Are merchant account rates and fees guaranteed?

Having a guaranteed merchant account does not mean that processing rates and fees will not be changed or raised. Merchant service providers are at the mercy of VISA and MasterCard, and cannot control when rates will be increased. The card associations (VISA & MasterCard) have the ability to raise the interchange rates every April.

The way that the electronic bank card industry is structured makes it impossible for a merchant service provider to guarantee merchant account fees and rates that they offer to their merchants.

Industry Structure - The electronic payment card industry is complex. There are third-party processors, Independent sales organizations (ISO), issuing banks, acquiring banks, agents, and more. All of these different entities play a roll in the end result of providing merchant services. It would be impossible for one of these entities to guarantee a processing rate, because they have no control over the other parties involved in the process.

If you take a close look at the merchant processing agreement (MPA) from a provider that claims to offer guaranteed merchant accounts, you will see a lot of fine print telling you when rates and fees may be changed regardless of the implied guarantee on the account.

Interchange Fee & Rate - Interchange rates are controlled by Visa and MasterCard. This is the fee that an acquiring bank must pay to an issuing bank in order to accept their card. If Visa and MasterCard raise the interchange fee, the acquiring bank will incur additional expenses, and they will be forced to raise their fees as well. This raising of rates will eventually trickle down to the merchant in the form of a higher discount rate.

Who Controls What- Your merchant service provider has control over the rates and fees that you are charged only to a certain extent. They do not have control over what the acquiring bank or member bank charges them in the form of wholesale rates and fees. If a merchant service provider is offering Guaranteed merchant accounts, be sure to find out exactly what is Guaranteed. They may only be Guaranteeing that the merchant account monthly minimum will not be raised, or that the merchant account statement fee will not change. However, even these promises are often hollow.

Merchant account contracts do not guarantee that processing rates or fees will not change for the length of the contract. Merchant accounts with a contract provide no more protection against rate changes than a month-to-month merchant account agreement. In the small print of the merchant processing agreement (MPA) are a number of clauses that give the acquiring bank or provider the ability to raise rates and fees at almost any time.

Visa and MasterCard determine the interchange rate that eventually dictates the the buy rate that a member bank or provider must charge merchant service providers and resellers. Neither the provider or the reseller is able to issue a contract that will guarantee a processing rate for any length of time.

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