5 Credit Card Processing Must Knows

Here are 5 critical questions you must ask your current or prospective processor to make sure that you are not getting completely ripped off!  It’s hard enough out there folks, you don’t need to give money away.

1.  What pricing model am I on? Tiered (Bundled) or Interchange Plus (Pass Through)?

• If they say tiered, move on to the next processor.  This pricing model is the most costly.
• If on Interchange, you will receive your proper credits from the Durbin Amendment and exchanges, unlike with Tiered pricing.
• Also, if the processor does offer Interchange Plus, what is the markup?  This is the one portion cost that can be negotiated.  Processors may hide exorbitant processing markups within this pricing such as their transaction fee and their rate.

2. Do you have an early termination fee/policy?  What is it?

• Contract terms will likely be in 1-3 year increments.  Should you terminate your contract early, you may be susceptible to a flat fee of say $300.00. In some cases, the processor may take the average processing income they made off you in the previous 3 to 12 months and multiply that by the number of months that you have remaining on your contract.
• If you are already on a tiered pricing model and you have a low flat fee to terminate your contract, do it. You’ll make up the loss in no time by switching to an Interchange Plus pricing model with a low processor markup.

3. Do you rent your equipment or sell it?

• This is a big one.  Many processors will try lease you a credit card machine for a low flat rate of $30 per month. The problem is that you may have to sign a 3 to 5 year lease when the unit sells for only $100.00!
• It’s always better to purchase equipment rather than leasing it.
• Also, do not buy proprietary leasing equipment that will only work with a particular processor.  In the event that you want to change processors in the future, you want to make sure that you have a compatible setup and don’t have to buy all new equipment.

4. How long are my rates good for?

• Processors may coax you in with great rates, but what they fail to tell you is that the rates may increase in a few months.  Once the magical hour of midnight hits on your last contract day your “real” rates will kick in and there will be nothing that you can do about it.

5. What are your rates?

• It’s best if you are in the driver seat.  Get organized and create a spreadsheet before you start making calls to processors.
• Research what rates are acceptable per your industry and come up with a list of demands for your processors.
• Let them know what your terms are. The following items must be on your demand list.

1. I will only consider interchange pass through
2. Give me your best rate up front as you will only have one opportunity to do so
3. I will not lease my equipment
4. I will not pay an early termination fee

About the author: Jason Ezzo helps businesses save an average of 45% on credit card processing services at CardFellow.com. CardFellow is a free Web site that allows businesses to receive multiple interchange plus quotes from leading processors instantly. We’re ready to help you keep your credit card processing fees to an absolute minimum.

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