“If it seems too good to be true it usually is”. We all know this adage. Like most industries there are ethical and unethical credit card processors. Here are a few tips to avoid shady deals and save you from falling into unethical traps.
Unbelievably low processing rates: If a credit card processor offers you more than a 35% savings, there are likely hidden fees. Make sure you fully understand how they arrive at such significant savings and don’t just take their word for it. Ask for a true apples to apples, side-by-side comparison based upon your current processor’s rates. Ask for every fee to be explained on a line by line basis. If the company trying to earn your business isn’t willing to do this, you shouldn’t do business with them as they are either not educated enough to explain the fees to you or, they are hiding something and breaking down line fees line by line will expose their scam.
Not in the U.S.: If the provider trying to earn your business is located somewhere other than the United States you should seriously consider why they are based outside of the U.S. There are many U.S. based companies that can offer you what you are looking for.
FREE Equipment: Processing companies will offer you “FREE” equipment to earn your business. Like anything else is life, nothing is really “free”. Do not fall subject to this scam as most companies offering free equipment have hidden fees; They may lock you into a long-term contract with a large cancelation fee (to cover the cost of the equipment) and make up for the FREE elsewhere. If you are offered free equipment, ask this simple question: “How are you able to give this to me for free”?
Don’t get locked into a long-term contract. Purchase the equipment if you need it. Credit card machines are less than $200. A long-term contract can cost you $500 – $2,500 in cancellation fees. There are legitimate companies that will offer free equipment as part of earning your business however this will not be their initial pitch and will come later. Those companies that offer this legitimately will generally not put you into a long-term contract. They may ask you to sign a free “placement agreement” which means as long as you process with them you can use their equipment. If you cancel, you simply return the equipment. Free equipment is a red flag!
Dine and Dash Representative: Be aware of uneducated representatives that don’t have experience or recognition within your industry. The “dine and dash” rep will be swift in the sales process and you will likely never hear from them again. Always ask questions such as, “How long have you been in the industry”? “How long have you been with your current company”? Also, be sure to ask them who their funding bank is. If they can answer these questions with confidence then you are likely dealing with a professional industry representative. Identify their relationship with the processor. Are they a sales representative for an ISO (Independent Sales Organization) and if so which ISO? Are they a sales agent for a direct processor and if so what processor? You should research the ISO or credit card processor as well as the sales agent to ensure you are doing business with both an ethical and professional company. There are many companies offering large sign-on bonuses to sales agents. These sales agents may create shady sales pitches to convince you to give them your business so they can collect their sign-on bonus. If you have never heard of the sales rep or the company and they seem like a “Dine and Dash Rep” this is when you should start asking a lot of questions and don’t give them your business if they seem shady.
Equipment Leasing: Be careful of companies trying to lease you new processing equipment. There are many unscrupulous companies that may come to your business and tell you your equipment is out of date or non-compliant against Visa/MasterCard rules and more. They may tell you they can save you money on fees by offering an “effective rate” much lower than your current costs so that you can lease a brand new piece of equipment without costing you anything extra. They will claim the savings they offer will offset the leasing costs. If you hear this pitch, don’t fall for it! Unless you are 100% positive that you need new equipment based on your own research, don’t bother entertaining this pitch. If you processed credit cards yesterday without any difficulty, your machine is fine.
Additionally, if a sales agent shows you one simple rate as opposed to breaking down your entire merchant statement, line by line, they probably are not being honest with you. If these two common denominators exist (leasing new equipment + using fee savings to offset lease payments) you should steer clear. Not only will you get stuck in a 48-month lease, you will end up paying $4,000 for a piece of equipment that costs merely $200.
There are many honest, and ethical companies out there that you can choose to do business with. These companies will not try to sell you using the above tactics. Credit card processing fees are a significant administrative expense of your business. Take the time to find a trusted company with a solid reputation in your industry.
About the author: Jeff Brodsly in an industry veteran who is the founder and CEO of Chosen Payments. Chosen Payments takes pride in educating merchants and will assist all merchants whether clients of Chosen Payments or another processor. Contact Chosen Payments by emailing [email protected] or calling toll fee (855) 4-CHOSEN (855-424-6736).