Dirty Tricks: Rising Credit Card Junk Fees

[bantar]

I get the daily calls of wanting me to switch CC processors and with MUCH (misplaced) confidence, I refused to have a discussion with any of these guys, because I already had great rates.   Then, I had a persistent one call me back and ask why I didn't want to talk.  She said enough right things that I let the salesman come visit me.  

My rates were and supposedly were going to get better over time as I built up history.  Original Quote:

• Credit Card Rate - 0.05% + Interchange (AMEX 0.055%)
• Debit Card Rate - 0.05% + Interchange
• Credit Transaction fee - 0.05 cents per transaction
• Debit Transaction Fee - 0.05 cents per transaction
• PCI Compliance-$9.95/monthly
• Chargeback fee-$10.00 (VISA, MC, Discover) $30.00 (AMEX)
• Paper Statement-$5.95 monthly (online statements free)

The other guy comes in and tells me that my current processor increased my rates and added numerous junk fees.    The rate raised to 0.25% for most cards and .75% for AMEX and now have a $34.95 platform fee and numerous other fees.   At this point, I stand to save $250/month minimum by switching CC vendors.     I did confirm that on day 1, my bills had way fewer fees.  The bills also stated that they were raising rates along the way, so they were disclosed and allowed by contract.  I'm halfway thru a 3 year contract with a $495 cancellation fee.   This is what I'm paying now with the same processor: 

• Credit Card Rate - 0.25% + Interchange (AMEX 0.75%)
• Debit Card Rate - 0.05% + Interchange
• Credit Transaction fee - 0.05 cents per transaction
• Debit Transaction Fee - 0.05 cents per transaction
• PCI Compliance-$9.95/monthly
• Annual PCI Audit Fee - $99
• Chargeback fee-$10.00 (VISA, MC, Discover) $30.00 (AMEX)
• Paper Statement-$5.95 monthly (online statements free)
• New Junk Fees - $41
• To be clear, the interchange fees don't change on either deal.  We are only dealing with CC processor markup fees and junk fees.   The 0.05% is a markup fee over interchange.   

The new deal is:

• Credit Card Rate - 0.05% + Interchange (all cards including AMEX)
• Debit Card Rate - 0.00% + Interchange
• Credit Transaction fee - 0.05 cents per transaction
• Debit Transaction Fee - 0.05 cents per transaction
• PCI Compliance - $0 (with a successful audit and $9.95/month penalty without one)
• Annual PCI audit fee - ??
• Chargeback fees - $25.00 (VISA, MC, Discover, AMEX) - refundable if you win
• Monthly Charge - $10.00

As best I can tell, it looks legitimate.   I'll be carefully reading the new contract tomorrow.   So, the real question is whether or not I'm switching from one liar to another liar?     This second one is telling me that my contract will have the rates guaranteed and locked in.   If I see the right things in writing, I'll be switching.  Will recoup my cancellation / startup costs in 3 months.

I guess the moral is get an annual checkup from a competitor. 

Supposedly these rates are available as a result of being low-risk from my transaction history (or it's just marketing-speak).  I don't know.    My original deal was reasonable, but it isn't any longer.   My plans were to wait for the 3 year contract to end before shopping around.

[NATURE]

I think credit card processing is becoming highly competitive.  Your situation sounds exactly like mine, I was paying 0.25% and I just signed up with a new processor at 0.05%.  My new processor seems to be signing up everyone in town and I think there is a mad rush to be the first to sign people up at this new rate so that if they are making less per customer, at least they'll have more customers to offset this loss.  One thing I will say is that I won't sign a contract.  Obviously you have to sign up for the service but my rate is locked in as long as I stay with them and I can get out anytime without a penalty.  Also, it may not matter to some people but I much prefer the PAX S80 to the VeriFone  VX520.

[Guest]

I sure wish you would share the names of these companies. The bottom line after every fee adds up to a little over 2% for me. I tried changing but always get lied to. One guy even forged my name on a document and I had to turn him in to the state attorney general to get out of it. If your total fees are less than 1% then I'm all ears. That's alot of money.

[NATURE]

Sorry for the confusion.  Total fees will never be lower than around 1.80% as you have to pay the mandatory interchange fee.  The .05% we're talking about is the fee the processor charges on top of the interchange.  I'm not sure if naming the company I'm now using breaks any forum rules but I wouldn't yet anyway.  I haven't been using them a month yet and we'll see if reality stacks up to the sales pitch.

[bantar]

My old processor was First Data.   This new one is Capital Bankcard as an agent to Paysafe.   Most of these processors appear to be "little guys" reselling for the big guys and they do markups & fees to make their money.  I had to sign a PaySafe Mechant Services agreement.

I just signed up this week, so we'll see if they live up to their promises.   They claim that I can trust them because we have no term contract and the cancellation fee is $0.   Last month I was about 1.8% in fees and if I was at the new fee structure, about 1.5%.   These percentages are Interchange and Fees.   I paid $180 for the keypad and they are loaning me an FD-130 terminal.   My existing keypad cannot be reused due to encryption.  So, I now have 2 FD-130's and 1 remote keypad.  Next, I have to pay the $495 cancellation fee to First Data.

As an addendum to my first post:  The annual PCI audit fee is $149 (so this one went up)

[Guest]

Okay. Mine is through my bank. Amex is the same rate as Visa mc and the money is there the next day. When I figure out the percentage each month it's about 2 to 2.2 percent. Sometime a little lower so I guess I'm in the ballpark. I've given myself the nickname Pay-the-most-Paul because I've been too trusting. Now I'm paranoid Paul.

[bantar]

Hey, you and me both.  That's why I shared.  I was being overcharged and possibly lied to ("we can probably lower your rates as you build more volume").   Frankly, it's difficult to read those statements.   I'm just starting to better understand them.   The layout that I presented above is a good way to compare apples to apples.   Maybe have your bank help you create your fee structure and then you can compare.  

Be aware that your mix of debit vs credit card vs reward card vs fleet card will really change up the Interchange fees.  So, I could be 1.5% with mostly debit and you can be 2.0% with mostly AMEX and we can have the same fee structure.  This table is just looking at fees, knowing that interchange is the same for all of us.

My CC mix for 2019 YTD is:   Debit Count: 39.9%  CC Count: 54.0%   Cash Count:  6.1%    Debit Volume:  35.7%  CC Volume:  60.5%  Cash Volume:  3.8%    All Fees for 2019 YTD:  1.8% (up from 1.7% for last year)

[tco]

On 7/14/2019 at 12:41 PM, NATURE said:

Sorry for the confusion.  Total fees will never be lower than around 1.80% as you have to pay the mandatory interchange fee.  The .05% we're talking about is the fee the processor charges on top of the interchange.  I'm not sure if naming the company I'm now using breaks any forum rules but I wouldn't yet anyway.  I haven't been using them a month yet and we'll see if reality stacks up to the sales pitch.

Hi,

My company just became a sponsor on AutoShopOwner.  I just read your prior post and thought I'd reach out.  My company, Loma Solutions, represents a 0% credit card fee solution.  We have 1000's of customers in the US and our solution makes auto shop owners thousands of extra dollars every year.

How does 0% processing work?
When your customer decides to pay with a card, they have 2 options.  If they use a credit card, a small percentage of the transaction will be charged to their card.  If they use a debit card, there will be no fee to the customer.  Our software does all the work and explains to the customer of their choice prior to the card being authorized.

What exactly are the costs to the merchant and to the customer?
For credit cards: Merchant pays zero credit card fees, the customer pays 3.5%  
For debit cards:  Merchant pays 1% + $0.25/authorization, the customer pays 0 fees

Facts:
- A card swiper is not needed: credit card information can be typed in a phone or computer or over the phone.  There is a 'brick' card swiper if needed*
- No set-up costs or any other fees
- Our agreement is month-to-month
- If you auto batch by 8:00 PM EST, you get your money the next day
- The solution complies with all card rules and regulations
- We'll have you up-and-running within a week

Benefits to the Merchant:
*** You are being fair to your customer by offering them a choice to pay a fee or not, while you are eliminating your credit card fees, which can be up to 2.5% of your total card sales.
- Simple to use and all charges are viewable through our real-time online portal.  
- Support: our team is there when you need us.  We will show you and anyone on your team how to use the solution, but it’s very straight forward.
 

Making you more money!
If your current credit card fees are 2.5% of your total card sales, for every $50,000 in credit card transactions, you'll put an extra $1,250 in your pocket.
 

* we will provide you with a ‘brick’ terminal: $35/month if needed.  This includes free paper re-supplies.

Is there a good time that you like to speak on a call?  Please let me know when works best. 

[bantar]

23 hours ago, tco said:

What exactly are the costs to the merchant and to the customer?

For credit cards: Merchant pays zero credit card fees, the customer pays 3.5%  
For debit cards:  Merchant pays 1% + $0.25/authorization, the customer pays 0 fees

 

As a consumer, this is a non-starter for me.   As a business owner, I would not be charging my customers 3.5%, but would absorb this cost as we do today.     Now, my credit card costs have just risen.   I don't see this as a positive. 

[tco]

I understand your concern.  This is the best legal way for a merchant to eliminate their credit card fees forever, while providing the consumer a choice whether they pay a surcharge (using a credit card) or not (using a debit card).  I realize that this solution is not for everybody, but it does provide a way for the merchant to keep more money and provide the consumer a choice rather than a mandate.

[NATURE]

3.5% is exorbitant.  If you chose to go this way it would be better to charge a 2% credit card fee on the RO just like hazardous materials and shop supplies.

[tco]

If the 3.5% is too high for the consumer, then they can use their debit card for Zero fees.  It's the consumer's  choice. 

[DUFRESNES]

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[Transmission Repair]

2 hours ago, DUFRESNES said:

1st of all, we all get the phone calls daily.  Our newest answer has declined immensely the calls is "We don't take Credit cards"  I still have a hard time charging the customer for the fees.  We do approx  $110,000 a month in credit cards.  The merchant we have now is Heartland.  We had him and then Key bank came in and promised us much lower fees.  So fired the Heartland and went with key bank.  Well, it wasn't what they promised by the time you added all the fees extra.  I called my Heartland guy again and said I wanted to come back to Heartland.  He did.  I did.  You have to take into consideration Customer Service and the total bill including all the fees and extras.

Things are constantly changing over time when it comes to payment.  Who pays by cash or check anymore?  Few, if any.  99% of our invoices were paid with plastic.  Because we were a transmission repair shop, our average sale was over $1.5K.  We shopped around at first but finally settled on a company that charged us .5%.  (I can't remember who.) With the annual volume we were doing, that still worked out to about $500/mo.

Edited December 13, 2023 by Transmission Repair
Added a sentence.

[DUFRESNES]

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[Transmission Repair]

1 hour ago, DUFRESNES said:

How can that be on 1.5 million .  We pay 2500 -3000 a month

That was about 10 years ago before we sold our shop and retired.  We are doing similar figures in plastic sales.  We were grossing about $1.3-$1.2 million a year in sales in the last 3 years we were in business.  $1.5 million with our processor would be about $7.5K/yr.  You're paying what works out to about 2% while we were only paying half of 1%.

$2,500/mo. X 12 = $30K.   $30K divided by $1.5 million = 2%.  I would think you are paying a higher rate because your average sale is much smaller and more numerous than ours.  We only wrote about 80-90 tickets a month, but they were often really big tickets.  Perhaps things have changed in the last 8 years since we sold our shop, I don't know.  But judging from Bantar's posts from 2018 at the beginning of the thread, he was paying even less.

 

Edited December 13, 2023 by Transmission Repair
Added sentence at the end.

[bantar]

In an attempt to understand this junk fee ridden business, I did quite a bit of analysis.  In the end, I found that the Interchange fees are the biggest factor.   They will eat, let's say about 1.5% and rising.   Can't duck or hide from these fees.  The CC Processor will then tack on an addon to pay for their services.  This can range from a low of about .20% to 1% or more.   This is the fee that you want to manage.  Now, just like us, if you have a provider that is giving you good service, it might be worth a few more pennies.

To further add to the Interchange fees, I found that my fees went up and down with the mix of Debit to Credit cards.   Debit cards are practically free and CC's are costly.   Usage depends on your customer mix.   This can't be controlled.   It's builtin to our labor rate.  Charging the customer for using their CC leaves a sour taste, so most people don't do this.   It doesn't make for good repeat business.

Once I grasped this, I've ceased the detailed tracking and analysis of my CC's.    I'm lightly tracking now....  For the past 11 months, I've had a low of 1.32% and a high of 2.08%.   The average for the last 11 months has been 1.83%. 

What is interesting is that the low was on a big month.  Must have had many debit card transactions that month.  My current processor 360 Payments, does not show debit vs credit transaction counts, so this is just a guess.

[Transmission Repair]

43 minutes ago, bantar said:

In an attempt to understand this junk fee ridden business, I did quite a bit of analysis.  In the end, I found that the Interchange fees are the biggest factor.   They will eat, let's say about 1.5% and rising.   Can't duck or hide from these fees.  The CC Processor will then tack on an addon to pay for their services.  This can range from a low of about .20% to 1% or more.   This is the fee that you want to manage.  Now, just like us, if you have a provider that is giving you good service, it might be worth a few more pennies.

To further add to the Interchange fees, I found that my fees went up and down with the mix of Debit to Credit cards.   Debit cards are practically free and CC's are costly.   Usage depends on your customer mix.   This can't be controlled.   It's builtin to our labor rate.  Charging the customer for using their CC leaves a sour taste, so most people don't do this.   It doesn't make for good repeat business.

Once I grasped this, I've ceased the detailed tracking and analysis of my CC's.    I'm lightly tracking now....  For the past 11 months, I've had a low of 1.32% and a high of 2.08%.   The average for the last 11 months has been 1.83%. 

What is interesting is that the low was on a big month.  Must have had many debit card transactions that month.  My current processor 360 Payments, does not show debit vs credit transaction counts, so this is just a guess.

I would trust your research a lot more than my 8-year-old dated experience.  Using your 1.83% figure, we would have been paying about $1982.50 per month.  Charging extra for plastic goes against the written merchant agreement.  I believe you have the best idea for covering the cost in the shop labor rate.  Good job on the research! Thank you.

[Transmission Repair]

21 hours ago, Transmission Repair said:

Charging extra for plastic goes against the written merchant agreement.

Well, I guess I'm wrong about charging extra for plastic.  We recently received our property tax notice and they charge extra for paying our property tax with plastic.  They call them "bank fees" and charge 2.45% for credit cards and 1% for debit cards.

Edited December 15, 2023 by Transmission Repair
Added property tax notice.

[DUFRESNES]

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[Waynes Garage]

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[Transmission Repair]

1 hour ago, Waynes Garage said:

What about shop supplies, if you charge them, if you see fit, to raise it by 1 - 2 % to cover cc fees?

This is a quote of mine from another post I made...

There were several items I "buried" in either parts, labor, or both because listing them separately would raise eyebrows.  Items like...

• Shop supplies
• Waste oil disposal
• Towing (because we advertised free towing)
• Chemicals
• Gas in customer's cars
• Credit/Debit card fees
• and other incidentals...

were never listed separately, but the customer did pay.  I never had a problem doing it that way."

[Ed Cantera]

I have a great processing company that charges a flat fee of 2-2.25% (depending on monthly volume) so it’s really easy to keep track of. We used to have interchange plus and it was really confusing to make out what was being charged for what. No cancellation fee and a reasonable annual PCI charge if you do the periodic compliance surveys. Don’t know what the rules are but I’m happy to share their contact info. 

[Eric Allen]

Ed, please do share!