If you’ve been in business for any amount of time, chances are someone has tried to “pull one over” on you.  The merchant processing business provides for an abundance of examples of this scenario.  I previously wrote about suspicious phone calls where someone calls acting like your current processor and before you know it you have been duped.

So how do you know when to look into an offer and when to tell them to take a hike…or flying leap?  In most cases you should tell them to go away and not come back, but what if you are looking to switch? 

The first thing you should do is to calculate your net effective rate or NER for short.  You do this by taking ALL of your processing fees and divide them by ALL of your merchant processing volume.  For example, if your fees total is $2500 for the prior month and you took $50,000 in credit cards last month, then your NER is 5.00%.  This is very high, but unfortunately I have seen higher.

So what is a “good” net effective rate?  The lower the rate is…the better for your bottom line.  If most or all of your transactions are “card not present”, “MOTO” or “keyed” then you should have a NER of 3.00% or below.  I have clients below 2.00% that key all of their transactions.  Your rate will depend on how much your processor is charging you and what type of cards your customers pay with.  If you are a retail location, your net effective rate should be much lower.  Your range should be somewhere between 1.50% - 3.00% depending on your business type and customer card types.  Some retailers are fortunate and have rates well below 2.00%.

If you feel your rates are too high after calculating your NER, then you need to find someone that offers interchange plus pricing with no contract and no fluff fees.  This is not very easy.  Most companies will do and say anything to earn your business, only to change the rates and rules after they have you locked into a contract.  Also, most reps in this industry are not empowered to honor the promises they will make so make sure you get it in writing with their company logo on it.  It is very important to get everything in writing up front.  Review every single line of every paper prior to signing anything.

If you decide to let someone do an analysis for you, make sure you mark out your merchant ID (MID) on every sheet of paper you give them as well as your banking information.  Tell them they need to provide you with a detailed analysis showing if and how they can save you money.  If they will not or cannot share their detailed analysis with you, IN A WAY YOU CAN UNDERSTAND, then they need to go away.

If they provide you with a detailed report and they explain it in a way that makes sense, then you should ask them to send over the application showing all of the fees they charge.  Compare these fees to the analysis they provided you on the application.  The fees should match and there should not be any fees other than what was on their analysis.  The only exception is interchange cost that did not apply to the month they analyzed, but be careful here.  Look up the charge they show as interchange cost online.  It is there, you may just have to dig for it.  Look below for a link to Visa and MasterCard’s websites.

I place all of my clients on interchange plus pricing with no application fee, no annual fee, no monthly minimum…no fluff fees period.  There are a few others out there like me.  I have met them, but they are very few and very far between.

The bottom line is, if the offer seems too good to be true, it probably is too good to be true.  You will need to get DETAILS and email me if you have questions.



Your comment will be posted after it is approved.

Leave a Reply