Why are business owners paying more for credit card processing than their sales rep said they would at the end of the month? Why are the statements sent from processing companies so confusing that only a professional can understand what the numbers mean? Is credit card processing really this complicated?
The simple answer: No.
Since the advent of credit card processing there has never been an industry wide pricing standard for this service for small to medium sized businesses to make comparisons with. No two processing companies are alike and there seem to be endless ways that processors can make a profit off business owners.
Think about it this way. When getting your oil changed, you and everyone else getting their oil changed know what a fair deal is. It’s something that everyone does on a fairly regular basis, therefore the widespread public knowledge results in a industry standard. This way, if someone decides to give oil changes for $100, they will soon find themselves closing up shop. Credit card processing is not nearly as simple, but why not?
The public at large does not regularly shop for credit card processing, and even business owners, who are the select few making decisions about it, will only shop for credit card processing 3-5 times throughout the life of a single business. This reduced exposure to the industry drastically effects the average business owners knowledge about this service... and the processing companies know it, exploit it, and make profits to the tune of billions a year because of it.
By keeping the industry complicated these processing companies are making profits from hidden fees, junk fees, embedded rates, leasing equipment, merchant loans, undisclosed profit margins, the list goes on. The point is, most of these fees were never mentioned to business owners or fully explained at the time of the sale; the antithesis of transparency.
So what can you do?
1. Get educated about the industry. The web has exploded with information about payment processing over the last 5 years and there are many business owners that have seen it all and are more than willing to share experiences and advice.
2. Demand “Cost Plus” pricing. Cost Plus pricing has become very popular in recent years because it is the fairest way to handle payment processing for the merchant. If your current company wont do it, find one that will.
3. Demand to know your processors profit margins. Make them be transparent. Your customers demand to know how much they are paying for your goods and services before they pay, why should credit card processing be any different? It shouldn’t. If your current processor will not disclose their profit margins to you, find one that does. Simply asking for cost comparisons from multiple processors will give you a sound idea about what you are actually paying.
As always, we welcome any comments on our blogs and encourage anyone to share experiences. Visit us at www.ogflatfee.com to find out how we are turning the processing industry on end with committed and complete transparency, all disclosed to you in one flat fee.