We are all aware that if you are in business you must accept credit cards as form of payment. What most are not aware of is how the industry works and why you need an advocate on your side to make sure your money is going in your pocket and not someone else’s. You can very easily increase your bottom line by up to 5% with the proper knowledge and with very little effort from you or your staff.

One problem most merchants have is that as soon as a sales rep calls and mentions credit card processing, their ears close. Practice managers, office managers, and even doctors get pitched on credit card processing multiple times per month from friends, family, banks, telemarketers, and sales reps knocking on their doors.

Sales reps

The reason you are approached so often is simple, sales reps selling merchant services earn a residual income from every transaction that you process in your business. A percentage of every sale run on your credit card system will go into quite a number of people’s pockets. Most believe that it is Visa and MasterCard, and possibly the banks that make all the money on transactions. The secret is that there is also an acquiring bank, processing companies, independent sales offices, agents, and possibly even sub‑agents that all earn a small piece of your transaction. That’s up to six people that can be earning money on your back.

The problem is that there is no regulation set up on the acquiring side of the business, so a sales agent working in the business, who is usually not educated on the details, will do anything to sign your business up and keep the rates as high as possible. Yes, some of you are smart and shop around for the best rates and have excellent programmes; however, I will explain why these programmes can be very misleading.

Unethical practice

In 2007 and prior, the margins for sales agents were excellent and an agent could make more than 1.5% of each transaction from your business without you knowing it. As the economy began to collapse, margins started to compress and competition got fierce. Many of the mortgage agents started selling in the credit card space to build a residual income after their income got slashed. This actually started the cannibalisation of the industry. Margins on processing dropped to under 0.5% for many, and even as low as 0.10% for agents. While this was positive for you (the merchant) at the time, what followed is why it could be costing you more to accept credit cards.

If you’ve ever looked at a merchant statement you would realise it is impossible to decipher. There are more than 600 card types, different terminology for each category, ridiculous miscellaneous fees, and really no clear way to understand pricing unless you become an expert in the industry, but who has the time? Because the industry is complicated, it opened the door to unethical practices by agents and processors. Everyone working in the industry needed a way to make more money and unfortunately, it was on the back of the business owner.