If we were to take inventory of all the things business owners are confused about, payment processing would definitely be high up on that list.
Among other uncertainties, many business owners have no idea how to read their monthly statements, why they’re being charged such high fees, what those fees are for, or who’s collecting them.
All they know is they need to be able to accept payments with credit cards, and in order to do that, they have to pay for this service.
Unfortunately, a lot of payment processing providers are taking advantage of this confusion by disguising their true intentions, making ridiculous claims, and offering deals that are obviously too good to be true.
We’re not going to name names, for obvious reasons, but we’re tired of seeing business owners get bamboozled like this, so we wanted to warn them about this sort of thing and give them a heads-up about what they should watch out for so they can avoid getting ripped off.
So, if you’re confused about payment processing, or overwhelmed by the idea of choosing a payment processor, then you’re going to want to keep reading.
Because in this article, we’re going to let you in on what you need to know to make the best possible decision and avoid getting scammed in the process.
What to Watch Out for When Choosing a Payment Processor
As we said above, we’re not going to name any names here because if we did, we’d be shooting ourselves in the foot.
But what we are going to do is detail the questionable practices of several providers, so you, as a business owner, will know what to look out for when making your choice.
So, without further ado, let’s look at what you need to watch out for when choosing a payment processor.
1) Guaranteed Rates
Speaking of taking advantage of people’s naivety, some providers will advertise their services based on the fact that they can tell you the exact rate you’re going to pay on each transaction.
Undoubtedly, this sparks interest in business owners who’ve been told (rightfully so) by other providers that they can’t tell them exactly what they’re going to pay, as every card’s rate is different, and there’s no way to know what kinds of cards their customers are going to use.
We deal with this sort of thing all the time, where business owners will call us demanding to know exactly what their bill is going to be each month, and because we don’t offer a flat rate (because it’s not in the best interests of business owners), we have to tell them that we don’t know how much they’ll have to pay each month.
And of course, many business owners don’t like this, typically because they don’t understand how things like interchange rates work.
We even wrote an article on this, explaining Why It’s Impossible to Calculate the Cost of Payment Processing, so check out that post if you want to learn more about this topic.
In any case, obviously, it would be great to know exactly how much you’re going to pay each month for your payment processing, but the problem with this is the only way a provider is going to make that claim is by charging a flat rate that’s considerably higher than the average. Otherwise, they’d lose money.
So, don’t be fooled by this marketing tactic because you may have a better idea of what you’re going to be paying each month, but you’re going to be paying more for it, and that’s just not worth it.
2) Ease of Use
We love a device that’s easy to use as much as the next business owner, but sometimes ease of use is used to distract customers from other, less desirable aspects of a company’s business practices.
For example, back in 2010, a certain computer and electronics manufacturer (who will also remain unnamed) was in the midst of another resurgence, doing whatever it could to convince everyone that its products were easier to use than those offered by its competitors.
But at the end of the day, was that even true?
From our perspective, the answer was no. They ran an amazing marketing campaign, and it worked, but at the end of the day, this company’s products weren’t any easier to use, and what’s more, many of its products cost two or even three times as much as those being sold by the competition.
In retrospect, this scenario is eerily similar to what’s going on today in the payment processing industry.
Some providers are marketing their devices based on ease of use, but in most cases, the difference between their devices and everyone else’s is negligible at best.
At the same time, some of these same providers are charging their customers two or even three times as much per transaction as the competition.
But with everyone so mesmerized by these “easy-to-use” products, it seems some business owners are forgetting to look at how much the service is going to cost.
So, if a company is advertising its services based on the ease of use of its equipment, make sure to actually confirm that it’s considerably easier to use.
And more importantly, when choosing a payment processor, make sure to look at the rates they’re charging per transaction, and then decide if the “ease of use” is really worth the price.
3) Fees Being Waived
Another tactic we’ve seen from payment processors is to waive some of those pesky fees business owners hate so much.
For instance, typically, payment processors will charge a monthly rental fee for their equipment, and many of them also charge a monthly statement fee.
But in recent years, some providers have committed to waiving these fees, and have been using that to advertise themselves as more affordable.
Sounds great, doesn’t it?
In theory, yes, this sounds amazing, especially to disgruntled business owners getting gouged on their payment processing.
But if you actually take the time to look into what they’re charging, oftentimes, it becomes obvious that this is just another marketing ploy, meant to distract business owners from what they’re actually going to be paying.
Because in spite of the fact that they’re waiving these fees, a lot of these providers are charging a flat rate on each transaction and a flat fee, both at prices that are way higher than the average.
For instance, even though the average interchange rate paid on a credit card in Canada is 1.4 per cent, and these rates range anywhere from 0.87 to 2.85 per cent, some companies are charging a flat rate of 2.6 per cent or more, which allows them to scoop quite a bit off the top because these rates are considerably higher than what you’d pay on about nine out of ten credit cards.
And believe it or not, the rates continue to snowball from there.
Some of these same companies will charge rates of 2.9 to 3.4 per cent for transactions done over the phone or online, and they’ll also charge a 30-cent fee on credit card transactions and a 10-cent fee on debit transactions, even though the average for these kinds of fees is usually something around five cents for credit and four cents for debit.
These companies will then waive some of their fees, hoping you take that bait while ignoring the fact that their rates are incredibly high.
So, if you’re thinking about choosing a payment processor, keep in mind that they can waive all the fees they want, but if you’re paying twice as much or more on each transaction, that’s a pretty raw deal.
How Our Approach is Different
Here at Lucid Payments, we pride ourselves on using a personalized, flexible approach that allows us to tailor our services to the unique needs of each customer and nine times out of ten, find ways to save them money on their payment processing.
The first thing we like to do with customers is to review the last statement they received from their current provider, so we can determine what kinds of cards their customers tend to use, and with that in mind, try to figure out how we can help them save money, if at all possible.
Now, because we take everything on a case-by-case basis, and refuse to charge flat rates, we’re not going to be able to tell you exactly what you’re going to pay each month.
But if you’re with a company that’s charging you a flat rate of 2.6 per cent or higher, we can pretty much guarantee you’ll be able to save money with us.
And aside from refusing to charge flat rates, we also prefer to use what’s known as cost-plus pricing.
This means that whatever the interchange rate is on a particular card, that’s what you’re going to pay.
Unlike the other guys, we won’t inflate these rates with extra markup or miscellaneous fees, and if the credit card companies reduce their rates, that reduction will be reflected on your bill because we want to pass those savings on to you.
We prefer this kind of transparency and loyalty over flashy marketing campaigns or preying on people’s naivety, so we’ll never try to fool you with fake deals, or capitalize on your lack of understanding.
We’re tired of seeing business owners being manipulated by some of the unscrupulous players in our industry and in response to that, we want to do whatever we can to protect the best interests of business owners and provide absolute clarity for our customers.
So, if you’re sick of being bamboozled by the big guys, maybe it’s time you gave Lucid Payments a try.
Are you tired of payment processors trying to take advantage of you? We’ll strive to ensure you have absolute clarity when it comes to your payment processing. Give us a call today to learn more about what we can do for you.