Thursday, April 7, 2011

Deceptive Credit Card Processing Tacticts

Phil Hinke a veteran of the merchant service industry, has a great article at Practical E-Commerce.He goes on to discuss many of the various pricing methods used in the credit card processing business including tier and interchange pricing. Phil explains some deceptive interchange pricing practices:

"Interchange-plus pricing is typically the best way to go. However, there are some processors who claim to be offering interchange-plus pricing, but are deceptively offering something worse. The first are those processors who are offering interchange-plus pricing with the under-the-breath caveat that it is only for 'qualified' transactions. What they are really offering is a tiered pricing plan because there will be no qualifying transactions. Therefore, every transaction will downgrade at a much higher rate to one of their tiered pricing levels.
"The second deceptive interchange-plus pricing plan is the one that inflates the interchange rate. A salesperson recently sent me one of his own merchant statements to analyze — many salespeople do not trust their processor any more than merchants do. He felt something was not right but could not put his finger on it. I quickly figured out that the processor was adding 0.25 percent to the interchange-rate it was posting on the merchant statement."
He also discusses deceptive merchant statements:
Do not necessarily believe the numbers on your merchant statement. As previously mentioned, I analyzed a merchant statement where the interchange rates listed were not the true card association interchange rates. I analyzed a merchant statement where the per-item fee list was 6.2 cents, but after doing the calculations it was obvious that the merchant was being charged 6.5 cents; 0.3 cents may not seem significant, but for this large merchant it was.

"One of statement types I continually come across — which confuses merchants — is the one that does not show all the charges for the month on the statement, and in fact may delay showing all the charges for up to two months. I have spoken to salespeople who love this statement because when they sign up a new merchant, that merchant generally does a cost comparison after the first month to see how much money he or she is saving after switching processors. Unfortunately, the merchant does not realize that some of that month’s processing cost will not show up on the statement for up to two months. Therefore, a merchant’s total processing fees for April sales may not show up until the June statement."

Prestige Merchant Services offers potential merchants a free statement analysis so they can see how much they are paying and how much they can save by switching without a contract or set up fees.

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