Get Informed on Credit Card Processing

Article excerpt

Some providers that accept credit card payments are taking an unnecessary financial hit

Addiction treatment providers are findking that today's credit card processing industry is highly complex and the large majority of credit card processing vendors offer little help in bringing light to unanswered questions. Hidden fees, confusing monthly merchant statements, sales representatives with little or no industry knowledge, and questionable business ethics from most vendors are typical of what is encountered by treatment providers that receive credit card payments from clients and their families.

Credit card vendors are capitalizing on the industry's complexity to add to their own profit. They blame high rates and high additional surcharges on Visa and MasterCard, but they camouflage built-in profit streams behind this claim. What is even more disturbing is that some retail and software companies also offer credit card processing services and count on their reputations to invoke trust, yet prove to be some of the worst offenders.

Approaching one's local bank may not offer a much better solution. Most banks simply will pass their customer over to a large credit card vendor with which they have partnered and then will have nothing else to do with servicing the account-other than to receive a monthly referral fee.

Understanding rates

When making a proposal for merchant services to a prospective addiction treatment provider, credit card vendors generally present only one or two "qualified" rates. Higher "mid-qualified" and "non-qualified" rates are usually disclosed in the small print, or their importance is minimized. This pricing structure is called "tiered pricing" and provides the highest profit margin for a vendor. A tiered pricing structure allows credit card vendors to point any transaction they want to the higher midqualified and non-qualified rate categories, no matter what card type is being used. This effectively translates into anywhere from 30 to 80% of one's transactions never being priced at the enticingly low rate seen on the proposal.

In fact, if a provider is being priced fairly, the pricing structure should be referred to as "Interchange Plus" and the monthly merchant services statement format will show all transactions categorized into the interchange categories developed by Visa and MasterCard. Each of these categories has a different rate based on the type of credit card being used, the way the transaction was conducted (swiped or keyed by hand), whether added information was attached to the transaction, and the time between when the card was authorized and when it was presented to the bank for collection.

Rates are not the only variable affecting a provider's ultimate cost of accepting credit cards. Even if an agency is set up on an Interchange Plus pricing structure, there are generally two or three interchange category rates for which each transaction can qualify, depending on whether essential data were received with the transaction or if certain time frames were met. Missing data will result in a transaction qualifying to a higher interchange rate or, if pricing is tiered, to a mid-qualified or non-qualified rate.

With tiered pricing, a provider will never know why its transactions didn't qualify, so it will be unable to generate corrections to get the best rates. …