While Helcim has always focused on honesty and transparency in all of our interactions with merchants, not all payment processors are as upfront with their billing and pricing.
This can lead to unfortunate surprises and prolonged frustration for business owners after they have signed up for a merchant account. We hope that this information can help you to better vet payment processors by knowing what to ask before you sign up for a merchant account. Darrah Brustein, a guest writer from Entrepreneur Magazine, recently described credit card processing sales agents as “The used car salesmen of financial services.” Consider yourself warned.
Playing The Elevator GameOne of the most common sales practices is known by industry insiders as “The Elevator Game.” Preying on merchants who may be hunting for the lowest rates, providers advertise an impossibly low rate to initially persuade unsuspecting merchants to use their service. They have now entered the “elevator” on the ground floor, and the game begins.
Only a few months after signing up, the provider begins their “elevator” billing program by increasing their processing rates, sometimes as frequently as every few months. To disguise the rate increases, the providers create confusing monthly statements (often the weapon of choice for dishonest providers) so they can hide the increases for as long as possible. Every rate increase without the merchant canceling their service is another victory and another floor on the pricing elevator. Sooner or later, merchants realize just how large the monthly fees debited from their bank account have become and start looking for a way out. Sometimes its relatively easy, other times they face harsh termination fees or find themselves locked into lengthy equipment leases and multi-year contracts, which we will discuss in more detail later. Oftentimes in their panicked haste to leave their current provider, merchants will land with another unscrupulous provider with a slick sales pitch, who is once again promising low fees for signing a new contract, effectively getting you to step back into the elevator.
At Helcim… we have a rate lock guarantee, which means that our Cost+ margin will not increase for the lifetime of your account with us.
Back Billing Without ScruplesImagine visiting your local bakery and seeing a beautiful cake for $10. The baker explains why their cakes are the best and the cheapest, so you happily purchase the cake and head home. The next day you check your online banking and notice there’s a second bank withdrawal for another $10 from the same bakery. You call demanding an explanation, only to be told that you should have read the fine print – that this is how cake buying works and you should have known this. This is how the terrible industry practice of back billing works.
Just like with the elevator game, processors will lure in unsuspecting merchants with the tempting offer of low processing fees. When you check your statement after the first month of service, you see the promised rates and nothing more. Happy with your decision, you drop your guard and forget to scrutinize the next month’s statement. This is where the back billing begins, and additional fees for last month’s transactions are mixed in with the current month’s charges. Because your processing volumes vary every month, thus changing your monthly statement amounts, it can be extremely difficult for merchants to determine their true processing rates.
At Helcim… we post all of our pricing, fees, and rates on our pricing page, so you know exactly what you’re being charged at all times.
Faking the InterchangeThe “Interchange rate” is the base charge – a small percentage of a given transaction – that the card-brand will charge for each transaction that is processed on their network. The billing practice of passing those Interchange rates onto the customer with a fixed margin on top is commonly accepted as being the most honest and transparent, and it is called Interchange+ pricing (also known as Cost+).
So how can you take such a transparent practice and somehow make it dishonest? What happens is processors portray themselves as a Cost+ provider but overcharge for the Interchange rates and hope that merchants don’t notice. In a Cost+ model, the Interchange rates are supposed to remain constant and be charged at the rate publicly listed on Visa and MasterCard’s websites. Processors feel like they can do this because, while the rates are publicly available, the sheer volume of categories (there are hundreds!) can make it hard to keep track of what each payment should be processed at. Unfortunately, even good practices can be taken advantage of by payment processors who are only focused on their short-term profits.
At Helcim… we bill all of our merchants using interchange+ pricing and we actually disclose the true wholesale interchange rates set by Visa and MasterCard. Our monthly processing statements clearly break down the specific Interchange rates and show our markup on the total volume on a separate line. This ensures that merchants know our cost and our margin, creating a very transparent relationship between us, the processor, and you, the merchant.
What to do about it
While these practices may be discouraging to a new merchant looking for a payment processor, know that there are honest and transparent processors out there. By knowing that these payment tricks exist, you can ask the right questions to see through the facades and select a payment processor who is committed to being a good partner for your business.