Choosing the right merchant account is tough, especially for new business owners, and it’s made even tougher by the growing prevalence of merchant account scams. New businesses are often the victims of these scams, because they are the least likely to understand how much merchant accounts should really cost them. If you’re afraid your merchant account provider is charging way too much for credit card processing, there are some obvious red flags you shouldn’t overlook.
To understand whether your fees are too high, you should do some research into merchant accounts and what other providers generally charge. Most service providers charge around 2.5 percent per transaction as a discount rate, plus a flat fee between 20-30 cents. If you’re being charged a discount rate of 5 percent or more, you could usually find a much fairer rate, unless you have very poor credit and have made allowances with the provider in order to get approved. Other fees like address verification, monthly minimum, gateway, and ACH fees are usually normal, but they shouldn’t be excessive.
Another common way that you can get gouged on credit card processing fees is through so-called junk fees, which are unnecessary and often inexplicable. These fall under a number of different categories, from IRS reporting fees, to teaser fees, to cancellation fees that rise exponentially the longer you hold the account. Sometimes you can simply see a spot for “additional fees” on your bill with no clarification as to what they are for. Researching these fees can be tricky, but it’s important to understand why you’re being charged each amount before you sign a contract.
For the first few billing statements after you activate your merchant account, you should check to make sure that all of the charges match with your records. Even businesses that have been long established can fall victim to merchant account providers who tack on extra charge back or return fees. It’s easy for bookkeepers to miss these discrepancies, and some scammers get away with charging too much for years. If you have a thorough record of charge backs and returns as well as transactions, you can make sure that every fee lines up. When you sign a contract with a merchant account provider, they are just as obligated to stick to the amounts agreed upon as you are. It might take some extra work to make sure they’re doing their job.