When soliciting and evaluating a request for proposal for a client’s credit card processing, I always let the client include any provider or salespeople she wants. Clients often want to include their bank or a specific salesperson that has been calling on them.
I allow any provider selected by my client to participate in the RFP even if I know from experience that the provider is not reputable. I allow any salesperson selected by my client to participate even if I can tell by the salesperson’s actions and language that he is not knowledgeable or, even worse, deceitful.
The reason I allow unacceptable providers and salespeople to participate is simply to educate my client. Credit card processing may well be the most convoluted and misleading industry a merchant will ever face.
This article is the third installment of a three-part series on identifying acceptable salespeople and convincing them to work with you, not against. The previous installments were “Partnering with Credit-card-processing Salespeople, Part 1: Detailed Statements Key” and “Part 2: Setting Expectations.”
The two previous installments are abridged versions of the education process and methodology I use to help merchants find reputable providers and salespeople, obtain competitive pricing, confirm the negotiated pricing, and set expectations for the relationship.
Weeding Out Unacceptable Parties
The methodology and process explained in this series come down to the following.
- Neutralize the merchant application. Credit card salespeople don’t typically understand all of the fees and verbiage on the merchant application. Moreover, many salespeople don’t even know how to correctly fill out the document, which has resulted in merchants being charged higher rates and fees.
Despite that, merchants must sign the application and, generally, sign a personal guarantee. The purpose of the “confirmation of offer” email, described in my April article, is to let the salesperson know that no matter what the application states, it’s the information in that confirmation email that the salesperson and merchant have agreed to and that the salesperson will otherwise be held accountable.
Many unacceptable salespeople and providers will weed themselves out of the selection process at this point because they will not want to answer the yes-no questions in the email and disclose their surcharges, hidden fees, inflated fees, or their lack of knowledge.
- Neutralize the terms and conditions. Many salespeople do not understand the terms and conditions. Most have never read them. Merchants should ensure that any agreement they sign, including any equipment or maintenance contracts, could be exited with a minimal or no termination fee. Do not accept a salesperson’s verbal assurance of no termination fee. Make sure the document states that no termination fees would be charged for exiting the contract at any time.
The terms and conditions of a merchant’s processing agreement are crucial. For example, assume two providers offer the same pricing. The first company doesn’t charge a termination fee. The second charges an average month of processing fees times the number of months remaining when your exit the contract. This could easily result in a termination fee in the thousands or even tens of thousands of dollars.
As an aside, beyond the termination fees, which provider is more likely to add surcharges or invent new fees? In my experience, it’s the one with excessive termination penalties.
Many providers that depend on locking merchants into contracts via punitive termination fees will weed themselves out of the selection process by not eliminating those fees.
- Insist on a detailed and itemized monthly processing statement. If you cannot verify the rates and fees you negotiated, you likely are not receiving them.
Providers that do not want to disclose the facts each month will be reluctant to provide a detailed and itemized statement. Weed out any provider’s offer that cannot be verified with a processing statement.
- Make sure that the salesperson understands her agreement with the merchant. The only agreement of any value is the one between the merchant and the salesperson, as set forth in the aforementioned “confirmation of offer” email. You can exit the provider’s contract at any time (since you’ve insisted on no excessive termination penalties). The contract between you and the salesperson is paramount.
Unacceptable salespeople or salespeople who know that they represent an unacceptable provider will generally weed themselves out of the selection process rather than face the merchant to review the statements.
- Insist on the methodology. Unacceptable salespeople and providers dislike the above methodology because they make their money by misleading merchants. However, good salespeople representing good companies appreciate the process because they do not have to worry about falling short on their commitments. They will maintain a solid business relationship with the merchant that will result in ongoing commissions and referrals.
The processor must provide a list of its pass-through fees, which are the actual fees that the card companies charge the provider. But many providers inflate these fees. For example, it is not uncommon for providers to inflate the Access Fee (1.55 cents to 1.95 cents, as shown below) to as high as 10 cents. The MC License fee of 0.0040 percent, below, is charged to the provider as a bulk fee, but some providers charge up to 0.10 percent for this fee.
Many providers have additional charges that they call pass-through fees. For example, some providers add a 0.055 percent “Other Fee” to all transactions. Also, some providers add a “processing system fee” to the American Express OptBlue pass-through fees.
Compare the pass-through fees listed below to the list obtained from the salesperson and provider. More importantly, (a) compare the list of pass-through fees provided by each competing provider and (b) hold the salesperson accountable to the list of fees she presented.
The card companies do occasionally change some pass-through fees. For example, Visa just increased the Debit assessment fee from 0.11 percent to 0.13 percent. If the twice-yearly pricing verification (described in “Part 2“) with your salesperson reveals a fee that was not on the initial list, it the salesperson’s responsibility to prove that the fee is legitimate and not a new one from the provider.
Dues and Assessments: Visa, MasterCard, Discover
MasterCard: 0.12% (<$1,000) and 0.14% (>$1,000)
Discover: 0.13% OF PA
Access Fees: Visa, MasterCard, Discover
Visa APF: 1.55 cents (debit) /1.95 cents (credit)
MasterCard NABU: 1.95 cents
Discover Data Usage Fee: 1.95 cents
Other Pass-through Fees: Visa, MasterCard, Discover
MasterCard License Fee: 0.0040%
MasterCard Digital Enablement Fee: 0.01%
Discover Network Auth Fee: $0.0025
MasterCard Auth Access Fee: AVS CP: $0.010
MasterCard Auth Access Fee: AVS CNP: $0.010
MasterCard Auth Access Fee: $0.005
MasterCard Card Validation Code 2 Fee: $0.0025
MasterCard Account Status Fee (Intra-Regional): $0.025 or $0.03
Visa Account Zero $ Verification Fee: $0.025
MasterCard Processing Integrity Fee: $0.055
Visa Misuse of Authorization Fee: $0.048
Visa Zero Floor Limit Fee: $0.10
Visa Transaction Integrity Fee: $0.10
MasterCard Cross Border Assessment Fee: 0.60%
Visa Int’l Service Assessment Fee: 0.80%
Discover Int’l Service Fee: 0.80%
MasterCard Int’l Support Fee: 0.85%
Visa Interregional Acquiring Fee: 0.45%
Discover Int’l Processing Fee: 0.50%
FANF Fee: Per volume for card-not-present
Visa/MasterCard Visa -Base II/Kilobyte Fee: This fee no longer pertains but some providers still charge it.
Pass-through Fees: AmericanExpress OptBlue
Network Fee: 0.15%
Non-Swipe Fee: 0.30%
Inbound Fee (Int’l cards only): 0.40%
Data Quality Fee (Error with SE/MCC): 0.75%