Credit Card Processing Secrets
We’re spilling the dirty insider secrets that credit card processors have been hiding from you.
Most Processors Aren’t Actually Processing
There are only a few real credit card processors. In reality, there are tens of thousands of smaller sales organizations who resell services under their brand name. The resellers, known as Independent Sales Organizations, or ISOs pretend that they are the big processors to convince you to buy from them. The actual processors do the majority of the back office work while the ISOs sign up new clients. Some clients spend years switching between different ISOs but still process with the same back-office company.
They All Buy the Same Rates from the Same Place
Every credit card processor, and by extension their ISOs, buy the processing rates from the same wholesalers, Visa, MasterCard, Discover, and American Express. That means no one processor has a disadvantage based on their portfolio size. Each processor or ISO chooses how much to mark up these rates before selling them to clients. Therefore, continually switching processors to get a better set of rates is often an exercise in futility.
Merchant Statements are Impossible to Understand by Design
Monthly credit card processing statements are unnecessarily long and complicated with lines upon lines of confusing percentages and fees. There are two good reasons for processors to have complicated billing reports. If clients can’t understand the charges, they can’t know if the processor is overcharging them. If clients don’t know whether or not their fees are fair, they’ll have a hard time complaining about their costs with their processing vendor. Additionally, if the statements are hard to read, competing credit card processing representatives won’t be able to understand what they are bidding against. The lack of transparency is a two-pronged retention tool.
Virtually No Training or Licensing Required
Visit any job recruiting website and search for sales jobs. The credit card processing industry is one of the most aggressive advertisers for sales jobs on any site. Part of most pitches includes how easy it is to get out right away and start making money. Most credit card processors or ISOs offer a few hours of training before sending out their sales reps. These reps collect sensitive personal data from potential clients like social security numbers and bank accounts information. No governing body or trade organization require professional licensing. Therefore, there is very little accountability for unethical behavior. For example, a merchant contract usually includes terms and conditions. Some companies have terms and conditions directly on the merchant contract while others have a separate packet. Merchants don’t always receive that separate packet.
The Contract is King
Unfortunately, many processing clients never read their original agreement. Clients listen to the sales rep’s dazzling presentations and take their word as gold. Clients have no idea that they are locking themselves into a long-term agreement or purchasing proprietary equipment or software, which makes it nearly impossible to leave later. Don’t forget liquidated damages clauses, which means that an early termination fee could be tens or hundreds of thousands of dollars. The credit card processors retain some of the top lawyers in the country to write their agreements. They’ll do everything they can to get you to sign up without reading the fine print.
Sales Reps Have an Incentive to Overcharge You
Most processing sales reps aren’t on a salary. The compensation plan for most sales reps includes a small up-front commission for each new contract they bring in. However, sales reps make most of their money on long-term profit-sharing, known as residuals. The sales reps receive a percentage of the monthly profit on their clients’ accounts, typically between 50-70%. Therefore, the sales rep is incentivized to overcharge clients by as much as possible to maximize their pay. An average merchant account makes them $25+ per month, but premium merchant accounts can pay thousands per month. Sales reps with at least 300 active accounts easily make over $100k per year just on their residuals.
Now You Can Keep Your Processor and Reduce Your Fees
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. See if you qualify for IdealCost.com’s monthly savings program be uploading your most recent merchant statement for a free analysis. You’ll receive an estimate within 24 business hours.