The Shady Side of Credit Card Processing

November 5, 2015
TLDR;

What you need to know:

  • Traditional merchant accounts are a sales driven industry.
  • They work on a price discriminant basis. Meaning, they will get the most out of you that they can.
  • Merchant accounts will pack your statements with fees, hidden in different areas of your statement to confuse the issue.
  • Want a free and confidential statement analysis? Read to the end.

Have You Had This Conversation?

You: “How much are your processing fees?”

Salesperson: “Oh, we start at an industry leading 1.89%”

Then, when you sign contracts and documents, you are confronted with an 8 page contract full of legalese. Buried in this contract is the truth of the matter.

Yes, you might be able to get 1.89%, if you operate your business in a manner no gyms will: If you require a debit card only, and you swipe the card using a terminal they provide, every single time you charge the person.

Variable Rate Processing

What you likely missed in that agreement are some key points. One of those key points is the fact that you are likely setup on variable rate processing fees:

  1. Bank issued cards
  2. Corporate cards
  3. Rewards cards
  4. AMEX / boutique cards

For starters, as a gym owner, you won’t be asking a member for their credit card every time they need to bill, so the “swiped” rates are immediately off the table. And not swiping a card usually brings the biggest rate penalty.

Secondly, on average, less than 10% of your members will use a bank issued, non-rewards card. Most credit card users like to earn their points on purchases, especially recurring ones - and generally don’t like to potentially get hit with an overdraft charge if their bank account is low.

So immediately, almost all of your transactions will be thrust into the most heavily penalized types of transactions.

That 1.89% rate you were promised is a pipe dream. But the sales person won’t readily highlight this for you, because…. he’s a sales person and likely his/her commission is tied to your ongoing business.

Hidden Statement Fees

The other way merchant accounts rack up the cost is via statement fees. Go grab a statement and check it out. You likely see them scattered around your statement. More than likely they won’t all be listed in the same section - so scan your statement in detail.

  • Statement Fees. Which if you think about it… is a fee to generate a statement? Which likely was delivered to you electronically at this point? It’s just a way to add money to their take from you. Plain and simple.
  • PCI Compliance Fees. Their system should be PCI compliant simply because they are in business. That’s like paying a tire mechanic to change your tires, and him tacking on an additional “Mechanic Safety Fee”.
  • Transfer Fees. Fees they charge each time they initiate a virtually costless transfer of your money to your bank account.
  • Batch Fees. Either another name for a transfer fee, or an additional fee where they charge you a small amount to batch up your money into one transfer.
  • Refund Fees. They charge you to refund money? That’s actually backwards.
  • Gateway Fees. Most merchant account also requires an additional connection - a gateway. Which of course incurs a fee.
  • Address Verification Fees. They will charge you a small fee per transaction to verify that an address is correct on the card. In short, you’re paying them for doing something they should (again) be doing to protect the integrity of their own business.
  • Monthly Minimum Fee. If you don’t hit a minimum volume of transactions, they will charge you a fee to ensure your minimum fee is a certain amount.
  • Cancellation Fees. And of course, they rope you into a contract - and will ding you heavy if you decide there’s a better option.

Price Discrimination

Lastly, and maybe the most infuriating, is you will be going thru what’s basically no different than buying a car when you shop Merchant Accounts.

Merchant Providers will haggle, because they open with a rate and terms they can cut down on. If you take the opening terms, you’re over paying - and that money is going right to the sales person’s pocket.

To get the best rate possible, be prepared to spend weeks of going back and forth haggling and waiting on the sales person while they “check with their superiors if it’s ok”.

Get A Free Statement Analysis

Are you wondering now: “Crap - how much am I actually paying for my merchant account processing?”

If you’re a PushPress client, that answer is simple. It’s 2.9% of your gross revenue.

If you’re with another system - we can help. Simply go to this page and let me know you’d like a statement analysis. I’d be happy to help you figure out your true effective cost.

Click Here to Get a Free Personalized Statement Analysis

Yes. It’s a Flawed Industry. Enter Stripe.

We have partnered with Stripe because - LITERALLY - they do not have any of the fees or conditions listed above. Not one.

You pay one flat fee, without any of the sales games, without any surprises, all the time.

In fact, when you refund your clients money, they will refund you the fees they took on that.

If you’d like to find out more about how PushPress can help you and your fitness related business, you know where to find us - http://pushpress.wpengine.com

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