This guest blog post was contributed by Revel Payments Sales Executive Brianna Ticknor. Brianna uses her expertise in the payments industry to help Revel clients select the best payment solutions for their unique businesses.
The way the world population pays, receives, and transfers money has rapidly evolved, and at a faster rate than ever over the past two decades. Online purchases, as well as in-store tap-to-pay transactions—not to mention mobile wallets—have become increasingly popular, and merchants must evolve alongside these consumer trends.
As business owners comb through dozens of payment provider options to pick what’s right for their business, they’re likely to come across gimmicky pitches such as “no transaction fees, ever!” It can be difficult to pick up on these red flags because as a business owner, it’s easy to want to choose the seemingly lowest cost option. The fine print behind these sales tactics are also designed to be subtle, but they typically result in fees that add up over time.
In order to help make the best decision for your unique business, read on as we walk through five of the top red flags to look for when it comes to assessing the way your business processes payments.
Many of us have parents who taught us the old adage “nothing in life is free.” Well, they may have been on to something. When someone mentions “free” in the payments space, especially pertaining to 0% markup programs, your first instinct should be to question their definition of “free.”
These programs are typically advertised as straightforward pricing with no hidden fees, substantial savings (before a provider even knows what you pay now) and a generic monthly software package with several add-on features.
Throughout the payments process, there is cost in accepting cards – between a card issuing bank, an acquiring bank, and card brands (Visa, Mastercard, Discover, American Express, etc.), that are set by these entities and are non-negotiable. So, unless your merchant services provider is paying your fees for you, these are misleading tactics that prey on a lack of knowledge in the industry or a business owner’s desire for low-cost options.
Technically speaking, a surcharge occurs when a business passes their payment processing fees to their customers who pay with a credit card. It can seem appealing to business owners as a way to avoid processing fees.
That said, there are several things to consider before making the decision to implement surcharging:
It’s also important to note that putting surcharges on the customer can also scare them away. A customer might choose to patronize the major pizza chain down the street instead of your small business because they don’t apply an additional 3% on their order. Consider your customer base when making the decision on how to cover surcharge fees.
Knowledge is power. And as a business owner, the last thing you want to chase is the data you already own. Statements should be available to anyone that has signed for a merchant account (this often happens with the previously mentioned models).
Not only do you need this data for reconciliation purposes, but every business is required to report their annual sales to the Internal Revenue Service (IRS). All providers should be held accountable to this standard, so if you’re lacking access to statements or data in general, this is a red flag.
Europay, Mastercard, and Visa (EMV) is a payment technology that allows your customers to use their credit and debit cards that have a smart chip, which provides an additional layer of improved security in order to better avoid fraud. EMV also allows customers to use their cards abroad with greater convenience and confidence, as it is a worldwide standard of acceptance.
There are two primary things to look out for when considering EMV payment technology:
Depending on the credit card processor you’re using, the type of business you have, and the type of purchase you’re processing, there are a variety of different rates and acceptance methods you should note.
This is the wholesale rate of a debit card or credit card for pizza shops anywhere. These fees are non-negotiable, and set by the banks and card brands.
Because card-not-present transactions pose a higher risk to the players involved (including you as a merchant), many processors will charge additional fees for those transactions on top of the higher interchange rates. However, that cost is already built in so there is no real reason to increase that rate.
Many processors tend to place a higher rate on American Express (AMEX) transactions, compared to other card brands. Although AMEX does not charge “true interchange,” they do have costs associated with accepting their cards. These fees are passed through to you as the business owner.
It is very common for payment processors to offer a “flat rate” pricing model, which is intended to be simpler and easier to understand – however, it isn’t always a true flat rate. At times they have a separate rate for card not present transactions, in which they bill clients an assessment fee, network fees, and non-qualified (NQ) fees.
Make sure to ask your provider whether their flat rate offer is for all card types and acceptance methods across the board, inclusive of all interchange and assessment fees.
While there are a variety of payment processing red flags you want to avoid as a business owner, the right research and understanding of your business's unique needs will lead you to the best solution.
At Revel, we’re proud to offer clients access to Revel Advantage, our in-house payment processing solution that seamlessly integrates into the Revel point of sale (POS) platform to create a complete system, tailored to your business needs.
Request a free demo of Revel Advantage today and learn how Revel’s transparent payment processing solution can benefit your business.