The subject of credit card processing is confusing. Information about credit card
processing can vary from one source to the next and even from one provider to the
next. It's tough to know who to listen to and what can and can't be taken for granted.
To set the record straight, the list below addresses five costly myths and
misconceptions about credit card processing that every business person should know
Merchant service agreements with a contract term guarantee rates and fees for the
length of the term.
Wrong. A contract term is not a guarantee that rates and fees will not change within
the contract period. In fact, processing agreements with terms of a year or more
provide the same protection against rate and fee changes as a month-to-month
Merchant service agreements have multiple clauses that enable the issuer of the
account to change rates and fees under certain, broadly interpreted conditions.
Agreements with a contract term will automatically switch to month-to-month when
the initial term expires.
Wrong. Some merchant service agreements have clauses that automatically renew the
contract period when the previous period expires. In order to terminate an agreement
that automatically renews a merchant must cancel within a short window of time that
is usually 30 days or less. If an agreement is not cancelled within the specified
window, the agreement is renewed for another full term.
Credit and debit cards swipe at the same low discount rate.
Wrong. Swiped debit transactions carry significantly lower processing fees than
swiped credit card transactions. To appear more competitive, some merchant service
providers will advertise their swiped debit rate without including the higher rate for
swiped credit cards. When researching merchant service providers make sure to get
both sets of fees.
Merchant accounts have hidden rates and fees.
Not really, by law merchant service agreements must disclose all processing fees but
there's nothing that says they have to be easy to see. Merchant accounts don't have
hidden rates and fees, just fees that merchants overlook in the merchant service
agreement. When opening a merchant account it's crucial to read every single word in
the agreement and ask about anything that you don't understand. This can time
consuming because some agreements can be 20 pages or more, but it's worth every
Monthly minimum fees are based on gross processing volume.
Sorry - Wrong again. Merchant account monthly minimum fees refer to the fees paid
by the merchant to the provider. They don't refer to gross processing volume. For
example, if a merchant has an account with a monthly minimum fee of $25, the
merchant must accrue at least $25 per month or they will be charged the difference
between their actual fees and the $25 minimum.
Many business owners are forced to learn the ins and outs of credit card processing in
trial by fire situations. There are so many things to know it's nearly impossible to
avoid every mistake. Utilizing services, tools and information from web sites like
MerchantCouncil.org greatly increase your chances of navigating the merchant
The Small Business Administration and your local SCORE chapter are also good
places to find assistance and information on getting a new merchant account or
avoiding problems with the merchant account you already have.
MerchantCouncil.org offers information and support about merchant account quotes,
merchant account reviews and more to businesses shopping for credit card processing