Is your choice of Payment Processor costing you?
Guest written by Samantha Ettus, Founder of Park Place Payments
In 2010 I attended a payments industry event where two pivotal things happened. I looked around the room which was almost entirely white men and asked where the women and people of color were. I was told: “There are none in this industry!” Shortly following that conversation, the Durbin Amendment was passed, legislation you likely haven’t heard of. The intent was to regulate how much merchants could be charged for debit card payment processor fees. But the authors of the amendment didn’t completely understand the industry, and they regulated VISA and Mastercard without regulating the middle man. And it’s the middle man that works directly with businesses like yours. I watched this room of wealthy white men pop open champagne to celebrate the win – if the credit card companies had to charge less, but the ISO didn’t, the ISO would see steeper profits. I vowed to return to the event one day, having disrupted this dishonest old-boys club. And years later with that vision etched into my mind, Park Place Payments was born – the only female founded and run payment processing company that is powered by a primarily female salesforce and the only company in this space offering pricing clarity supported by white glove customer service.
As I dug in, I learned that there is more to payments than the per transaction rate you are quoted when an agent calls on your business:
- There are many fees, some necessary, some bogus, in addition to the quoted rate.
- The quoted rate is rarely what you actually pay per transaction.
- The rate is calculated without any knowledge or analysis of your business.
Yet the industry has trained merchants to focus exclusively on rates rather than asking deeper questions. Sadly, the rates that the middle man is quoting you will likely be far different than the ones that show up on your monthly merchant statements.
So back to you and what you can do to change this pattern. First, know that you have more choices than you think you do. Secondly, you can gain a better understanding of what you can control. And thirdly, you should demand excellent customer service.
I’ll start by breaking down the three common pricing models, get into bogus fees to watch out for, and explain the difference between a merchant account and a third party merchant services provider.
Payment Processor Pricing Model
The most important thing to understand in terms of pricing structures is that every single card – and there are thousands of them – charges a different rate. A debit card is less than a standard credit card, which costs less to process than a rewards card.
- Flat Rate Pricing – Although easy to understand, if you run a legitimate business that transacts more than $10,000 in credit or debit cards per month, this is not economical for you. Imagine walking into a restaurant and the side of brussel sprouts cost the same as the lobster main dish. You would know that you are overpaying significantly for the side of veggies. Just as we would never tolerate it at a restaurant, you shouldn’t accept it in payments either.
- Tiered Pricing – The most complicated pricing model, tiered pricing separates transactions into three tiers depending on certain characteristics of the transaction. Often a merchant is sold on the least expensive tier, being assured that most transactions will fall into this category. In reality, either it’s not possible to put most transactions in that tier or on the backend, your transactions will be mysteriously put into the higher tiers. At the end of the day, this is the most egregious of the pricing models.
- Interchange Plus Pricing – Interchange plus pricing is the most direct and favorable structure because it charges the rate of each individual card, plus a specific dependable mark-up. You’ll want to understand the exact mark-up being changed by your payment provider to know if you are getting a fair deal.
Bogus Fees
There are some necessary costs to having a merchant account that are unavoidable, yet, the industry has also peppered in a boatload of unfair fees. Often these are inflated to cover the cost of equipment given to a merchant for “free.” They include:
- Annual Fees which show up in the December statement when it’s too late to do much about them.
- PCI Compliance has two associated fees. One is a general PCI fee which you might be charged whether or not you are compliant. And, if you allow your account to fall out of PCI Compliance (a yearly renewable status), you will be charged a hefty monthly fee. You want to choose a provider that will take responsibility for you keeping up with your PCI compliance.
- Statement Fees charged each month just for receiving a statement.
- Monthly Minimum fees charged if you transact below a certain amount.
- Equipment Leasing charges are common and never in your favor as you will end up paying many times over for a terminal will cost far less if bought outright. If you are in a lease, it will almost always lead to a sizable Early Termination Fee and another charge for the price of the equipment if you end your agreement and don’t return the terminal fast enough.
- Next Day Funding is crucial for cash flow and there is a cost to getting this service, but in reality, it should only run you $5-$10 a month.
Third Party Merchant Services Provider
PayPal, Square, and Stripe have all become household names as payment processors and have served an important role in making payments a hot topic but also in enabling micro businesses to compete in the economy. They also make it very easy for businesses to set up an account, seemingly removing the hassle of getting approved for an individual merchant account.
With this ease comes great cost. Not only are these very expensive options, they are notorious for having little to no customer service. Perhaps most important to understand is this: every business that opens an account with one of these providers is lumped into one merchant account with ALL of the other businesses using that service. This makes your money and your account volatile and vulnerable. If you have a legitimate business, you absolutely want to be protected by having your own Merchant ID (MID), despite the process of going through underwriting with the bank. It’s worth it and most accounts are approved within 24 hours!
At Park Place Payments, it is our mission to make sure that every business owner fully understands their payment solution and is given a clear, professional analysis. We believe that just like your body needs a checkup every year, your payments do too. Our payment checkups are fast, pain free, and take a 10 minute phone call and a previous merchant statement so that we can compare your current service, pricing and technology to what we offer. We’ll analyze the information and within 48 hours, we will return back a clear side-by-side presentation including a comparison of what you are getting now versus what you would get with Park Place. Then you decide if it makes sense to switch!
In celebration of Women Owned Business Month, we are also offering $50 off the cost of equipment to any woman owned business that joins us as a client in October!
To start on your free payment checkup, contact our VP Marketing and Business Development Selina Meere: selina@parkplacepayments.com or 747-263-0546.
Samantha Ettus is the Founder of Park Place Payments, Author, Speaker, Radio Host, and TV Contributor
Overwhelmed? You’re not alone.
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