We've said it before and we'll say it again: Shopping for credit card processing services can be really confusing and without the right information it can even be intimidating.  The following is a quick reference checklist to look over the next time you find yourself shopping for a new merchant services provider.

1. Is my representative telling me the whole story?  

It's sad to say, but credit card processors are notorious for leaving out all of the necessary information you need to make an educated decision when it comes to their proposals.  Their sales pitch may seem like a great deal, but they may not be telling you about additional percentage rates for certain types of cards.  Processors are also ill-famed for failing to list the catalogue of junk fees that accompany their contracts, catching the business owner unaware until the first few statements come in.  An easy way to avoid this is to ask to see a sample statement from one of the processors current clients.  They can protect the current clients private information while revealing what their charges will actually look like month to month on paper.  Once you get the sample statement, ask as many questions as possible about everything on it that you do not understand.  If the processors answers are too convoluted and couldn't be easily understood by an 8th grader, chances are, something is foul.  If they refuse to provide a sample statement, give serious thought to looking elsewhere. 

2. Do I fully understand what the processors profit margin will be?
With the many different pricing options available today due to heavy competition in the payment processing industry, there is no reason for any business owner to process credit cards without utilizing either a 'flat rate' or a "cost plus" processor.  We say this simply for the argument of transparency.  These two methods allow business owners to know exactly what they are paying for every card that comes across their counter and why they are paying it. Cost plus pricing allows the business owner to know their processors fully disclosed profit margin, for instance with the OGroup our profit margin is fully disclosed and comes in the form of a flat fixed fee. Flat rate credit card processing may not allow you to know the true profit margin for your pricing but it simplifies the fee structure so you can easily understand exactly what you will pay for every single transaction. If you don't hear one of these two methods being offered in the credit card processors sales pitch, then move on, or your going to be on the raw end of the deal.

3. Is the credit card processor underwritten by a credible bank?
A credit card processors essential function is to act as liaison between you and the major credit card issuers like Visa and Master Card.  Since their is so much financial information being managed on any given day, the money from your customer that just bought that $350 appliance from your store can't be immediately transferred to your account.  The credit card processor, through their underwriting bank, fronts that money to you either on the day of the transaction or the next day.  Through a monthly batching of your businesses swiped credit cards, the processor collects what they are owed from those customers at the end of the month.  A good processor gets you your money on time and they themselves wait to get paid.  That's essentially the service you are paying for when it comes to credit card processing.  If you're dealing with a merchant service provider that can't get money into your account within 1-2 days of the transaction, they're not worth your time.

4. What does exceptional customer service from a credit card processing look like?
We all know this truth: The bigger the company, the more machines and red tape you will have to trudge through in order to get the information you need to keep your business running smoothly.  Who has time for that? There is so much competition out there for your business that there is no reason you should accept any proposal from a credit card processor if they cannot provide you with a 24/7 support line AND the direct line of your merchant services representative.  If something goes wrong with your card swiper, or problems, like frozen funds, arise with your account, you should have solutions immediately.  You work hard to keep your business running, so why should you accept anything less?

    Having a difficult time finding a processor that satisfies all of these questions with integrity?  Let us help.

After being in this industry for over 7 years, we at The OGroup, Inc. have witnessed first hand just how notoriously shady the credit card processing industry can be.  From half truths, to hidden fees and even straight out lies, it seems that sales reps from credit card processing companies will do anything just to get small business owners to sign on the dotted line.  Any business owner that is familiar with the in's and out's of this industry is every shady credit card processors nightmare.  A few key points, like these listed below, can help immensely as you take control of your credit card processing expenses.  

                                                  The Top 3 Lies of Credit Card Processing
1. One Low Rate
Lie - More often than not when a payment processing sales rep pitches their services they only quote one rate that may sound something like 1.29%.  This leads the business owner to believe that this is the only rate that will ever be charged for all payment processing services. 

Fact - That 1.29% quoted rate is more than likely the first of three to four other rates that a processor will slip into a contract without you knowing.  It's called the tiered pricing structure; an opaque method of processing credit cards that can be manipulated with all types of hidden percentage rates and junk fees. The example quote of 1.29% s probably what the processor will charge for every debit card you swipe, but what about regular credit cards or reward card?  Be assured, those cards WILL be processed with other, inflated rates.  The tactic is to simply get the business owner in the door with the lowest rate, they fail to leave out that this is just the beginning.  These other rates, undisclosed but very real, are applied depending on the types of cards and how those cards are accepted. For example, a corporate credit card will always be charged a higher rate than a personal debit card; therefore there will never be one rate for all payment processing services.  Our best advice: Find a Cost Plus Pricing Structure with a flat fee for processing.  This pricing method allows you to pay straight interchange (rock bottom cost) and you will always know your processors profit margin.  Cost Plus pricing methods are the most transparent way to pay for credit card processing today and it's what we recommend until something better comes out.
2. “Free” Equipment
Lie - Payment processing companies will tell business owners that they will give them card swiping equipment for “free” when they switch to their processing services. They will often make this equipment appear to be worth hundreds if not thousands of dollars to make it look like they are giving the business owner a great deal.

Fact - Most things in this world are seldom free.  The reality is, most card swiping equipment can be found at relatively inexpensive prices.  Because of high and undisclosed processing rates, hidden fees, and junk fees, many small businesses end up paying for their equipment many times over throughout the term of their contract.  Leasing equipment can be a pitfall as well simply because it is just one more way that a processor can bind you to their expensive services Our best advice: After finding a processor that best fits the needs of your business, secure your own, reliable equipment for that will be compatible with your processors software.  

3. Junk Fees
Lie - Extra Fees such as statement fees, data security fees, batch header fees, monthly minimum fees, and a host of other hidden fees are necessary administrative costs to keep payment processing services operating.

Truth -  There are costs to maintain processing services, however, the majority of hidden fees out there are typically never disclosed by sales reps. These fees are honestly junk fees that are simply lining someones pocket and further cutting into the business owners profits.  Take a look at your last statement and scrutinize every charge you see on it.  Our best advice: If you're unsure what a charge is for, ask your processor directly.  If they give you the classic run around, give us a call.  We'll analyze your statement for free and let you know just how much "junk" is really in there.

                                                                             What do you think?
Do you feel you may have personally experienced one or more of these lies as a small business owner?  
Share your experiences or comments below.