Credit Card Processing Fees - Why Transparency Always Wins

Jeff Fortney


I recently read an article on absolute words and it reminded me of the words used to describe credit card processing fees. The article defined absolute words as those that allow for no interpretation. Examples include simple words such as yes, no, always and never. One of my favorite words, transparent, is an example of a more complex absolute word.

In sales, we are trained not to use absolute words unless we are 100% confident in what we're saying. It is always better to have that wiggle room (see what I did there?). You don't want to lose a sale or promise something you can't deliver by using the wrong word.

In the credit card processing world, the word transparent gets thrown around a lot. It's used to describe how someone does business, how and what credit card processing fee information they provide, and it is also used as a commitment to a merchant. An example of how it's commonly used in a sentence is, ”We provide you full transparency.”

Merchants know this as an absolute word. But in the payments world, there are some that only give it lip service, or worse, have a loose definition of transparency. This becomes obvious when you look at credit card processing fees on various merchant statements.

Let's be clear, when a person or company claim transparency that means they show everything — the good, the bad, and even the ugly. For example, if you offer interchange pass through pricing plus a markup, the interchange fee should be fully disclosed. That is transparent.

What is not transparent is when an additional markup is tacked on to those ”passed through fees” (another absolute phrase by the way). This practice is becoming more prominent every day. Sometimes it's couched in a fee name that is slightly different than the name from the card associations. Other times, it's blatant. In all cases though, it's not transparent.

Set Yourself Apart with Honesty and Earn Trust

Due to the complexity of processing statements, merchants are likely unaware of this practice. If they are told that certain credit card processing fees are pass through fees, they have no way to confirm it, unless someone points it out to them of course.

That is where the independent sales agent comes in. If a merchant believes they are paying a specific credit card processing fee because that is what they were told, how do you think they will feel when you show them that they were misled? Obviously, they will listen to your offer.

If you are selling merchant services, it would behoove you to know which processors and sales organizations pad fees and where they are typically padded. Lately, I have discovered that there are many ISAs that don't know how to find these hidden fees. What's worse, they are unaware that their current ISO partner even pads fees.

Spotting Padded Credit Card Processing Fees

Before you can leverage this lack of transparency, it is important that you first educate yourself on two things: 1.) how your competition pads credit card processing fees and 2.) if your current ISO partner does it, too. You need to begin with the latter.

At this point I would normally recommend you contact your trusted advisor, your mentor, or even your ISO partner. But if your partner is padding fees, and you weren't aware, it's not likely they will volunteer this information. Instead:

  • Pull a copy of one of your merchant's statements that is on IC plus pricing. Look for Assessments, NABU, APF (or similarly named fees) and compare the charge with the actual costs for those fees. For example, if NABU is listed as 4.95 cents, it's padded 3 cents.
  • Then, check the actual interchange rates. You don't need to proof every single one. Just look at the common rates such as regulated signature debit or CPS Retail. Again, anything higher than the actual cost is padded.

If you discover padded credit card processing fees you did not know of before on your merchant statements, you have three choices:

  1. Call your current ISO partner and question these fees. Don't assume they will change their practices though just because you're bringing a padded fee to their attention.
  2. Do nothing and understand that if you can identify padded fees on your merchant statements, your competitors can too — and they can easily point them out to your merchants. If you choose either option 1 or 2, it's prudent to remove the word transparency from your sales pitch.
  3. Find a partner who is truly transparent.

In addition to determining if your ISO partner is padding credit card processing fees, it's also important to know which competitors pad fees. Identifying competitors who markup card processing fees is done exactly the same way as I described above. When reviewing a merchant statement, look for the same areas and compare the same rates. Once identified, highlight the area of the statement and maintain a file. And don't be afraid to point it out to the merchant.

Merchant services is a trust-based business. If a merchant trusts you, they will stay with you over the long haul. A lack of transparency damages that trust. That's why it is effective to point out padded credit card processing fees. It's also why it's critical that you are transparent.

Yes, transparency is an absolute word. Lacking it can be absolutely damaging to your income.