How to Identify Dubious Credit Card Processing Fees, Part Two

The purpose of this show is to determine suspicious fees that are generally charged by specific credit card suppliers. Bear in mind, there’s a lack of enforced standards in the card processing industry and all providers don’t impose or compute rates and fees in exactly the exact same manner. It’s possible, therefore, for two suppliers to provide apparently the very same rates and fees but nevertheless have significantly different processing costs to merchants.

Refund Processing Fee

All merchants should understand how the supplier processes refunds before they sign the processing arrangement. This is particularly vital for ecommerce companies since they probably have more refunds than the normal card-present merchants.

When a merchant refunds the client for a returned item, Visa and MasterCard return the interchange fee for the initial sale to the supplier. The interchange rate generally constitutes most the whole processing fee. The amount returned by Visa and MasterCard might not be the specific interchange charged for the sale due to the tiered interchange refund program they use. Nonetheless, the huge majority of the interchange is returned to the supplier. But, there are no enforced business standards that require the supplier to provide the return to the merchant. Even worse, some suppliers not pocket the returned but they also charge the complete processing fee on the refund transaction. This suspicious fee costs many ecommerce merchants thousands of dollars every year.

Providers normally handle refunds in one of four ways.

  1. Return the whole processing fee. Some suppliers not only return the interchange but also return the whole processing fee. They may charge a transaction fee (say 10 cents) for the sale and the refund.
  2. Return the interchange. Some suppliers properly return the interchange to the merchant. They bill their markup (state 0.10 percent) and a transaction fee on the sale and a transaction fee on the refund.
  3. Maintain the interchange. Some suppliers keep the interchange. In actuality, they keep the whole processing fee change on the sale and charge a transaction fee on the refund.
  4. Maintain the interchange and charge another processing fee on the refund. Some suppliers keep the whole processing fee, for example, interchange, charged on the sale and then charge another processing fee on the refund.

The cost difference between Provider 1 and 4, in the cases above, can be enormous if they both provide the same rates and charges. By way of instance, say a merchant had 50 refunds totaling $10,000 and state the successful rate was 2.5 percent + $0.10 per transaction. Provider 1 would charge just 50 transaction fees for the earnings and 50 transaction fees for the refunds — for a total of $10. Provider 4 would cost 2.5 percent + $0.10 on the $10,000 in earnings and charge 2.5 percent + $0.10 on $10,000 in refunds — totaling $510. The gap between Provider 1 $10 commission and Supplier 2’s $510 fee is substance, particularly once you think about the merchant’s net sales were zero for all those transactions.

Address Verification Service Fee

The address verification service charge — AVS — is a fraud reduction tool supplied by credit card associations and issuing banks to examine the credit card billing addresses submitted by clients. Alas, the AVS fee is one the most hidden and deceptive penalties used by some suppliers, to generate revenue at a merchant’s expense. This fee may have a material effect, particularly for merchants with a low average sale amount or a very substantial transaction volume.

Moreover, many salespeople and customer service private at merchant account providers don’t know the true fees charged by the card companies. They may say that the AVS fee billed by the supplier is a card firm fee rather than their fee. This isn’t necessarily accurate.

In actuality, MasterCard charges a $0.0075 (0.75 cents) per transaction AVS fee for ecommerce and other card-not-present merchants once the merchant uses address verification service to confirm a cardholder’s address. MasterCard also charges a $0.005 (0.5 cents) per transaction AVS fee for card-present merchants when they utilize the service. Nonetheless, some suppliers will attempt to control their own AVS commission on all credit and debit card transactions. Ordinarily, these suppliers will cost $0.05 to $0.15 per transaction. For these providers, the AVS might be used to create their speed of state 0.10 percent + $0.05 look better than the competitor’s rate of 0.10 percent + $0.10 when actually they’re charging a $0.10 AVS fee in addition to the speed and the competitor does not charge an AVS fee.

American Express Transaction Fee

It would not be surprising to find you’re paying a higher per transaction fee for American Express than you are for Visa, MasterCard, and Discover. When auditing statements, it is not unusual for me to find that the Amex transaction fee charged by the supplier to be 2 to 4 times over the other card manufacturers. There’s absolutely not any justification for the massive difference in those transaction fees aside from the supplier knows the merchant is not worried about the fee. It may be another dubious revenue generator for your supplier.

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