3 secrets credit card processors don’t want you to know

That chances are that you’re paying too much for credit card processing. There are thousands of processors operating in a lightly-regulated, but complex marketplace. And the fact is, what they offer is pretty straightforward. Your processor is simply the communications link between the credit card issuer and your merchant bank account.

So why would one processor charge 4 percent in fees on a transaction while a different processor charges 2 percent — even when the exact same card is used? Here’s what you need to know to get the best rate on your organization’s credit card transactions.

* Multi-tiered debit transaction agreements sidestep the Durbin Amendment. This is a little complicated, but as part of the Dodd-Frank Financial Reform regulation, the Durbin Amendment was created to lower debit transaction interchange fees to 0.05 percent plus $0.21. Before the legislation, the typical fee was $0.44 per transaction. However, tiered pricing allows the processor to pay the regulated transaction fee and then turn around and charge the merchant whatever it wants. Check to see whether your agreement includes tiered pricing. If it does, ask the processor to take it out. If it doesn’t, find another processor.

* You can negotiate with your credit card processor. Many organizations take the path of least resistance when it comes to credit card processing. That approach can cost you thousands of dollars each year. Regardless of the processor you choose, chances are you can get a better rate. Most credit card processors will negotiate with you because they know that they don’t offer anything you can’t get elsewhere. But beware—you may want to enlist a professional to lead your negotiation. The agreements are complex and in many cases are intended to make it difficult for merchants to understand the fee structure. 

* You should never lease your equipment. If a credit card processor offers to lease equipment, don’t do it. Equipment leases often force you to pay five or six times more than what the device is worth. Equipment lease agreements are notoriously difficult to terminate because the lease is often sold to another company as soon as it’s signed.

Credit card transactions can be a significant portion of your expenditures. Keep them as low as possible so that your organization has more money to do good.