How Can I Have The Lowest Discount Rate and The Worst Deal?

Credit card processors know that merchants look at two things: (1) discount rates and (2) transaction fees.

An average merchant statement that runs from four to ten pages per location contains tons of fees—more importantly, tons of unregulated fees. These unregulated fees mean everything in the merchant processing world.

The Oxford English Dictionary defines “unregulated” as follows: “Not controlled or supervised by regulations or laws, as in ‘an unregulated free-market economy.’”

If something’s uncontrolled or not supervised, then no one is looking or even cares about what’s going on. I define “unregulated” as giving someone free rein.

To quote Senator Dick Durbin, “We also know the current interchange system is unregulated and uncompetitive.” He goes on to say, “Small businesses and large businesses alike are being overcharged across America by credit card companies and banks, without restraint.” Senator Durbin made these statements on the Senate floor back in 2011.

Two of the world’s largest credit card processors recently reached a $52 million out-of-court settlement over allegations of over-inflating interchange. One may ask why they would settle if no rules were broken. You can read more about this in The Capital Forum. So, what’s “inflating interchange” (a.k.a. “enhanced billing”)? It’s when a transaction has an interchange rate of say, two percent, and the credit card processor charges the merchant anything over two percent. We find the average rate the processor over-inflates is around .65%. So, if your disclosed discount rate is .05%, your actual discount rate is .70%.

This type of overbilling is very hard to spot. It’s so hard that most sales reps for processors would miss this.

Processors widely use this billing method due to its intense labor and complexity. Even the smallest merchant can require hours to do the research, trying to match charges to the published interchange charts line by line and then do the math to determine whether the billing has been inflated.

Processors often over-inflate American Express dues and assessment fees as they know it is much harder to validate those fees with the extra layer of complexity of American Express programs. We have seen processors inflate these fees by as much as 0.83 percent.

Again, if the merchant had a 0.05 percent discount rate, their actual American Express discount rate would be 0.88 percent. I say discount rate because the discount rate is the processor’s profit, whether it is disclosed or hidden within an inflated American Express dues and assessment rate.

They changed the name to “Network & Processor Access Fee”. It is super easy to overlook that the name has been slightly altered, adding in one little word, “Processor”. They feel like this is their way of being transparent. After all, they did kinda did tell you. We find they almost double the fee, anywhere from a few hundred to a few thousand dollars a month to the small merchant.

The above is just a small sample of hidden or inflated fees. This blog post would have to be quite a few pages longer to list them all, and even then, it wouldn’t truly cover them all because we find new ones all the time. I think they spend more time trying to figure out how to hide fees than they do on how to help merchants stop fraud.

You can get a free audit to see if you are getting overbilled and if your statement is full of hidden or inflated fees, as well as made-up fees.

Go to weAudit.com and simply upload your statements, and in a few days you will get your findings. No risk or obligation with no strings attached and no credit card. It’s our free gift, much like the big box grocers that give you the free cookie in hopes you will want to buy the whole bag once you see how good it is.

Subscribe to insights  –  Read more Insights   –  Submit an article idea