As discussed in the post about interchange cost, there are many different fees associated with interchange.  There are also many fees being charged that are not part of interchange, but part of lining the pockets or your processing company and yes, the rep that “sold” you.  So how can you tell the difference between what is an interchange cost, legitimate processing fees and fluff?

The first step is to make sure you are on interchange plus pricing.  This is the most transparent, cost effective pricing model.  When you are on interchange plus pricing, you pay the processors cost plus their processing fees which are the fees they charge you to do your processing for you.  Bundled pricing setups will cost you too much, no matter what your rep or “banker” says.

The second step is to watch your statements monthly, especially around April and October.  The card associations make their adjustments every April and October so this is when you will notice the majority of changes to your account…rate hikes or “the creep.”  Watch for the small print warning of upcoming changes to your pricing structure.  Some changes are legitimate.  For example if you are on interchange plus and your statement message says something like the rate for Visa Rewards 1 transactions is being adjusted from 1.65% + $0.10 to 1.67% + $0.10…then it is likely to be legitimate.  You can always go to the Visa site and look for yourself.  It is posted. 

If you take the same scenario, but you are on bundled pricing…your statement message would likely say “…due to card association price adjustments your rates will be adjusted by +0.15%.  This means all of your cards will get a 15 basis point increase, not just the card that changed…rip off! The message may even just make a vague statement of upcoming rate increases “due to an interchange adjustment.”  Yes they will raise your fees even if their cost does not go up.  Think they can’t, read your contract.

The third step is to look at your statements for fees such as regulatory and compliance fee, TIN validation fee, PCI non-compliance fee, monthly PCI compliance fee, customer service fee, annual fee, etc.  Most processors charge a monthly fee of some sort and this is acceptable if your discount rate (the percentage in processing fees you pay) and the authorization fees are reasonable.  Never pay a monthly fee over $10 unless it includes your use of a virtual terminal.

Have a question you would like answered on my blog?  Email me from the contact page and I will either respond individually or I will give the answer in an upcoming post.



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