Credit Card Processing - 5 Costly Myths & Misconceptions

The subject of credit card processing is confusing. Information about credit card processing can vary from one source to the next and even from one provider to the next. It's tough to know who to listen to and what can and can't be taken for granted. To set the record straight, the list below addresses five costly myths and misconceptions about credit card processing that every business person should know and understand.

Merchant service agreements with a contract terms guarantee rates and fees for the length of the term.
Wrong. A contract term is not a guarantee that merchant account fees and rates will not change within the contract period. In fact, processing agreements with terms of a year or more provide the same protection against rate and fee changes as a month-to-month processing agreement.

Merchant service agreements have multiple clauses that enable the issuer of the account to change rates and fees under certain, broadly interpreted conditions.

Agreements with a contract term will automatically switch to month-to-month when the initial term expires.
Wrong. Some merchant service agreements have clauses that automatically renew the contract period when the previous period expires. In order to terminate an agreement that automatically renews a merchant must cancel a merchant account within a short window of time that is usually 30 days or less. If an agreement is not cancelled within the specified window, the agreement is renewed for another full term.

Credit and debit cards swipe at the same low discount rate.
Wrong. Swiped debit transactions carry significantly lower processing fees than swiped credit card transactions. To appear more competitive, some merchant service providers will advertise their swiped debit rate without including the higher rate for swiped credit cards. When researching merchant service providers make sure to get both sets of fees.

Merchant accounts have hidden rates and fees.
Not really, by law merchant service agreements must disclose all processing fees but there's nothing that says they have to be easy to see. Merchant accounts don't have hidden rates and fees, just fees that merchants overlook in the merchant service agreement. When opening a merchant account it's crucial to read every single word in the agreement and ask about anything that you don't understand. This can time consuming because some agreements can be 20 pages or more, but it's worth every second.

Monthly minimum fees are based on gross processing volume.
Sorry – Wrong again. Merchant account monthly minimum fees refer to the fees paid by the merchant to the provider. They don't refer to gross processing volume. For example, if a merchant has an account with a monthly minimum fee of $25, the merchant must accrue at least $25 per month or they will be charged the difference between their actual fees and the $25 minimum.

Many business owners are forced to learn the ins and outs of credit card processing in trial by fire situations. There are so many things to know it's nearly impossible to avoid every mistake. Utilizing services, tools and information from web sites like CardFellow.com greatly increase your chances of navigating the merchant account maze.

The Small Business Administration and your local SCORE chapter are also good places to find assistance and information on getting a new merchant account or avoiding problems with the merchant account you already have.

Questions & Comments

First Name:
email:
Seven plus one equals: (to help combat SPAM)
Receive Newsletter:
Comment/Question: