As you shop around for credit card processing services, you quickly realize that is not the most honest industry. Common questions arise like: "Why do so few providers show their rates on their website?" or "Why are there so many rate structures?" or "Why can't I just get a straight answer?"
To help Canadian merchants avoid the pitfalls of the credit card processing industry, we've compiled a list of the top five things to watch out for when shopping for credit card processing services in Canada.
#1 Teaser Rates
Credit card processors advertising rates "as low as" 1.59% are pretty common these days. Unfortunately since the payment processing industry has no advertising standards, what they don't disclose are all the "assessment fees", "card-brand fees", "mark-ups" and non-qualified charges tacked on top.
Ever see flights advertised for "$99" each way? Ever pay "$99" for those flights by the time you reached the checkout? Unlike airlines however, most processors bury these hidden fees in the fine print and go unnoticed until it's too late.
#2 Non-Cancelable Lease Agreements
The pitch is simple. "Why rent when you can own?"
But there is a catch... Instead of selling you a terminal at a fair purchase price, they lock you into a 60-month leasing agreement, with a 25% buy-out clause and a high interest rate. By the time you're done with your lease, you paid thousands of dollars for a terminal worth a few hundred.
Why are equipment leases so common? Because those processors get a very large up-front commission from the leasing company, so leases are in their best interest, not yours.
#3 Interchange Differential Pricing
"Interchange Differential Pricing" is a recent tactic being used to "double-dip" merchants. The processor will promise you a small additional percentage for "premium credit cards", but the fine print will reveal that this percentage is charged on top of their already marked-up "interchange differential fee".
In other words, you will be charged twice for processing premium credit card transactions, resulting in higher fees than with your original pricing.
#4 Monthly Minimums
Nothing says "We don't value small businesses" like penalizing them for not processing enough transactions. Unfortunately, most small merchants soon realize that their low monthly fee is actually quite high.
Processors place "monthly minimums" on the total fees generated from Visa/MasterCard transactions, meaning that if you don't process enough payments, you are paying for them anyways. To add insult to injury, some processors even call these "low achiever fees".
#5 Contract Cancelation Fees
Most processors have cancelation fees or early termination fees. Instead of providing a good service at a good rate to keep your business, they implement long-term contracts to try and deter merchants from switching to a more affordable provider.