Hidden Fees for High Volume Merchants
Nobody likes hidden fees, though usually such fees rarely exceed a few dollars any given month and aren’t a major cost factor for midsize and large merchants. But there’s also the other type of hidden fees that may cost your business hundreds or even thousands of dollars and you don’t even know that they exist, because they are – in the truest sense of the words – hidden, so well hidden that you won’t find them on your merchant statement at all.
What’s a high volume Merchant
A merchant is typically considered high volume if the monthly processing volume exceeds $100,000. Some steps listed in this article may only make sense once a certain processing volume is reached and there are some other factors that need to be considered besides volume as well.
A good merchant provider will name you these cost drivers and a great credit card processor will work on eliminating these costs with you.
Hidden Fee #1: Refunds & Chargebacks
Refunds requests are part of daily business and are sometimes the only way to avoid a chargeback. However, refunds are costly to you and that in more than one way. Credit card processors often charge you transaction fees above and beyond the chargeback and refund amount, making you pay twice. Ask your provider to conduct a thorough processing analysis and share the results with you.
Hidden Fee #2: Authorization-Voids
An Auth-Void transaction is an attempt to charge a credit or debit card which gets voided before the transaction goes through. Imagine you’re a pizza store owner and you’re about to charge a customer $10 for a pizza. After authorizing the transaction the customer asks fora bottle of coke to be added, so you go ahead and void the original $10 transaction and charge him $12 instead.
The $10 transaction never reached the customer s credit card. In fact, the transaction never happened since it got voided in time. Yet you’ve most likely paid for it. Doesn’t sound too fair to be charged for something that has never happened to begin with, does it?
A great merchant account provider and processor will not charge you an authorization but a capture fee – so that you only pay when you make an actual sale; after all, a great process will align ist success with your success to eliminate conflicts of interest.
Hidden Fee #3: Downgrades
Downgrades are the end-all-be-all of hidden costs. Nothing eats away your profits faster and is more complicated to get fixed. Stay tuned and subscribe to the RSS feed or email newsletter to bet he first to know how you can eliminate downgrades in our upcoming issue.
Contact us know. We are looking forward to answer your questions: (888) 255-4162
If you want to know more about Social Business Bank visit http://www.socialbusinessbank.com or follow us on Twitter!
Apply for a Merchant Account or call (888) 255 4162
You can follow us on Twitter and Facebook!
These comments rightfully belong with the ISO or acquirer offering the merchant services agreement not the processor.
Item 2-unfortunately the card association’s now charge for an authorization. If the POS sends an authorization why whouldnt that cost be passed to the merchant? Item 3-A downgrade is usually caused by the merchants POS. A very very common “downgrade” is where a merchant is priced for swiped transactions and either the magnetic stripe is bad on the card or the POS swipe reader has gone bad, and the merchant keys the primary account number. Or any one of a number of data elements necessary for correct interchange clearance are not sent thus causing downgrades.
The subject matter is much too complex to be covered in one or two sentence blurbs.
I see a lot of responses on articles such as these that appear to be taken personally. Let’s not miss Alexander’s point.
I don’t think a merchant really cares whether it is the Acquirer or the Processor that is taking the fee. Often they are the same or in an alliance with each other. Either way, the merchant pays.
I do however have to take objection to the word ‘hidden’. Per transactions fees are contractually evident upon merchant initiation. I think a more fair term for these fees would be ‘often overlooked’ or ‘unmanaged’.
As for the assumption of keyed versus scanned, I think we should wait to see what downgrades Alexander is talking about before firing across his bow.
Wayne already points it out nicely: to the merchant it doesn’t matter where the fees come from and quite frankly, it shouldn’t matter either. It’s the job of the merchant account provider to make credit card processing as simple as possible to the merchant, regardless how complex it may be.
Similarly it doesn’t matter to the merchant why downgrades happen; the only important aspect to the merchant is a pro-active partner that informs the merchant about higher-than-normal downgrade activity and offers to fix it together with the merchant.
Many processors and aquirers just pass the complexity off to the merchant and that’s exactly the problem. Let’s face it: most merchants would be happy if the processor was calling them to fix a broken POS in order to avoid unnecessary costs but processors don’t like to do that because they’ll reduce their own revenues in the short run (albeit you make up for it tenfold in customer loyalty…)
Let’s not forget another hidden fee merchants face — interchange fees. Like you have written in the past, these fees are charged by credit card companies and either passed on to consumers or absorbed by businesses.
Interchange fees are non-negotiable for small businesses. This leaves them with an average 3% fee (or hidden tax) on every purchase. Over time, this could amount to a profitable or not profitable year.
Make sure to check out our website, http://www.thecreditcardcon.com for more info!
Specializing in small and medium-sized businesses in both traditional and Internet environments, Merchant serviceshas one of the highest merchant acceptance rates in the industry, with most applications approved within two business days.
In addition, our technological advances have effectively harnessed and exceeded the growing demands in the processing industry—allowing us to support nearly every vertical market with increasing and profitable business solutions.