What to Do if Your Credit Card Processor Increases Your Rates
By Jasmine Glasheen
Credit card processing has never been cheap for merchants. Yet in the past decade, it has become a substantial, growing (and sometimes shocking) expense for small and large business owners alike.
The Nilson Report found that merchants paid an estimated $64 billion in credit and debit interchange fees in 2019, up 12% from 2017 and up 77% from 2012. That’s nothing to sneeze at! As a result of these rate hikes, your business has probably experienced more than one credit card processing rate increase in recent years.
This is made none the easier by the fact that giant retailers such as Walmart, Amazon, and Costco are able to charge less for credit because of the volume of transactions they handle. The Wall Street Journal reports, “In the U.S., the dollar amount of interchange fees paid by stores, which has been surging in recent years, is at the center of fights between merchants, card networks and large banks that issue cards.”
Sometimes credit card processors have valid reasons for increasing your merchant fees; other times… not so much. Because of this, it’s important to understand the reasons why processors raise your rates and what you can do to ensure you’re getting the best possible deal on credit card processing.
Why Credit Card Processors Raise Their Rates
When you realize your business has just been subject to an unexpected rate hike, it only makes sense that you may not (at first) be thinking rationally. However, there is a wide range of reasons why credit card processors raise their rates, and some are chalked up to just being the cost of doing business over an extended period of time. Here are four of the most common reasons payment processors raise their rates:
1. They are passing on the expense of higher merchant processing fees from credit card companies
The first reason you may experience a rate hike on merchant transactions is that your credit card processor is passing on a fee that they were hit by the credit card company. Visa and Mastercard just hiked their rates yet again this past April and, instead of eating the extra fee, many credit card processors just up their rates every time credit card providers raise their to cover the costs.
Short of hitting Visa and MasterCard with another class-action antitrust lawsuit, there isn’t much you can do about this one (it isn’t recommended to stop accepting credit cards from Visa and MasterCard, as it would cause more damage to your business than to the credit card companies.)
2. They got bought out by another company
Ooh, this one’s a biggie. The fact that sometimes credit card processing companies get eaten up by bigger corporations is a harsh reality of doing business. If you see a dramatic rate increase on your statement and your provider mentions an “acquisition” when you call them for an explanation, then you may have a company buyout on your hands.
In this case, you may not be able to negotiate a lower rate, since you’re dealing with a new parent company that isn’t familiar with you or your business. However, by asking them what services they are going to provide in exchange for the rate increase, you will be able to get the most bang for your buck.
3. Your business poses a higher risk for fraud
Certain types of transactions are higher fraud liability than others. Card-not-present transactions pose a huge fraud risk, and many credit card processors evaluate each merchant’s fees based on the percentage of card-not-present transactions they process each month. Out-of-country transactions can also be a sketchy proposition and companies that process overseas transactions always charge accordingly.
So, if your credit card processing rate is suddenly way higher than it’s been in the past, it’s worth taking a look at your statement to see if your business incurred extra fees for high-liability transactions.
4. The initial rate was a bait-and-switch
Nobody wants to fall prey to a long con. The unfortunate reality, however, is that some payment processors are trying to run one. Before you sign a contract with a payment services provider, always check their online reviews and their rating with the Better Business Bureau.
While many review sites are sponsored (sometimes businesses even pay to have their worst reviews removed), BBB ratings are still the real deal. A business’s Better Business Bureau rating will let you know if the company is trying to play at anything nefarious (like the ole bait-and-switch), or if it’s a solution provider you can trust.
What to Do if Your Provider Increases Your Rates
Credit card processing is a highly competitive industry and providers are always keen to discuss how to win your business. With that said, many providers have early termination fees that make it less economical to switch your plan once you’ve signed a contract.
In some cases, however, paying the early termination fee to switch credit card processing providers is the right decision––especially if your credit card processor can’t explain why they’re raising your rates.
Before you resign yourself to spending years working with a payment processing provider who has lost your trust, take a look at the whole picture. Perhaps the provider you’re working with doesn’t offer as many cost-saving opportunities as the competition in light of the rate increase, in which case it’s still better to incur the early termination fee and jump ship for more merchant-friendly pastures.
Look at how much the added fees will add up to by the time you reach the end of your contract. Doing the math now can save you thousands in credit card processing fees down the line.
It’s important to align your business with a credit card processing company you can trust… one that is forthcoming about rate increases and the reasons for them, so you aren’t hit with nasty surprises on your bill.
Payment Depot has an A+ Better Business Bureau rating and saves merchants an average of over $400 a month on credit card processing. No hidden fees. No surprises. Click here to speak with one of Payment Depot’s award-winning customer service representatives today.