Finding a company to process your credit cards can be a lot like buying a car. You’re looking at identical vehicles but Dealer A’s price is different from Dealer B’s. Why? Well, maybe Dealer A added a warranty, or gave you a better interest rate on your loan; or, he waived the tags and title fee. Or maybe Dealer A is just making more profit on the sale than Dealer B but how do you know? The great thing about buying a car is that the variables surrounding the true cost of the vehicle are transparent. You can clearly determine if you’re getting a better interest rate on your loan or if the fees for tags and title have been waived. The issue business owners face when dealing with credit card processing companies is that most make it difficult to differentiate between the cost of processing and their markup over it. In this article, we follow on our last installment about predatory merchant services to detail more of the tactics some merchant services companies use to milk the most profit from your business.
As many of you may know, in February 2015 American Express lost their anti-trust lawsuit when federal judge, Nicholas Garaufis, ruled that AMEX had violated U.S. anti-trust laws. As many of you probably DO NOT know this lawsuit was originally filed in 2010 with the Justice Department “arguing that American Express unlawfully inhibits competition by insisting that its merchants not express a preference for one card over another”. You also probably aren’t aware that in 2012 Visa, Mastercard, and a number of other large banks settled this same lawsuit out of court for more than 6 billion dollars in fines.
Now, I’m sure you’re wondering why this is important and how it relates to “slimy sales practices”, and the answer is the spin.
In February, before the judge’s ruling, AMEX was trading at over $90 per share. Today it’s trading around $76 per share. You don’t have to be a financial genius to know that isn’t good for shareholders. So what does AMEX do? They launch the Opt Blue Program in March of 2015. This program lowers processing fees to the merchant and is designed to appeal to business owners who are accepting less than 1 million dollars a year in AMEX transactions. The ultimate hope is that this will increase acceptance across the board and build revenue for the company.
The launch of Opt Blue has opened the door for what we will call “creative sales tactics”.
The following is a true account of what happened to one of our merchants. For the purpose of this example, we will call our merchant 123 Supply Company and the sales associate in question Roy. Last week, 123 Supply Company received an email from Roy, a sales associate claiming to be a member of the “American Express Account Development Team”. Roy claimed he had an exclusive AMEX offer that would help 123 Supply Company reduce their credit card processing fees. Roy asked 123 Supply Company to send him a copy of a recent merchant statement for review and analysis. Now, if I may return to the earlier analogy, this isn’t the first car 123 Supply Company has purchased so they were apprehensive and reluctant to send a statement to Roy. Roy, completely understood 123 Supply Company’s reluctance and told him if he had any doubts prior to the statement review, he could “visit us at www.americanexpress.com/merchant or call Customer Service at 1 8005285200”. Fortunately, 123 Supply Company didn’t fall for this tall tale and contacted CLARUS for clarification.
Opt Blue rates are variable depending on the business type, the size of the transaction, and whether or not the transaction is card-present or not. Because of the multiple factors that affect the transaction rate there is more of an opportunity for processors to hide their markup. CLARUS isn’t in the business of hiding markup. We bill our fees for Opt Blue the same way we do Visa, Mastercard, and Discover as a flat rate above the baseline cost. The facts are that AMEX did recently roll out a program that could reduce merchant fees, it’s called OPT Blue, and it’s not exclusive to any processor. The “American Express Account Development Team” is an actual team but it was created by one our competitors to manipulate merchants and trick them into sending a merchant statement under the guise of saving money on AMEX. It is a classic case of how one rotten apple can ruin the bunch and how some credit card processing companies are still going to use “creative sales tactics” to solicit savvy merchants who normally wouldn’t be swayed.
*Opt Blue is only available to merchants processing > 1 million dollars a year in AMEX transactions. It doesn’t replace existing ESA programs for merchants processing < 1 million dollars a year in AMEX transactions.