Your Bank is Probably Lying About Credit Card Processing
In this article, we’ll reveal the tricks and omissions used by banks to earn your credit card processing business and overcharge you.
How The Banks Get Your Business
After registering a new business corporation, what do you do? Of course, most companies will immediately open a new business checking account. During the account opening process, your banker will ask you about the deposits you’ll be receiving in the account. They’ll ask you about cash deposits and then transition into electronic deposits, such as credit card processing. Your banker will ask you if you’re planning to use “their” credit card processor because that bank offers benefits such as next-day funding. They’ll arrange for their credit card processing representative to call or visit your company to set up your account. This all sounds great, doesn’t it? It’s not as easy as it seems.
Banks and Third-Party Providers
When banks promote ancillary services such as payroll processing, accounting software, etc. they make it clear that they are referring you to a third-party provider such as ADP or Quickbooks. However, when promoting credit card processing, banks are often more cagey about their relationship. For example, Bank of America, Wells Fargo, and PNC all use the same third-party provider known as Fiserv, formerly known First Data. In fact, Fiserv has affiliate relationships with many local and national banks, most of whom own none or only a minority share of the relationship. While each bank branch typically has several business bankers, they do not have their own credit card processing representatives. These representatives usually float between several or even dozens of local branches, waiting for referrals.
Now that we know that many banks have an affiliate relationship or only a partial relationship with the credit card processors, how will that affect your pricing? Most independent credit card processors have to pay a sales representative a commission for opening a new merchant account. When it comes to banks, there are more people and entities involved. Payouts may include the affiliate bank, the referring business banker, and the credit card processing sales representative. If the bank is receiving enough leads, they may even pay a salary for their own credit card processing reps to fill out the third-party processor paperwork. With these additional payouts, the overhead on these accounts will naturally be higher, and you’ll pay the difference. Bank-affiliated credit card processors are more bureaucratic and less flexible on discounts.
Issues May Come Up Later
If you have a billing issue with your business checking account, you can easily walk into a bank branch for a resolution. Try to walk into a bank branch with a billing issue on your credit card processing statement. They’ll likely refer you to a toll-free phone number for their third party-provider phone number. Most banking customers won’t understand, until this point, that the banks are typically nothing more than a lead generation services, or affiliates, for credit card processors. Luckily, we’re able to solve the mystery for you before you sign up with them.
Banks may rattle off other advantages of working with their preferred credit card processor such as next-day funding or discounts or approvals on other services. Next-day funding was once exclusive to the banks, a decade ago, but now many independent credit card processors offer it.
Before accepting credit card processing services from your bank for the benefit of other services such as approvals or discounts on business loans and credit lines, be sure to familiarize yourself with the concept of tying.
Banks Aren’t The Only Affiliates
We’ve seen trade organizations, purported news outlets, software providers big-box retailers, and even discount warehouse clubs with the same affiliate arrangements.
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 must switch credit card processors due to funding delays, technical issues, or customer service problems, feel free to contact us for a free consultation. IdealCost.com can help secure the best terms and fees based on your specific needs.