Capped card processing fees are mythical

We’ve seen “Capped card processing fees guaranteed” advertised by some merchant service providers and thought this was a good idea. With constantly rising business costs like rates and energy, then a bit of certainty must be welcomed by businesses?

But when you look closer at these guarantees they don’t stack up and are of little value to businesses. Here’s 3 things to consider :

  1. Who sets your card processing fees ? It is normally the payment processor (for example First Data), whose name is on the merchant account contract you sign, not the merchant service provider (for example Paymentsense) who has organised your merchant account facility, acting as an agent of the payment processor. Sure the merchant service provider has flexibility to set your initial card processing fees, but it is the payment processor who has the power to vary these rates in the future. So unless it is the payment processor making the guarantee, then beware.
  2. Read the caveats attaching to any of these guaranteed capped card processing fees. For example, in their small-print some note exceptions such as “if interchange costs increase”.¬† Interchange cost increases are the main reason that any card processing supplier increases their fees, so a guarantee that excludes interchange cost increases really is of little value.
  3. Are card processing fees likely to rise in the future or are they likely to decline because a cap is only of value if we are in a rising cost environment. Payment processors do historically continually try to increase pricing so in normal times a cap on card processing fees may offer some comfort. But the EU’s proposed cap on interchange fees which are widely expected to take effect in the UK in late 2014 will reduce payment processors’ costs by 0.5% on credit cards. This should ease any upward pressure on card processing fees in the medium term, de-valuing any cap.

So, if capped card processing fees don’t really exist, how does a business prevent its fees from continually rising. Simple, be prepared to switch providers – its easier nowadays than ever before and there is a greater range of choice¬†!

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