Thursday, March 31, 2011

Money Saving Trick: Knowledge is Power

We hear about it all the time…“A credit card processor walked in my door offering the lowest possible rate, but I was charged fees that we never even discussed!”  Or “They told me that I needed a new terminal because I was non-compliant!”  Or “I didn’t even realize I was signing a Merchant Agreement!”

Unfortunately, we hear these scenarios from merchants across the country every day.  But here’s the good news: it doesn’t have to happen to you!  Learning what to look for and knowing the right questions to ask will help you avoid falling into a merchant processing trap and empower you to make the best decision for your business when it comes to credit card processing.

The Trap: A Free Terminal
The Truth: Many door-to-door merchant services salesmen use the hook of a new terminal for free to convince you to sign with them.  Keep an eye out for a monthly supplies fee, a higher rate or other unnecessary fees the processor may charge to make up for it.  The truth is profit margins are so thin for most credit card processing companies that they simply can’t afford to give away a $300 to $600 piece of equipment.

Helpful Hints:
Ask for a full list of the fees that you will be charged and make sure you understand the purpose of each.        

The Trap: An Affordable Lease on a New Terminal
The Truth: Many businesses who have never accepted credit cards are fearful of the cost involved to get started and a lease sounds like a great idea.  Here’s the problem: if you are paying a $30/month lease for 24 months, you will have paid $720 by the end of a lease and may not even own the equipment.  That’s more than the cost of some wireless terminals!

Helpful Hints: Ask for a comparison of the purchase price and the lease prices.  If the purchase price is a little more than you can handle, ask if it can be split up into a few payments and  you will get a much better deal in the end. 

The Trap: A Really, Really Low Rate
The Truth: This may be the most commonly used tactic in merchant processing sales, but the rate isn’t the only price you pay, not and all transactions are created equal.  In addition to your rate, you may also have transaction fees, authorization fees, AVS and CVV fees, batch fees, annual fees, monthly minimum fees, statement fees, customer service fees and more.  Every merchant account will involve some of these, but make sure you understand what they are and how much you will be charged.

Now for the truth on rates: the pricing structure for a swipe retail business will be very different from a key entered business in terms of pricing as a result of the risk associated with the type of transaction.  The farther you get from swiping the card and getting a signature, the more it will cost you.  A standard pricing schedule should include the following rates from lowest to highest: Qualified Debit, Qualified Credit, Mid-Qualified and Non-Qualified.  In some cases, a Rewards rate may also be available, but if not, rewards based cards will fall into the Mid or Non-Qualified categories.

Helpful Hints: If you ask if the rate is debit or credit, swiped or key entered, you may be surprised at the reaction you get.  Most door-to-door merchant processors don’t expect business owners to know enough to ask this question.  Make sure to get a copy of the full pricing schedule, including the categories above, before assuming that the low rate is true.

The Trap: You Need a New Terminal
The Truth: You probably don’t need a new terminal.  As long as your terminal is PCI Pin Entry Data (PED) compliant and is not proprietary, you should be OK. Your payment processor will have a list of all PCI PED compliant terminals.  If your terminal is compliant, most processors will be able to reprogram it for a low fee instead of requiring you to purchase a new one. 

Helpful Hints: There are only a handful of terminals that are no longer supported by their manufacturers, so you definitely need to do your research before throwing your terminal out and purchasing a new one for this reason.

In addition to watching out for these traps, you should also ask the following of processor you consider:

  • What will my overall savings be over my current processor, not just the rate?
  • What is the term of the Merchant Agreement?  Is there an early termination fee?
  • What type of account will I be set up with, retail or key-entered?
  • What per item fees will I pay?
  • What annual fees will I pay?
  • What monthly fees will I pay?
  • How long will it take before I can see the money in my bank account?
  • What is the availability of customer and technical support?
  • How long have you been in business?  Can I have the names of a few current customers to call for feedback?
  • Do I have the complete terms and conditions?
  • How can I reach you if I have any questions?
  • Can I have everything in writing to review before I sign anything?
It is no secret that the credit card processing industry is complicated and is a mystery to many business owners.  As a result, many credit card processing companies can be vague, sneaky and sometimes downright misleading when it comes to signing new accounts.  Next time a merchant processor approaches your business, avoid the above traps, ask the right questions and remember…if it sounds too good to be true, it probably is!

Work with a Provider NGA and WDDA Members Trust

Electronic Data Payment Systems (EDPS) has been providing fair pricing, important educational material and excellent service to NGA members since 2008 and to WDDA members since 2010.  In addition to full disclosure of all rates and fees, a comprehensive training session is provided before you begin accepting cards to insure the lowest processing rates. All members are also entitled to receive a complimentary savings analysis illustrating the savings available through this exclusive program.  Fax your statement to 866.528.3854 and a National Enrollment Specialist will contact you with the results.  To learn more about the NGA and WDDA member credit card processing program and other services available call 866.578.9740 or visit EDPS online at or

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