Free Credit Card Processing?
Credit card processors are always looking for new ways to market their service, which has largely become a commodity. If you want credit card processing for your business, there are endless places to find it, and everyone seems to have about the same offering. Over time, there have been many buyouts, mergers, and acquisitions. This means that all processors are starting to look the same to their clients.
Here are some of the most famous of previous campaigns, which yielded great success:
1. FREE CREDIT CARD TERMINALS – Credit card processors would offer clients a free machine to gain their processing. Similar to give the razor away to sell the blades. The money is in the monthly processing fees, not selling the old terminals.
2. NEXT DAY FUNDING – This is a very successful campaign because businesses rely on cash flow. Clients would pay more to process if they could get their money faster. Bank-partnered credit card processors once had exclusivity on next-day funding, but now it is far broader.
3. WE’LL BEAT YOUR RATE OR GIVE YOU $XXX.00 – Credit card processors are still running this campaign from nearly 20 years ago. They would wager that they could beat the client’s current processing “rate,” or the client would get $100, $500, even $1000. How could you say no? The truth is very few, if any, of these checks were ever sent. Anyone can pretend to beat a rate even if they don’t get the business.
Free Credit Card Processing Revealed
There is no such thing as free. Credit card processors and banks aren’t charities. They don’t donate their services out of the kindness of their hearts. So if free credit card processing isn’t free, who actually pays the fees?
The truth is that the credit card processors are promoting this program with the expectation that the business will pass a 3% surcharge to its customers who use credit cards. Restaurant customers paying by credit card will see their $20 check surcharged to a total of $20.60 to cover the processing costs.
Is It Legal?
Surcharging customers by regular for-profit businesses was conclusively illegal in a handful of states. There have been some court-cases challenging the new surcharges, but we aren’t lawyers, so we won’t give any legal advice. If your business is considering a surcharge program, we advise that you consult with an attorney.
What About the Fees?
Are these new “free processing” or “zero-cost processing” competitive with traditional credit card processing fees? Some might be, but most are not. The marketing ploy of free credit card processing is that business clients won’t pay attention to their fees because their customers reimburse costs. If someone else is paying your bill, why would you look at it? Credit card processors have purposefully set up a smoke-screen to allow themselves the opportunity to upcharge their business clients. It is undoubtedly working in many parts of the U.S.
The most important thing for business clients to understand is whether or not the processor is sacrificing competitive fees, equipment perks, funding delay, or any other benefits in exchange for surcharge reimbursement.
What Are the Potential Consumer Consequences?
It’s possible that business clients won’t see any negative response from surcharging their customers who use credit cards. However, in our current social media and online review culture, it will only take a small amount of backlash to harm a business. We can’t assess the risk of adding a new fee for customers based on the payment method, but the upside is probably limited.
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.