Recently we wrote a blog about some of the dirty tactics of Merchant Accounts. The concept behind this post was to try to educate some of the gym owners out there about how merchant pricing works, and the common traps put in place by traditional processors to charge additional/excessive/hidden fees.
Since we posted that, we’ve had an enormous response to our offer to do a 3rd party review of a gym’s merchant account statement. During the course of this we’ve gained some pretty good insight that we’d like to share with the community:
- Most statements looked simple, but were deceptive. The most common violation of this was the fact most merchants now issue you a statement with ONLY your processing transactions and fees on it. Most of them will not include the monthly “system”, “statement” or other “compliance” type fees on the statement they issue you. Instead, they will bill you directly, to your bank account, without any reference on your statement. This completely confuses the matter of how much your association with that company actually is costing you.
- The overall median rate is slightly over 3.0%. Some of you shrewd owners have negotiated hard for amazing good rates and have managed to keep your rewards and corporate cards to almost nil. The majority of you cannot. At the moment, in the United States, 2.9% is a general “industry standard”. The further from that you get on either side, the more “cheap” or “expensive” your processing fees are. Seeing the median slightly above 3% means most of you are treading above average in cost.
- Most of you are overpaying, both literally and relatively. If you’re over the 2.9% threshold, you’re definitely overpaying literally. If you were sold on a 1.99% rate and paying even 2.00% - you’re overpaying relatively. Which (if not both?) do you fall in? 74% of those surveyed were paying over 2.9% effective rate (the rate after factoring in ALL fees associated with your merchant account and processing).
- Most of you don’t know it. This is the worst part of it all. Most of you have gone thru business blind to the fact you might not be getting the rates you thought you were. Of those surveyed, 18% had a firm and close understanding how Credit Card pricing worked and what they were paying relative to what they were sold on.
- ALL of you care. 0% of those surveyed indicated that the price and structure of their merchant account had no bearing or importance.
How Do Merchant Accounts and Fees Work?
In an effort to enlighten our community about the potential hard facts of the merchant account world, we wrote a pretty lengthly blog post about it recently.
If you missed that blog post, it’s a good read. Even if you’re paying a superb rate, it’s good to understand how merchant account fees are stacked up, and how that might affect you without you even knowing it.
Read our previous blog: The Shady Side of Merchant Account Processing.