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Credit card processors trick small businesses into higher fees

Watch your statement for new increases
Watch your statement for new increases
Photo by Justin Sullivan/Getty Images

The time is here for Visa, MasterCard, and Discover to make their semi-annual changes to the fees and pricing that they charge merchant processors. Unfortunately, many credit card processing companies have once again used this time of year as an excuse to raise fees across the board on otherwise unsuspecting merchants. These mandated adjustments are the ideal time for processors to capitalize on the opportunity to mark up or sneak in other fees to increase their own profits.

While some processors are exploiting this opportunity to raise rates, others are even craftier. They aren’t just raising the “rates” on the merchant; they are raising fees on such items as assessments. These are fees that are commonly referred to as pass-through rates meaning that the processor is passing them on from Visa, MasterCard. However, instead of passing on these fees as-is, they are marking up those fees to enhance their revenue.

For example, in addition to marking up pass-through fees one processor is also changing all discount rate priced merchants so that they no longer benefit from the newly regulated debit fee caps, by increasing rates on pin debit, and/or increasing the transaction fees.

Another processor cited increasing profitability on the backs of their merchant customers to justify across the board rate increases in a letter to agents. However the message to its customers tells a different story; blaming the fee increases entirely on the credit card companies (Visa, MasterCard, Discover, and American Express) citing that they needed to “…pass through the card association companies' price increases.”

These are particularly egregious abuses because these fees are less troublesome when the merchant believes these mark ups are coming directly from Visa, MasterCard, etc. and must just accept these “changes”. Other assorted fee increases that creep in at this time include statement, monthly minimum and miscellaneous fees that are processor specific and are not controlled by Visa, MasterCard or Discover. So now, even merchants priced under an Interchange-plus pricing model aren’t safe from unnecessary and arbitrary price increases.

In the already confusing world of credit card processing merchants must understand the importance of transparency and disclosure because it is an industry not nearly as regulated as banking, insurance or investments. Yet every day, more and more of small business payments comes from credit cards resulting in a significant business expense. Many of these changes will take effect with the April processing statement you receive in May, so be sure to read the fine print and notes on your February and March statement for any questionable fee increases. There may be a way that you can opt out or use this opportunity to switch to a different provider.