Spring is a time when most business owners look forward to an increase in sales. This is also true of your Merchant Service Provider. Most companies will raise their rates once or twice a year. April has become one of those months when they like to raise rates. This is to align with the card brands adjusting their costs to the provider. There is more to increases however…
Why are there increases in fees?
Fees are generally increased when the pricing model does not generate enough profit. This is not necessarily true when it comes to credit card processing. Depending on if you have a Tiered or Interchange Plus pricing model your costs are already covered by the markup. On Interchange you get rates passed directly to you from the brands. This means that your costs are already covered. On Tiered you can actually be priced lower than cost on some cards but the majority are priced higher.
When and where are fees increased?
With most processors you will see fees go up once or twice a year, in the spring and fall. It is true that the brands do adjust the rates twice a year but it doesn’t always mean they go up. In the recent, past fees on some rewards cards and debit cards have actually gone down. You may not have actually seen this adjustment go down because processors like to hide behind the brands and just say they went up.
There is a couple ways to tell if your rates are going to be affected.
By now you should know if you have an Interchange or Tiered pricing model. If your account is an Interchange Plus account then you will generally see increases to your markup above interchange or your transaction fees. You may also see them in an additional monthly fee. On a Tiered account you will generally see the increase in your mid and high range rates. One easy way to tell is to simply read the notes section on your account. You can also dive a little deeper by checking your Net Rate. This is done by dividing your total fees into your total amount processed for a given month (Fees/Volume = Net Rate). The resulting number should always stay similar throughout the year with similar processing volumes. If it goes up then your fees went up.
What can you do?
You can always do something about fees going up. For one, do some research. Check Visa’s and MasterCard’s sites to see if there have been any increases. If there are no increases or nothing significant, call your processor and let them know that you’re not going to put up with it. If they refuse to work with you then switch. You should be able to get out of any contract you have since they are changing the terms and you do not agree with the new terms.
If you would like an outside opinion or a quote from a company that does not raise fees Contact Us for assistance.