April is the month when Uncle Sam wants you to own up to what he’s owed, and it’s also the month when credit card processors raise some of their rates and fees on credit card and debit transactions. Top industry expert, Jeff Mandel, founder of StopTheMoneyMagic.com warns small businesses that increases in credit card processing rates are often unjustified and can cost thousands of dollars each year.
“Credit card processors are unregulated by the federal government and often use April as an excuse to unfairly raise their rates and fees across the board for small business owners,” says Mandel. “Processors often blame their rate increases on credit card companies, but the truth is they’re just trying to boost their own profits at the small business owner’s expense.”
In April and October, credit card companies like Visa and MasterCard do adjust the interchange rates they charge processors, but these adjustments typically affect a handful of the almost 200 classifications the credit card companies use, while processors often raise the rates they charge small businesses across the board.
According to Mandel, here are four ways small businesses can protect themselves against unscrupulous credit card processors:
- Know the Interchange Rates
Business owners should visit the Visa, MasterCard, Discover and American Express websites to know the actual rates credit card processors are paying.
- Avoid the Bait and Switch
Be wary of processors who promise an incredibly low rate. Processors may offer a rate at or below interchange, but they’ll only apply it to a few “qualified” transactions.
- Read the Fine Print
If a processor is charging fairly, its billing statement will show a variety of rates applied to different types of transactions, based on the credit card companies’ interchange rates. If the bill groups the charges into a few arbitrary rate “tiers,” it’s probably not legit.
- Cancel the Contract
Don’t stay with an unscrupulous processor. Cancel the contract early, even if there’s a penalty fee. The long-term savings are worth it.
Credit card processing feels can steal your cash flow and make a big impact on your bottom line. For more great tips on how to avoid being taken for a ride on your merchant account , visit Mandel’s website at www.stopthemoneymagic.com. Mandel was himself once the victim of a predatory credit card processor and now works with Heartland Payment Systems to protect the rights of businesses.
Do you have a credit card processing story to tell? Leave me a comment.