Merchant service fees start to add up for honest businesses

By Robb Hicken/BBB’s chief storyteller

When you’re a small business starting out, even a small increase in the amount you pay for merchant services can affect the bottom line.

Gene Turley, owner of Kiwi Loco, came unglued when he read his statement from Payment Systems. For an unexplained reason, there were surcharges of $99 and $ card processing

“None of this is in the contract,” he says. “It’s nothing we agreed to at the time of signing the contract.”

Gene and Carol Turley started with a single store in Twin Falls in 2010. By mid-summer 2012, the business had grown substantially to the point where they needed to upgrade their credit card processing.

“We were doing about 800 transactions a month,” Carol says.

Kiwi Loco owners contacted a merchant service provider and negotiated what they believed was a no annual fee, low credit card and swipe fees agreement.

When the contract arrived, they signed and sent it off.

“That’s the mistake many small businesses make when they sign up for merchant services,” Dan Harrington, president of NLP Secure, a Boise-based services provider. “They sign the agreement thinking that’s it, all’s taken care of. But, it’s not.”

He says agreements are hundreds of pages loaded with clauses in fine print that basically allows providers to act unethically.

“What businesses don’t know is that the service provider, once they’ve locked you into a 48-month contract, have the advantage,” he says.

Additional fees, surcharges and compliances can be added as the service provider sees right.

Businesses, as a result of litigation, in the U.S. and its territories can pass surcharge fee directly on to customers that use credit cards (but not debit or prepaid cards).

Your customers will feel the impact, when you pass along these surcharges. Price changes in merchandise and services the most notable and visible.

But, you can make palatable changes at the cash register. A coffee shop in Nampa is transparent about it clearly stating that purchases under a $5 will be charge 3% more when you use your credit cards.  Another shop displays a sign that reads: “All cash paying customers will be rewarded with a monthly $10 gift card. For years, gas stations have posted “Cash Prices.”

Above all else, be transparent with your customers and help them understand the crunch.

BBB suggests teaching your customers to:

  • Use cash for smaller purchases; offer a discount if they pay with cash
  • Use a debit card with “bricks and mortar” establishments, and be a trustworthy businesses in your transactions
  • Use a credit card for online purchases where they can receive greater protections
  • Monitor their bank account and credit cards accounts watching for surcharge fees

In addition, educate yourself as to changes in the merchant services industry. Talk to your bank manager; talk honestly and openly about fees, recommendations and . While they do not control the surcharges, they become more aware of your situation.

Harrington says the more a business knows about the service provider and alternatives on the market the more leverage they have when it comes to renegotiation and/or sign with a provider.


1 Comment

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One response to “Merchant service fees start to add up for honest businesses

  1. Mark Burrows

    Now, here is something that has raised my hackles for years. Fees are the greatest unchecked white collar crime in history that has no laws nor regulations to bind or block them. Banks are making multiple billions of dollars in profit in fees. Try this, go into your bank and ask your teller how much her income has increased with the massive amounts of profit the bank makes with fees. Oh, they will brittle, but they are not getting any of it. Those fees do not show up as assets to the bank, they go directly into the pockets of little circle of the CEO. If the bank goes broke, they at least walk away with a nest egg. Same applies to airlines, credit card companies, or anyone else who uses the word fee. A fee is worse than taxes, with taxes you already know your government is squandering it away. So, you find ways to garner tax deductions and work hard to pay as little as you are required to. A fee is not tax deductible, it is cash out of your pocket that has no chance to be recovered. Does government do anything about it or investigate it? No, but I have heard they promise to look into it. Sure, we all know what the word promise out of the mouth of a politician means.

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