To run a business in today’s world, it is essential particularly during Covid-19 to take Chip & Pin and contactless credit and debit card payments. Unfortunately, many of you are probably paying unnecessary Merchant Service Fees way over the odds without even knowing about it.
I know understanding credit card processing fees and calculating credit card charges can be a bit of a headache when you’re busy running your business.
Yet, the last thing you want is to be paying sky high fees and hidden charges and being overbilled for your card payment transactions. Many of you can’t comprehend the statements you receive so can’t see when you are being overcharged. Others of you worse still do not receive statements so are totally in the dark to what you’re paying for.
As credit card processing is a major business expense, it is important to be fully aware of the typical gimmicks and games merchant services providers play.
Below are some things to look for when you read a merchant statement to help you spot the unnecessary Merchant Service Fees.
Let us first look at the most important part of merchant services costs before we get on to the extra stuff.
Merchant Service Charge
We are talking about Merchant Service Charge (MSC). This charge consists of three parts.
- INTERCHARGE – Everyone has to pay interchange fees. This is the direct cost of credit card transactions from the credit card companies. It is a fee, typically a percentage rate, set and charged by the Associations (Visa/Mastercard) to all acquirers/processors and passed through to Merchants for the service of accepting card transactions. This percentage is determined by the country of card issue; Country of transaction (where merchant is located); Type of card (e.g., corporate, consumer); Type of transaction (card present or card not present); Card technology (e.g., chip and PIN, contactless).
- CARD SCHEME – The card scheme fee is separate from the interchange fee. An interchange fee is a transaction fee paid by the acquiring bank account (the merchant’s account) to the issuer whenever customers use a card to pay for a transaction. Card schemes are part of the card payment cycle, which looks at the journey of a credit card transaction being processed and competed. Though, it may appear that a transaction happens instantly after you punch in your PIN, it’s actually much more complicated to ensure transactions are processed properly. Typically the parties involved in a credit card transaction are: the cardholder, the issuer, the merchant, and the acquirer. Card schemes manage and control the operation and clearing of payment transactions in compliance with card scheme rules, which results in a merchant being paid. Card scheme fees are the fees paid by acquirers to be members of the scheme. Acquiring banks then pass the fees they pay on to the merchants who pay generally on each transaction.
- ACQUIRER FEE – The acquirer fee is the mark-up determined by the acquirer for providing the card processing service. Basically it is the mark-up you pay.
All these determine the % you pay on every transaction. So for personal debit card you will generally pay between 0.3 to 1% per transaction. On personal credit this is going to cost between 0.6 and 1.2%, while company debit cards will cost any where between 0.6% to 2.5%. Alas these higher rates are charged by some banks and should be avoided at all costs. Because you are paying a far higher cost than you should be.
The other standard cost is for the chip and pin machine itself.
Card Machine Rental
The cost of renting a physical card machine, is normally charged monthly and can vary depending on whether you are choosing a desktop (static), Mobile or GPRS version.
Now let us look at some of the other costs which are often hidden and in most cases are totally unnecessary Merchant Service Fees.
Authorisation fee
Your merchant’s service provider may charge authorization fees, which cover the cost of approving a card for payment This is a fee that some providers charge every time a card is swiped, and a transaction is sent to the card-issuing bank to be authorized even if the card is declined. This is generally between 1p to 3p, in some cases more. Yet some banks charge no authorisation fee.
Minimum monthly service charge (MMSC)
Merchant service providers may require that a merchant meet a minimum processing volume, and therefore, minimum amount of processing fees each month. If monthly fees fall below the requirement, the merchant will be charged a fee. If your monthly transaction fees are more than your MMSC, the MMSC for that month won’t apply. This is generally set between £9.99 anywhere up to £29.99, where certain merchant banks don’t set any minimum monthly charge which has been a godsend for many businesses during lockdown.
Merchant Security Programme
A monthly charge for some type of Data Security Manager. This is charged by a few companies as an extra line of security. In truth I’ve never been able to see any true benefits this provides to the merchant.
PCI compliance fee
The Payment Card Industry Data Security Standard (PCI DSS) is a global set of requirements intended to optimise the security of card payment transactions and protect cardholders against misuse of their personal information. PCI DSS compliance is a contractual obligation for all businesses that process card payments, irrespective of volume and value. PCI fees may be billed annually or broken down into monthly payments. Many of your merchant accounts will be charging you between £4.95 to £9.99 for the privilege of keeping your terminal PCI safe. A few charge nothing for this.
PCI non-validation fine
If a merchant fails to be PCI compliant, they may have to pay a non-compliance fee. This can be anywhere from £25 to £75 a month. A crazy waste of money. Many of you, unknowingly will be paying this fine month after month.
Online reporting fees
Some companies charge for your online dashboard the place where you are able to check your transactions and processing history. Others will provide this FREE.
Statement Fee
This fee is charged by some merchant services companies to cover the printing and mailing costs for credit card statements if you do not receive them virtually. Others charge you nothing for this.
Batch Fee
You can be charged a flat fee for settling a lot of transactions at once, “batching out.” When you do your end of day totals this takes all transactions from the day batches them together and sends them to the bank. The batched fee is then applied for this.
Annual Fee
An annual fee is charged by some providers. This is charged every 12 months and generally comes as a complete surprise as it’s not something you are told about.
There are other charges that you may be seeing or missing on your statements.
Non-Secure Transaction Charge
Non-secure payments carry a higher risk, so you may be paying an extra percentage of the transaction value. They appear on your statement as ‘Non-Qual’, or ‘Non-Qualifying’. Types of non-secure payments include Mail order and phone payments that don’t include the CSC number (that’s the last three digits on the back of the card/signature strip); Internet payments that don’t use 3D secure verification,; Face-to-face payments that you take by swiping the magnetic stripe on the card through the card machine.
International Transaction Fee
The international transaction fee will be charged in addition to your base MSC rate for any transaction where the card is issued outside of the European Economic Area.
Card Not Present Fee
This fee will be applied in addition to your base Merchant Service Charge (MSC) rate for all Card Not Present (CNP) sales. This is generally where you are taking payments over the telephone.
Chargeback Fee
Chargeback fees are incurred when a chargeback is processed to a merchant’s account. If a customer is unsatisfied with their purchase, or if they believe it was made in error, they may initiate a chargeback with their credit card’s issuing bank. If it is determined that the customer is entitled to a refund, the issuing bank will initiate a chargeback, which is processed by the payment processor.
That is basically it. I’ve ignored the set-up fee some Merchant Services Providers charge you for the cost of application and associated paperwork but that is definitely another unnecessary Merchant Service Fees .
So how much are you being overcharged by?
Maybe you really do not know, so isn’t it time for you to find out, and hopefully make a large saving?
I strongly suggest you check through your next statement and see what extra charges you are paying for. It’s worth you doing because many of my clients have been able to save up to 40% on their fees.
I would be happy to carry out a review on your current merchant statement and potentially help you save a lot of money by helping you switch to a provider with far more transparent prices, lower rates and no crazy hidden charges.
If you would like advice for your business, give me a call on 07454 978255 or if you wish to email me your latest merchant services statement from your current provider to larry@smeehee.co,.uk i’ll go through it for you indicate any unnecessary charges or sky high rates you may be paying. I could, if required, give you a price comparison to show you how much i could save you going to one of the banks i work with, with no hidden charges and no unnecessary Merchant Service Fees.
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