo.
Do the math, you are not benefiting for the lease deal. And, here’s the kicker to top it all off; after your 48-month lease contract ends, you still DO NOT own the terminal. It’s a lease – you are obligated to give it back or re-enroll in ANOTHER contract for ANOTHER 48 months.
Tiered Pricing Plans
If you are paying for credit card processing services through a “tiered pricing” plan, you are probably not in a good place. If you are paying different fixed rates for swiped cards, keyed in cards, and non-qualified cards, you are on a tiered pricing plan.
Tiered pricing does work in favor for some, but more times than not, the payment processor is making extra money off you – money that you could be saving or reinvesting into your own business. For example:
Tiered pricing bundles thousands of card types, and sets one specific rate for all those cards. Let’s say the rate for all swiped card sales is 1.80%. Sounds good and low, right? Wrong! What the merchant doesn’t know is that many of those thousands of cards have a much lower rate than 1.80%.
By enrolling in a tiered pricing plan, you are stuck with paying 1.80% on all of those lesser-cost cards. Meaning, a card that costs 1.45% is still being charged to you at 1.80%.
The Solution: Interchange Pricing Plans
Fortunately, there is an alternative to tiered pricing. It’s called interchange pricing. Interchange pricing plans do not bundle ANY cards. You pay the exact cost of each card individually, plus a small percentage on top of the interchange price. That small additional fee is usually anywhere from .05% to .20%.
So, let’s reference back to those cards that have an interchange cost of 1.45%. With an interchange pricing plan, you would only pay 1.45% in addition to the “plus pricing” fee, which (Even after the Interchange plus fee) still totals to LESS than 1.80% (1.45% + .20% = 1.65%).
Now imagine all of the percentage points on the thousands of cards you accept as payment that could be saved. Don’t get nickel and dimed by payment processors. Trust me, those percentage points add up and that’s how you save on merchant services costs.