Merchant Services – Ah, those hidden fees

I had intended to write about the wonderful world of credit card fees a few weeks back as I was getting things together for the store, but I havent exactly found time for it.  At some point, I intend to put something a bit more full blown together on how it all works, but for now I just want to get a few words of advice out to you.

This article in the Post kinda got me going on it again.  Its nice to see some long overdue legistlation hopefully coming to give retailers a break from the credit card fees they fork over to the big banks and card agencies.   2 months ago, I wasn’t so aware of how much it was costing my local convenience store when I would swipe my credit card through.  Now that I am on the other end of that equation and actually taking credit payments from folks, I can better appreciate the 1.7% to 3+% that retailers pay to the banks in order to process credit cards.

Giving up a 3% hurdle just to complete a transaction means you are always selling at 97% of what you want to, and the discount isnt even getting back to your actual clients.  It flies out the door to the bank and you never see it.  While I know there has to be some fee for service due, I find it pretty tough to swallow some of the rates I’ve seen while doing my own home work on this one.

I think thats what I want to emphasise here.  The differentiation in what instituions will charge you in terms of merchant services rates (the rates charged to help a retailer process credit card transactions) is all over the map.  I looked at rates all over the place, as you know I love to save a buck when I can, and it blew me away that the quotes i got back were so far apart.  I assumed that bigger would be better, and a larger bank could offer me a better rate – again, not true.

I further assumed that it would be a pretty slick apples to apples comparison of rates.  I was WAY off on that one too.  Like closing on a house or picking up Twins tickets on stubhub, there are tons of different fees, rate schedules, and other fun charges stuffed into the quotes you get.  Comparing them side by side can sometimes require an advanced degree.

My advice is simple on this one:  take your time and shop around.  You could easily get 10 different quotes from 10 different banks and save yourself some nice cash in the process.  Don’t leave credit card services as the last item on your start up check list.  You’ll need some time to research what is out there and then a few days for set up and the wonderful paperwork that will come your way.

And hopefully, in the near future, we’ll see some interest rate relief come down the pike.

Dan Beenken, Director of UNI Small Business Development Center