Ideal Cost Reacts: Credit Karma’s “The Ultimate Guide to Business Credit Card Processing Fees”
In this article, the editor discloses that the website has affiliate compensation from third-party advertisers, but those relationships don’t affect the content. So how did they do? Let’s delve into the article paragraph by paragraph.
Non-negotiable interchange and assessment fees:
You can’t negotiate the interchange or assessment fees, but you can shop payment processors, and pricing plans to lower the fees you pay to the processor.
The author is only partially correct. These fees are indeed passed on by the credit card companies to the credit card processors, but the author fails to account for two specific variables:
1. The listed interchanges may be wrong. Credit card processors make mistakes and may assign the wrong interchange or outright falsifying an interchange. How does a company know if their processor’s listed interchange rates are wrong? You have to go line by line and cross-reference with the correct interchange rates.
2. Interchanges may be fixed, but businesses may qualify for different interchanges. Between collecting the correct card information and enrolling in an interchange optimization program, businesses can save hundreds or even thousands of dollars each month.
Payment processing plans
The fees you pay to the processor could be advertised or labeled in different ways, but the discount rate is a common term for the combined interchange rate (which you may pay as an interchange reimbursement fee), assessment fee and the payment processor’s markup.
Incorrect. Interchange rates, assessment fees, discounts, and payment processor’s markup are four separate charges with distinct meanings. Let’s concentrate on the discount rate. A discount rate is part of a credit card processor’s profit or markup. The discount rate has nothing to do with interchange rates. Either the interchange rate is charged separately from the discount, or there are no assigned interchange rates, but rather simplified grouped pricing. Discount rates do not always include assessment fees as processors prefer to charge those separately.
- Account setup fee: You might have to pay a fee to get started. You can easily compare this fee between providers.
- Terminal purchase fee: You can buy your point-of-sale terminal, which is often a good investment compared with renting or leasing a terminal.
- Cancelation fee: A one-time fee if you close your account before your contract ends.
- Monthly or annual fee: A recurring charge to keep your account open.
- Monthly minimum processing fee: The difference between how much you paid in processing fees from transactions and your monthly minimum, if you have one.
- Terminal lease or rental fees: Some payment processors require you to sign a long-term lease or offer to rent you a payment terminal or strip reader. Some payment processors give you this equipment for free.
Payment card industry (PCI) fees
The Payment Card Industry Data Security Standard is a set of security requirements agreed to by five major credit card brands. Your processor or merchant account provider could charge a PCI compliance fee. This charge is to cover the cost of ensuring your system handles customers’ credit card data appropriately. Noncompliance could also result in fees, higher processing charges, and costs associated with data breaches or fraud.
- Cardholder dispute: Processors may charge you a fee each time they look into a credit card transaction because a customer files a dispute.
- Chargeback: If the customer complaint results in a chargeback (a refund to the cardholder), you may need to pay another fee.
- Batch payment processing: A small fee that your processor could charge each time your business submits a batch of credit card purchases for processing, often once or twice a day.
The author details the schedule of fees regardless of transaction volume. This is mostly correct, but there are a few errors we should point out:
1. A credit card processor’s standard monthly minimum charge is $25. The credit card processor will deduct your processing discount fees, not all processing charges, from the $25 and charge you a difference, if necessary. The discount fees may vary, but most companies processing over $5000 per month, and all companies processing over $10,000 per month should not see this fee.
2. PCI fees typically don’t cover the cost of ensuring appropriate credit card processing practices from a company, but rather are a testing fee to get companies to sign off more responsibility for their processing practices. Furthermore, not mentioned in the article, there are typically PCI insurance policies charged by credit card processors in the event of a breach. This fee is a huge moneymaker for credit card processors because there are very few actual data breaches.
3. Cardholder disputes and Chargebacks are the same things, but chargebacks do are not contingent on customer complaints resulting in a refund. Chargebacks are forced refunds during a dispute, and chargeback fees are unavoidable. They don’t mention retrieval fees, which are issuing bank inquiries into specific transactions. Retrievals may end as an inquiry or evolve into a full chargeback.
4. Batch fees aren’t an incidental, but rather an additional transaction fee for a day’s worth of sales. Most companies automatically batch, known as autobatch or automatic settlements except for tipping industries which require employees to go back update a previous transaction with the increased dollar amount.
This article has most of the basics correct, but the author misunderstands some common industry concepts and charges. The author depends on their industry sources and may have received incorrect information or misunderstood some of the facts.
We give this article a solid B.
Don’t Take On The Credit Card Processors By Yourself.
Since 2009, IdealCost.com has helped hundreds of companies nationwide reduce their merchant account fees through identifying and fixing hidden profit, overcharges, fake fees, and billing errors. Clients have saved $300-$20,000 per month on their credit card processing fees without going through the hassle of changing their processing vendor, bank, or equipment. Switching credit card processors should be a last resort, only reserved for funding delays, poor customer service, or technical difficulties. Before you consider switching credit card processors, see if you qualify for IdealCost.com’s monthly savings program. Upload your most recent merchant statement for a free analysis. You’ll receive an estimate within 24 business hours.
If you are opening a new credit card processing account or switching credit card processors, feel free to contact us for a free consultation. IdealCost.com can help secure the best terms and fees based on your specific needs.