Hidden Fees That Payment Processors Charge Their Merchants

Credit card processors are notorious for complex pricing and terms that confuse their merchant customers. Typically, the first thing that comes to mind for a business owner is “hidden fees.” How do you know what’s a good deal for your business? Each processor has their own pricing model with different terms and line items. This complexity allows these payment providers to hide fees which go unnoticed until the customer gets their first statement.

Fortunately, if you know what to keep an eye out for, you can prevent yourself from falling into a money trap. Let us help you avoid the most commonly charged hidden fees!

Cancellation Fees:

Depending on your processor you might be signing up for a contract. Signing up for a contract means you are agreeing to stay with that processor for a period of time established within the application. This might not be a bad thing depending on what you want for your business. The downside is that when this happens, these processors may charge a cancellation fee. Crazy, right? We’ve seen cancellation fees as high as $300. Even worse, some processors calculate how much money they will lose on your account for the remainder of your contract and charge you the difference. This could end up costing you thousands of dollars!

As if that wasn’t horrible enough, sometimes processors will even go one step further and tell you that you CAN cancel at any time. Technically, they aren’t lying. You can leave whenever you’d like. However, there is a fee to discontinue service, which is essentially a cancellation fee. Don’t fall into this trap. Ask upfront how you can cancel service and if there is any fee associated with cancelling your account. Like any contract, the contract carries more validation than words. Make sure all of their promises are within any application or contract you sign.

Statement Fees:

You would think that getting your statement from a processor is part of their job. However, charging for a merchant’s statement is a commonly charged fee. Not all, but some payment providers charge up to $5/mo for what is called a “statement fee.” This means they are charging you for printing and sending your statement via mail. This fee can typically be negotiated. If you notice it on your statement, call your provider and ask for it to be removed. They may not immediately comply, but generally a payment provider won’t lose a merchant over a $5 charge.

Account on File Fee:

You can’t process any payments or use a payment provider's service without having an account on file. Although this fee may seem completely unjustified, it makes a little more sense than the statement fee. Payment processors provide services to all accounts, including risk monitoring and maintenance, which can generate a cost per account whether they process or not. So, if a merchant runs no volume a processor will lose money on the dormant account. It really depends on the provider and how they like to handle business. For Redde, it’s associated with the cost of doing business. Understandably though, if a provider does charge this fee, there is reasoning behind it. If you don’t want to pay this fee, make sure you ask the processor if this is something that you can expect to pay.

Annual Fees:

This particular fee is charged by processors to cover their costs. This should be an immediate red flag. Payment processing companies already charge a markup in addition to what the issuing bank and credit card associations charge (Visa, MasterCard, Amex, Discover). If they are charging an additional annual fee, they are essentially charging you twice to earn more profit.

Administration Fees:

Administration fees can mean just about anything. Payment providers may say it’s for maintenance or for providing customer support. However, this fee is the easiest way for processors to hide fees. Administration can mean just about anything and if a merchant sees this fee on their statement, they usually won’t argue against it. If a payment provider charges this fee, they are taking advantage of their merchant customers. Anything that would fall into this category is already being covered by all other required charges. Don’t fall for this common hidden fee!

Conclusion:

Payment providers can really help your business grow with the right solutions and equipment. They can add value to your business and that will ensure you gain more sales and long-term customers. If you know what hidden fees to look for, you can start a long, happy partnership with the right processor. All of the fees listed above are not part of what Redde charges. We pride ourselves on being both transparent and honest with our merchant customers. We don’t charge unnecessary fees or provide pricing that is confusing and hard to understand. If you are interested in doing business with a payment provider who isn’t like the rest, join us!

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