Is Your Credit Card Processor Secretly Costing You A Fortune? Watch For These 5 Red Flags

Credit insubstantial processors are basal partners for businesses, enabling seamless transactions for customers. But not each processors are created equal, and immoderate whitethorn beryllium softly costing you overmuch than they should. If you fishy your in installments insubstantial processor mightiness beryllium hurting your bottommost line, it whitethorn beryllium clip to reevaluate nan relationship.

Here are 5 reddish flags that awesome it mightiness beryllium clip to break up pinch your successful installments insubstantial processor.

Related: How to Choose a Credit Card for Your Startup

1. Your discount title is greater than 5 crushed points aliases not disclosed

The discount title is simply a captious constituent of your processing fees, representing nan percent charged connected each transaction. If your processor's discount title exceeds 5 crushed points (0.05%) aliases isn't intelligibly disclosed, that's a awesome reddish flag.

Action step: If you don't spot your discount rate, inquire your processor to show it to you connected your statement. Again, it should beryllium 0.05% aliases less.

2. Your wide effective title is greater than 2.5%

Your effective title — nan afloat fees you net divided by your afloat processing measurement — is simply a straightforward measurement to measurement nan costs of processing successful installments insubstantial payments. If your wide effective title exceeds 2.5%, you're apt overpaying.

Processors often sneak successful further fees aliases hide fees. However, calculating your wide title will fto you to spot nan existent costs of processing.

Action step: Divide your processing fees into your afloat processing measurement — this will springiness you your wide effective rate.

3. Your interchange fees are not afloat disclosed

Interchange fees, group by insubstantial networks for illustration Visa and Mastercard, are non-negotiable. However, processors are responsible for passing these fees consecutive to you without adding unnecessary markups. You could beryllium losing money if your processor is padding nan interchange rates. A measurement to show is they won't afloat disclose each nan accusation required to validate their fees. You petition to spot 1) nan interchange categories — specified arsenic Data Rate II. 2) nan processing measurement for each people and 3) nan fees charged per category.

Action step: If you don't spot each nan supra 3 items, you petition to petition they alteration you to a relationship that does. They petition to make that alteration connected your very adjacent statement.

4. Your processing fees personification accrued by overmuch than 10 crushed points successful nan past year

Interchange fees personification remained comparatively unchangeable complete nan past 15 years. For example:

• In 2009, Visa's highest title was 2.95%, compared to 3.15% today.
• According to a Government Accountability Office (GAO) report, Mastercard's highest title only accrued from 3.25% to 3.3% complete nan aforesaid period.

If your wide processing fees personification risen overmuch than 10 crushed points (0.10%) successful nan past year, nan summation is apt coming from your processor — not nan interchange rates. Processors often raise fees without justification, relying connected nan complexity of statements and balming interchange liking increases for nan title increase, moreover though they personification hardly moved.

Action step: Compare your wide existent processing fees to those from a twelvemonth ago. If you spot a important increase, inquire your processor to show you connected Visa and Mastercard's websites wherever nan fees personification increased. Unjustified liking hikes intelligibly bespeak that it's clip to look elsewhere.

5. You don't get reports connected interchange downgrades aliases really to spread them

Interchange downgrades hap erstwhile a transaction doesn't meet nan criteria for nan lowest imaginable rate, resulting successful higher fees. If your processor doesn't proviso a elaborate study connected downgrades — including really galore transactions were downgraded, really overmuch money was mislaid and what steps to return to spread them — you're apt leaving money connected nan table.

Why it matters: Without this information, you're operating unsighted and incapable to optimize your processing costs. A bully processor should proactively thief you minimize downgrades and maximize savings.

Action step: Request a downgrade study from your processor. If they can't proviso 1 aliases relationship actionable advice, find a partner who can.

Related: How to Leverage Credit Cards for Business Growth (the Right Way)

The bottommost line

Your successful installments insubstantial processor should beryllium a trusted partner, not a hidden costs center. If immoderate of these reddish flags resonate, you beryllium it to your business to investigation amended options. Transparent, adjacent processors exist; switching could prevention your business thousands of dollars annually.

Breaking up isn't easy, but successful this case, it could beryllium 1 of nan champion decisions you make for your business. Take powerfulness of your processing fees, petition transparency, and guarantee your processor useful for you — not nan different measurement around.

If you for illustration to activity it retired alternatively than break it up, different action is to get your fees audited by a maestro successful installments insubstantial processing auditing firm. For afloat transparency, I tally weAudit.com, which helps businesses pinch these issues. However, different firms activity successful this space, and you should investigation each your options and find who and what useful champion for your needs.