9 Signs You’re Overpaying For Credit Card Processing

The cost of accepting credit card payments is higher than most people realize. Depending on your volume, you could be paying tens of thousands or upwards of hundreds of thousands every year just to accept plastic. 

But are you overpaying to accept credit cards?

I’ve identified the top nine tell-tale signs that you’re paying too much for payment processing. Read on to see if any of these red flags apply to your business. 

1. You See Non-Qualified Rates on Your Statement

If the word “non-qualified” appears anywhere on your monthly statement, you’re definitely overpaying for credit card processing. Here’s why.

The term non-qualified only applies to tiered or bundled merchant account agreements. With this structure, businesses either pay the qualified rate, mid-qualified rate, or non-qualified rate for each transaction—with non-qualified being the highest. 

But your payment processor arbitrarily sets these rates. So they’re almost always going to stick you with the highest possible cost per transaction because it means more money for them. 

Lots of merchants fall into this trap because they were lured in by the processor’s qualified rate, only to find that few (if any) transactions actually fall into this tier. 

2. You’re Using an Aggregated Merchant Account Provider

An aggregate merchant account provider uses a single merchant account for a portfolio of different businesses. Square, PayPal, and Stripe are all examples of aggregate merchant account providers. 

While these platforms make it easier for merchants to get set up and accept payments quickly without a lengthy underwriting process, the tradeoff is that they’re more expensive than getting your own merchant account. 

So if you’re using any of these providers to accept payments or a provider that has a similar pricing structure (like Shopify Payments), then you’re definitely paying higher rates to process credit cards. 

3. You Pay a Flat Rate For Each Transaction

Flat-rate processing sounds good in theory because you always know how much it costs to process each card. Many businesses like this because it’s transparent and there are no surprises—and that’s exactly how flat-rate processors position themselves in this space.

The problem with flat-rate processing is that it’s more expensive than interchange-plus pricing. 

Let’s say you’re paying a flat rate of 3.49% + $0.49 per transaction (this is an actual rate charged by one very popular aggregate merchant account provider).

The interchange fee imposed at the card network level could be something like 1.43% + $0.05 per transaction. But with your flat rate deal, you’re paying over 2% above interchange—which is highway robbery. 

Think about that for a second. That 2% is an extra $20,000 for every $1 million in credit cards you process. 

4. You Found Your Merchant Services Provider From a List of “Best Payment Processors”

If you found your payment processor on a “top ten” list or any similar blog post online, then I can almost guarantee that you’re overpaying to accept payments.

Unfortunately, these lists aren’t fueled by facts—they’re all based on affiliate marketing commissions. So any processor can essentially pay to be the top spot or appear anywhere on those lists. 

The websites that publish those lists need to make money somehow, so they’re incentivized to promote processors that either pay them the most or have the most lucrative affiliate programs for referrals and signups. 

5. There Are Tons of Extra Fees Unrelated to Processing on Your Monthly Statements

This is a one-two punch. First, you’re obviously paying extra fees in addition to processing. While these may not be too high, they can still add up to $300-$500+ in bogus fees every month.

But the real red flag here is that your processing rates may also be inflated. 

That’s because if a processor buries hidden fees in your statements, there’s a good chance they’re using other deceptive practices to squeeze more money from your business. 

If you see terms like PCI compliance fees, early termination fees, settlement fees, annual fees, terminal fees, gateway fees, and return fees on your statement, then you need to do two things. First, get those removed ASAP. And two, start negotiating your processing rates immediately. 

We have a list of the most common hidden fees in payment processing that you can use to help identify any extras on your bill. 

6. Your Effective Rate is Higher Than 3%

When you calculate processing rates, your effective rate covers more than just what you’re paying per transaction. It encompasses everything, including interchange rates, assessments, markups, and extra fees added by your processor.

Anything above 3% is a sign that you’re overpaying to accept card payments. 

So crunch the numbers on your statements and see where you stand. And if you’re having trouble calculating your effective rate, just reach out to our team here at MCC and we’ll take a look for you.

7. You’re Leasing Your Processing Equipment

Leasing your equipment is never a good idea. While there’s less of an upfront cost, you end up paying hundreds more or even thousands more than you would have paid by just buying machines outright.

Worst of all, you don’t even own the equipment after your lease expires. This forces you to keep renting—potentially at even higher rates than before. 

Do whatever you can to get out of your lease ASAP and take steps to own your equipment. This will save you a ton of money over time.

8. You Think You’re Overpaying For Credit Card Processing

It sounds simple, but sometimes your gut feeling is enough to tell you if you’re paying too much to accept credit and debit cards.

Maybe your sales rep promised things that sounded too good to be true. Or maybe your costs feel like they keep rising every few months. You may even get some wordy and somewhat ambiguous notices from your processor about “upcoming changes” due to “rising costs” or something along those lines. 

Whatever the case might be, if it feels like you’re overpaying then you probably are. 

9. You’re in a High-Risk Industry

Certain industries or business types are automatically flagged as a high risk by credit card processors. This is mostly due to highly-regulated industries or situations where businesses are more susceptible to chargebacks and consumer disputes. 

Businesses with bad credit or a history of processing fraudulent transactions may also be charged high-risk processing rates. 

If this sounds like you, then you are definitely overpaying to accept credit cards.

That’s because your processor feels like they have you cornered. They know that it’s tough for you to get a merchant account elsewhere, so they can charge high fees and continue to raise them knowing that you probably won’t fight it—you’re just happy someone will process your transactions.

But this is far from the truth. While high-risk merchant accounts may need to pay a little bit more than a typical business, it doesn’t mean that you should be getting price-gouged. 

So, You’re Overpaying For Credit Card Processing—Now What?

Credit card processing rates are negotiable. That’s right. 

Most businesses don’t realize this, but you don’t have to accept your rates at face value—and it’s 100% within your right to push back and negotiate with your merchant services provider. 

Gather your last few statements and call your processor. Start to call out the bogus fees and ask for a reduction. They’ll probably tell you that you’re already getting the lowest possible rate, but keep pushing.

Your processor doesn’t want to lose your account because they make money every single time you accept a card payment. So you have more power than you realize. 

I know that doing this on your own can feel a bit daunting. So if you want some help and guidance through this process, just reach out to our team here at Merchant Cost Consulting. 

We’ve saved millions of dollars for our clients by negotiating directly with processors on their behalf. We know what you should be paying, and we’ll make sure to help you get the reduction you deserve. 

Best of all, you won’t have to switch processors and there’s no risk on your end. We only get paid if you save money. So it’s a win-win for everyone. Get a free audit and analysis to find out how much you can save.