In a previous blog, we talked about Scam #1, the Fraud of Lack of Disclosure. Some merchant processing salespeople leave out significant rates and fees in their quotes. If you haven’t read that blog, click here. A second scam that processors commit against merchants is the scam of raising rates. Their salespeople don’t mention this to their prospects. Embedded in the 30 page, small print, contract terms and conditions is the notification of the ability of the processor to raise rates and add fees. Processors notify merchants of rate and fee increases in the small print verbiage at the bottom of their monthly statement. Many merchants never read that small print. Many more merchants don’t even look at their merchant statements in the first place.
Every six months, the issuing bank associations get together to decide if they are making enough money to cover liability in various categories of credit card charges. There are over 1000 different categories of rates for various types of cards. Debit cards are a relatively low risk of losses and have a low rate. Rewards cards need to be a higher rate to buy someone an airline ticket. Corporate and business cards have a high rate of fraud, so they need to charge a higher rate for merchants to accept those kinds of cards. Of those 1000 rate categories of transactions, the bank associations meet to discuss and raise rates on those categories that aren’t covering losses. Then they notify the processors who have to pass on those rates to merchants to cover their increased costs.
However, the processors raise rates higher than their increased costs from the bank associations. The rate changes from the bank associations give them any excuse to pad their profits. They also throw in extra monthly fees for “extra services”. They increase PCI fees, annual merchant fees or add a monthly marketing service which yields them higher profits. It is all totally legit in their contract terms and conditions. These increases cook the merchant like the frog in the pot who doesn’t notice someone is turning up the heat every so gently until he finally gets cooked!
Electronic Money Company does not pass through any fee increases from our processor! We want to keep out relationship with our merchants for the life of their business. Check your merchant statement and pay attention to rate increases. If you think you are getting cooked like the frog in the pot, give us a call at 505-296-2847.