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Beware of Companies Offering You "0.50% Processing"

It's been an unfortunate series of re-occurring events over the last few months for me... I've received multiple phone calls in that time from my clients who were confused after they got off the phone with another merchant service company (the same company, in all the instances, but I'll refrain from mentioning names). The telemarketing calls that came from this company epitomize why our industry has such a negative reputation! In all of the cases, the sales rep proceeded through a string of ridiculous, fraudulent, illegal, and disgustingly unethical lies that could very easily fool many business owners. 

This company starts the conversation by saying they "work for Visa/Mastercard and that they noticed in their system that the business is on the old rate structure and updates need to be made." That, in itself, is a lie that is punished by severe fines and black-listing from selling processing services ever again, since these sales reps work for a merchant service company, NOT Visa/Mastercard. They then tell the business owner they need to come by the office in order to "update" his account with the newer pricing, never once mentioning that their real intent is to SWITCH the account to their company.

The sales reps show up to the office and proceed to tell the business owner that they are going to "update their account to a flat fee of 0.50% for all credit card!" Sounds AMAZING, right?!?!? Hell, the average business pays about 2 to 2.5% to accept credit cards so these people can cut that down about 75%!!! Unfortunately, THIS IS THE BIGGEST LIE OF ALL!!! The way the plan REALLY works is that the business will pay Visa/Mastercards' cost PLUS 0.50%! This is a very typical plan that every merchant service provider can offer. It's called "Interchange + 0.50%." Typical Interchange (Visa/Mastercards' hard-cost) is about 1.5% to 2.5%. This means that Interchange + 0.50% would result in the business paying 2 to 3.00%. THE SALES REPS WILL NOT TELL YOU IT'S INTERCHANGE PLUS 0.50%, they simply tell you "flat rate of 0.50%."

In one case, the girl sales rep told my client "I will save you $130 per month by putting you on 0.50%." The funny thing is that my client was already on "Interchange + 0.40%" so the rep was FLAT OUT LYING to her!!! How could you possibly save someone money by increasing their rate???

The bottom line is this: If it sounds too good to be true, it is!!! Every merchant service company has to pay the same hard-costs (interchange) that Visa/Mastercard have. Offering a flat 0.50% would lose the merchant service company about 1 to 2% on every transaction. Period! If your business takes $20,000 a month, the merchant service company would lose  $200 - $400 a month by hosting your account. Sorry to be the bearer of bad news, but merchant service companies aren't in this industry to lose money.

As always, if you have questions, PLEASE don't hesitate to call me. My name is Cameron and I'm the CEO of Merchant Services of San Diego. My job is to insure every business gets the most honest merchant account possible! God bless you for reading and be careful out there!