Predatory Merchant Service Practices: How to Protect your Business

May 10, 2015

At least once in a business’ lifetime, merchants who wish to accept credit cards have to go through the experience of signing credit card processing contracts with merchant service providers (MSPs for short). While in some cases the experiences are positive and make the lives of business owners a bit easier, in other cases, the word “experience” could better be substituted by “business ordeal”.

The industry of credit card processing is sometimes seen with suspicious eyes and is many times blamed for throwing transparency down the drain -what with hidden fees, obscure jargon and confusing contracts. These practices are commonly known in the industry as “predatory merchant services”.

Obviously, not all MSPs are created equal, but in this instance, we’d like to offer you a set of tips to avoid falling prey to practices that can seriously affect your business.

Read before you sign. Obviously.

This one seems glaringly obvious, but you’d be surprised by how many times merchants get duped by the small print (or by a lack of attention). If a merchant services provider quotes you one rate, make sure they are not adding any extra fees somewhere in the contract. Read it three times…you can only sign once!

Get some advice from your buying group or industry’s trade association and take advantage of their knowledge.

Normally, your buying group will have one or two preferred MSPs who provide payment services to them. Therefore, it’s always good to consult with them for advice. They have already done research on the MSPs that work with them and have probably been with them for some time. Thus, the chances of them being predatory MSPs are slim, as they will normally look to take good care of the buying group’s members in order to keep their existing contracts with the group itself. Referrals and reviews from trusted sources make all the difference when acquiring any product or service.

Don’t panic in the face of scare tactics

Many times, merchants are scared into buying equipment or services that they don’t need at that particular moment. This usually happens on the eve of a change in regulations or practices, where predatory MSPs put on the pretense of doomsayers and saviors alike. The EMV shift is a prime example of this “Buy these EMV terminals now if you want to avoid (insert language evoking an impending calamity)!” To avoid unnecessary purchases, do some research before you’re scared into buying new equipment. In most cases, you could wait until the introduction period has passed and prices stabilize. If in doubt, get some expert advice.

Go for interchange-plus-pricing structures and use reporting tools.

We recommend this type of processing cost structure. By going for an MSP with this type of pricing, you are avoiding remaining in the dark about the interchange rates that you are charged. This type of pricing means your MSP passes on the interchange rates to you, so you know what percentage of payments made to you go to the card companies. Some MSPs offer you reporting tools where you can keep track in real time of your transactions and avoid unnecessary downgrades and excess fees.

We hope you’ll find these tips useful in getting the best service from your MSP. For more information, get in touch.

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