Top 5 Misleading Tricks That Payment Providers Use

When it comes to choosing a payment provider, there's a plethora of options. This abundance has made it possible to find some real duds out there. Learning how to navigate your way around the fine print is critical to being able to stay in business and not get strung up in smoke-and-mirror charges. In this post we are going to describe the most popular tricks that payment providers use and show you ways that you can avoid them or, at least, know what you're getting into.

1. Annual Fees

One of the biggest tricks you'll find in the payment processing industry is that many companies hide their annual fees. They're not always listed in the sales presentation and often aren't mentioned until the agreement has already been signed. This means that many small businesses are paying fees they don't even know they're being charged. Ask your provider to point out all the fees you'll be paying, including those that are charged annually but show up on your monthly statement. Some of these include boarding fees, early termination fees, standard annual fees and more. If you don't want to pay these costs, steer clear of companies that charge them—and if they get you to sign for one of these without telling you about it, ask them to waive it or have it taken off your contract. Most providers aren't willing to lose a customer over a small fee.

2. Contract or Cancellation Fees

Payment providers charge unnecessary "contract" or "cancellation" fees. This means, when you apply for a merchant account, the provider will try to get you to sign an agreement that says if you leave their service, they'll charge you a hefty fee to get out of it. If you're not careful and read through the fine print before signing on the dotted line, you could end up paying hundreds of dollars just to get out of a deal with your current provider. Some providers even claim they can't close your account until it's paid off in full. Other providers go one step further and even charge a percentage of what they feel like they would have made off of your account had you processed payments for the full term of your contract. In some cases, this can cost merchants thousands!

The bottom line: Always read anything before signing it — especially if it relates to your business finances!

3. Instant Approvals

Some of the most popular payment providers offer instant account approvals, but it’s important to understand that this approval isn’t really official. These providers allow merchants to start processing payments through a “pre-approved” account. This allows the provider to board merchants quicker and allow transactions to take place. Once the merchant is “approved”, they are put through the underwriting process. This process is where the payment provider digs deeper into the account to find if they can work with the business. It is during this process that underwriters will decide if the account should remain open or not. They may request documentation or deny all transactions. It really depends on what they find associated with the account. Allowing merchants to process payments through an account that may or may not be officially approved is why merchants often have closed accounts with their funds held. Then, once the payment provider decides they don’t like the account, it’s far too late. This is why there are endless stories online of merchants having their accounts closed almost immediately after signup.

Merchants should look for a payment provider that allows for immediate signup and approval after the underwriting process has taken place. This way, merchants can still benefit from the convenience of a quick online signup while making sure that once their account is approved, it’s permanent. If that’s what you need, then you can sign up through our website to get started. You can sign up 100% online, just like our biggest competitors. However, unlike with those guys, we don’t hide the fact that your account will go into underwriting. That way, once you are signed up completely, you will stay signed up!

4. Statement Fees

Payment providers charge statement fees to cover their costs for printing and mailing statements to customers. But some providers don’t send statements very often — only once per year or less — yet still charge you a monthly statement fee. To avoid paying these unnecessary charges, ask your payment provider if they can send you paperless statements via email instead of by mail.

5. Account-On-File Fees

In order to process payments or use a payment provider’s service, it’s pretty obvious that you’ll need to have your account-on-file. This fee may seem unnecessary, but it at least makes a little more sense than the statement fee. Payment providers ultimately provide a service for all accounts, whether they are running transactions or not. This includes risk monitoring, account maintenance and fraud prevention, which generates a cost per account for the payment provider. If a payment provider has a merchant who doesn’t run sales, the provider is still responsible for covering these costs. Account-on-file fees really come down to the provider and how they choose to handle these circumstances. If a provider does charge this fee, understand that there is reasoning behind it. If you don’t want to pay this fee, make sure you ask the provider if this is something that can be avoided.

In conclusion

We don't know about you, but we think that's a fairly good list. Not only does it square off with companies who engage in unethical business practices, it also offers some key insight for those of you who are considering signing up for a new payment processor of your own. Be smart and pay attention to the fine print, and you'll avoid any nasty surprises down the road. If you are looking to switch to a reliable, transparent payment provider - don’t hesitate to reach out to us! You won’t be given the run-around and you’ll be happy to hear you’ll speak to real-person, every single time.

Join us at reddepayments.com/contact or click get started to sign up!

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