Beware Of Those Hidden Charges!
For anyone who’s already experienced getting setup with a merchant account for credit card processing, some of you probably already know what to watch out for. If you are new to payments and you are searching around for a processor for the first time, here are a few tips to help you out.
Be careful with the to-good-to-be-true offers. Well, since credit card processing isn’t that familiar to the first time shopper, that might be hard to initially know what’s too good to be true. For eCommerce, if someone is offering rates of 1.9% or less, then you better watch out for hidden fees since that price is at or below the actual cost of credit card processing.
With really low rates like this, you will normally get hit by higher than normal rates for cards that are classified by the processor as Mid-qualified and Non-qualified. Rates as high as 4%.
How about the Free Setup, Free software, and other free offers? Nothing wrong with companies that offer an easy entry as part of their sales pitch, but again be careful. Anyone selling credit card processing has to make money so if it’s free to get in, are there higher than normal monthly costs and minimums? Extra monthly fees that are tagged on that you just plain don’t need or should try and negotiate a lower rate?
Now for the big one! Cancellation terms and fees. Again, nothing wrong with a company having a great offer where they want to put into the agreement a cancellation fee or terms that you stay with them for a period of time. The problem with these kinds of clauses is you have no out if you discover pricing or service you don’t like. In my opinion, the only reason for cancellation fees and terms where you can’t cancel at any time is there’s too high a risk that you might leave.
I’ve been in the processing business (mainly on the software side) for years and the truth is, if you provide good service at a reasonable price, it’s too big of a hassle to be switching processors all the time just to save a few pennies or dollars. Therefore, I don’t think you should have to tie someone into a service with large $300-$500 cancellation fees.
So, shop around, compare all those monthly fees, monthly minimums, gateway fees, software fees, cancellation and even annual renewal fees to be sure you are getting a reasonable deal. One of the biggest signs you are going to have higher than normal rates and hidden fees is when you don’t immediately get a full agreement with all the pricing for you to review.
This post is filed under Tools, Tips and Suggestions and has the following keyword tags: credit card processing, merchant account, payments.
1 Comment
Dennis says:
There are several providers that do not disclose all of the fees that are tied to their merchant accounts and it posses problems for the smaller providers because of the stereo typing that follows.
