Every once in a while, I run into someone who openly admits, “I have no idea how merchant processing fees work.” But on a daily basis, I speak with plenty of people who are confident they know everything about it. It takes me back to when I first moved from working in the bank to the merchant processing side. I remember thinking, “This has to be the easiest job ever.” My plan? Simple:  if the competition charges 20 basis points for their discount rate, I’ll charge just under that, close the deal, and go to lunch.

Wow, was I wrong. Two weeks in, I was already on the phone with my old boss, asking if I could come back. His response? “Your position’s been filled.” Fast forward a decade, and I’ve learned a lot. I’ve written a book exposing deceptive billing practices, spoken at events nationwide, done countless interviews, and am referred to as an industry expert by every major credit association.

But let me be real—just like I was in my book—I’m not the ultimate expert. I just know more than most. The truth is, no one can know everything about merchant processing. The industry evolves constantly, and staying up to date takes up about 20% of my workweek.

For those who think they’ve got it all figured out, we’ve created two quizzes to put your knowledge to the test.

The first one is a simple exercise:  Find the $79,551 in overbillings. And unlike most tests, we encourage you to cheat, Google, call your friends, reach out to anyone in the merchant processing space—anything goes! Click here to get started.

The second quiz is for those who believe they really know this industry inside and out. If you score 90% or higher, we’ll pay you $1,000. If you fall just short at 90%, we’ll still give you $100. But this time, no cheating allowed—some questions are timed, so you won’t have time to Google or phone a friend.

Click here to take the second quiz and see if you can win $1,000!

So why did we create these quizzes?

Because you can’t fix or effectively manage something you don’t fully understand. It’s like playing a casual game of football with friends—you don’t need to know every rule to have fun. But if there’s a million dollars on the line, you’d want to know every loophole, every rule, and every strategy to win. There’s a difference between playing for fun and playing when the stakes are high.

That’s why so many companies trust us. They understand that merchant processing isn’t a casual game—it’s a complex, high-stakes competition where the rules are rewritten over 200 times a year by the very teams they’re up against.

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If credit card processing networks controlled ACH Fees, then ACH fees would look very different than they do today.

When addressing the Senate back in 2011, Senator Dick Durbin said, “Credit Card Interchange is a price fixing scheme.”

Finally someone, besides me, that sees this for what it is.

If credit card processing networks controlled ACH Fees, it would look something like this:

• Was color was the check?
• What day of the week was the check written?
• Was it from a business or personal check?
• Was it a single signature or dual signature check?
• Did it have cats or dogs printed on the check?

I could go on and on, but I think you get the idea.

There are things most merchants don’t realize about credit card interchange. Like when a retail merchant has to key a transaction and puts in the wrong billing zip code, Visa hits that merchant with a substantially higher interchange fee. Why? Because this transaction is considered a higher risk. This makes sense, except for one major thing… WHO is at higher risk? It’s the merchant will not get paid if the transaction turns out to be fraudulent in addition to being out the cost of the product or service they provided.

Let’s make this simpler to comprehend… Imagine your child just turned 16 and started driving. The insurance company tells you that your rates are going way up. Of course that makes sense now that you have a high risk driver. Imagine if they end up getting into an accident and the insurance company tells you, “sorry, but your child is not covered” even though your rates soared to offset the risk. In no other industry would this be acceptable.

Or, how about paying much higher interchange fees because a transaction is tax exempt? Why would you have to pay way higher interchange fees just because the buyer had a tax exempt status?

Again, I could go on and on, but I hope you get the idea. They make up crazy rules in order to force merchants’ transactions to downgrade so they can charge them a higher interchange fee.

In order to keep merchants guessing, they are constantly adding and removing fees, as well as adding hundreds of new interchange fees since as far back as 1991. At that time there were a total of only eight interchange categories, and it grew to just over three hundred by 2009. Today in 2024 there are approximately one thousand! Why are there so many interchange categories?? Well, because they can!

One of our greatest expenses is updating our software just to keep up. Every April and October they change the rates; however, unlike what the media says, (see below) the rates hardly ever move.

In the chart above you will see in 2009 the highest rates ranged between 2.95% – 3.25%. As of today (September 2024) fifteen years later, the highest tiers range between 3.15% and 3.30%. That’s about 0.01 per year. Nothing else has had that small of an increase that I know of, and as we all know, most things have skyrocketed over the last few years.

So why would they say credit card fees keep going up?

Read some of the other insights like:

• Are Credit Card Processors Inflating Your Interchange Fees?
• The Great American Heist – How Credit Card Processors Steal Businesses’ Profits
• How Can I Have The Lowest Discount Rate and The Worst Deal?
• Do You Have Risk Fees On Your Credit Card Processing Statement?

The common theme is credit card processors add in made-up fees, inflated fees etc.

Here is the good news! We help merchants with Interchange Optimization™ – getting merchants transactions to settle at the lowest interchange rates, reducing the average merchant’s interchange fees as much as 30-40%.

Credit card processors do everything they can to make things hard and make merchants pay higher fees. We do everything we can to help merchants get their credit card fees reduced, and for pennies on the dollar. Make sure you check out our fees at the bottom of our home page.

Then you will see why Kevin Harrington from Shark Tank says we truly are a NO-BRAINER!

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Is the title a statement or a question? It’s up to you to decide. But let’s shed some light on this, and maybe it’ll help you make up your mind.

I discuss this kind of statement in my latest book, The Great American Heist – How Credit Card Processors Steal Businesses’ Profits. In Chapter 13, titled “Different Billing Types: Zero Disclosure/Numeric Billing,” I cover how credit card processors often use hidden codes to represent interchange categories, instead of using the already complex official interchange categories.

To clarify, while interchange categories are complicated, they can still be understood with enough time and expertise. For instance, “EIRF” stands for Electronic Interchange Reimbursement Fee, a term that might mean little to the average merchant. However, with some research, you can learn that it often indicates a missing or incorrect zip code, depending on your Merchant Category Code (MCC). Yes, it’s confusing—and that’s exactly how the issuing banks and processing networks want it.

Below is an example of how your interchange fees should be displayed. If your statement looks like this, we can review each line item and explain why a transaction was downgraded. A downgrade means the transaction settled or cleared at a higher interchange rate. We can also determine whether your credit card processor charged you the actual interchange fees or if they inflated them. Now, before we get too far, you might be thinking, “Of course they’re charging the right amount.” But what many don’t realize is that merchant processing isn’t regulated. Credit card processors can inflate or even invent fees. For more on this, see, “How Can I Have the Lowest Discount Rate and the Worst Deal?”

Interchange fees make up about 90% of your total processing costs. So controlling your interchange fees is the most important step to controlling—or reducing—your overall processing costs. Part of that involves ensuring that each transaction clears at the lowest possible rate. But to do that, you first need to understand how the transaction settled and where it might have gone wrong.

Below is how your interchange should be disclosed. If your statement includes this information, we can tell you whether your transactions are settling at the best possible interchange fees or if there are settlement issues.

We can also determine if your credit card processor is inflating your interchange fees. For more information, check out an article I wrote for Forbes on this exact issue.

Now, let’s take a look at a Chase Paymentech statement below.

Instead of providing the actual interchange category, such as “MC-BUS LEVEL 3 DATA RATE I,” they use a code like “V148.”

Did the transactions clear at the lowest interchange rate or the highest? If you don’t know, how can you improve it? Are they inflating the interchange fees? This is a question I explore further in the Forbes article.

Why are they hiding the interchange categories? Generally, things are hidden when someone doesn’t want you to see something. Could it be that they’re inflating or padding the interchange fees? Take a close look at the image below—a Chase Paymentech statement where two of the largest credit card processors settled for $52 million after being accused of inflating interchange fees. Even after the settlement, they maintained they did nothing wrong and stated they would continue conducting business as they had been.

I wish I could say, “Call us, and we’ll make Chase Paymentech transparent,” but unfortunately, that’s not possible. They’d rather lose merchants than reveal their secret coding system.

Merchant processing is not regulated, which means any processor you deal with can hide fees, inflate them, or even add made-up charges. If you’re like most merchants, you’ve probably switched credit card processors a few times, only to find yourself facing the same situation—being taken advantage of again.

This is why some of the largest companies in the world turn to us for help in navigating this highly complex part of their business. On average, our clients pay 40% less in fees after they start working with us. To be clear, we don’t sell credit card processing. We audit credit card processors, negotiate, and vet agreements. Our guarantee is simple: if you find a company that saves you more money after hiring us, we’ll refund you double what you’ve paid us over the last six months. Plus, everything we do is backed by a Love-The-Results-Or-Don’t-Pay Guarantee.

This is why Kevin Harrington from Shark Tank says we truly are a NO-BRAINER!

And why Trevor Gleason, Treasurer of Facebook UK, called us “a company not to be overlooked.”

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This article was written for the Forbes Business Council and will only be available on Forbes.com until December 2nd, 2024, when the exclusivity rights expire. Click here to read the article on Forbes.com

As a merchant, you’ve probably received calls from companies promising to lower your credit card fees. What’s surprising is how they make these promises without even reviewing your processing statements. How is that possible?

It’s because merchant processing fees are made up of many components and several fee categories, and there are many ways to inflate and hide certain fees, which is something I’ve written about previously.

My company specializes in auditing credit card statements for businesses, and key fee groups include:

• Discount fees: These are the fees charged by credit card processors, often calculated as a percentage of the transaction (e.g., 0.05%) or a flat fee per transaction (e.g., 5 cents per transaction). I’ve seen that sometimes, but rarely, both a percentage and transaction fee apply. The good news is these fees are often negotiable, in my experience.

• Dues and assessments: These fees are charged by credit card networks, such as Visa, Mastercard, Discover and American Express. These fees are not negotiable, and they can vary among networks.

Tips For Reducing Fees

The answer to reducing credit card fees lies in how your transactions are processed. While interchange fees are typically the largest component, reducing the rate at which your transactions settle is key to cutting costs. There are a few ways you may be able to do this.

Use a level three payment gateway.

One of the best ways to reduce your fees is by ensuring you’re using a level three payment gateway. A level three gateway means more data is being passed along with each credit card transaction. The more data passed, the lower the interchange fees.

For example, a transaction that clears at more than 3.5% may also be able to clear at less than 2%. Reducing your rate by even 1% can make a difference. If your current effective rate is 3%, lowering it to 2% would mean a 33% reduction in your processing fees. If your business primarily handles consumer card transactions, this advice may not make a huge impact. However, for merchants that accept business, corporate or purchasing cards, this could be a game changer.

However, a level three payment gateway is data in and data out. This means it is up to your system to pass the necessary transaction details, which I’ve seen is an average of about 30 fields, to qualify for the lowest interchange rate. Merchants can use data-enhanced payment gateways for this. These gateways automatically populate the necessary data fields, which can help you get the lowest rates without the manual data entry required with a level three gateway.

I recommend taking the following steps:

1. Request a detailed interchange downgrade report. Ask your processor for a report on your interchange downgrades, or the transactions that didn’t qualify for the lowest rates, and how much money you’re losing because of these downgrades. This will give you a clear idea of potential savings from upgrading to a data-enhanced gateway.

2. Compare the cost of solutions you’re considering. In my experience, many processors offer a data enhancement service, but they may take 50% to 80% of interchange savings. Another option is asking for a data-enhanced gateway, which often comes at little to no extra cost and allows you to keep more of the savings.

Here is a hypothetical financial comparison of the two options: Let’s say a business processes a $500 purchasing card transaction. The data gets enhanced, which simply means any data that may be missing was added to get the lowest interchange rate. Now, the transaction clears at the lowest rate and reduces the business’s interchange fees by 0.85% (which I’ve observed is about the average). This would save the business $4.25 on the processing cost.

• Option A: For a data enhancement service, we’ve found many processors charge 75% of the savings. So, the business saved $4.25, but the processor charged it $3.19 to enhance the data. This leaves the merchant a savings of $1.06.

• Option B: Providers of data-enhanced gateways often charge 0.05% of the transaction plus 15 cents in my experience. If you multiply $500 by 0.05%, plus 15 cents, you’re at 40 cents, which leaves the merchant a savings of $3.85.

While that’s only a difference of $2.79 between the two options, if the business processes a thousand of these transactions in a month, the difference is now $2,790 per month or $33,380 a year.

Consider an audit.

There are several companies (my own included) that specialize in helping merchants lower their processing fees, including audits of your existing fees. However, be careful; many will try to lock you into contracts, which could make it difficult to switch if their service doesn’t deliver as promised. Look for companies that offer no-contract, transparent services. A simple Google search can help you identify companies in this space, but make sure to do your research and choose wisely.

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This article was written for the Forbes Business Council and will only be available on Forbes.com until January 5th, 2025, when the exclusivity rights expire. Click here to read the article on Forbes.com

Get Your Free Audit            Schedule A Free Consultation  

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This article was written for the Forbes Business Council and will only be available on Forbes.com until February 13th, 2025, when the exclusivity rights expire. Click here to read the article on Forbes.com  

This article was written for the Forbes Business Council and will only be available on Forbes.com until October 30th, 2024, when the exclusivity rights expire. Click here to read the article on Forbes.com  

Every day, our clients ask us about the Payment Card Interchange Fee Settlement, which has been going on for years and has many extensions. The latest one is now February 4th, 2025. If you would like to read more about it. Here is the official link. 

Our clients repeatedly ask us because every day, a company will call them up saying they help businesses by filing a claim on their behalf, and they work on a success-based basis. First, the case has a $5.5 billion dollar cap, which means, most likely, there won’t be anything left after the biggest merchants take their cut.

Secondly, if you want to file a claim for the Payment Card Interchange Fee Settlement just click here. It is FREE and only takes a few minutes. So now you don’t need to give 50% of whatever money you may receive. 

The reason this class action lawsuit was brought in the first place is because of the lack of government regulation, which allows credit card processors to overbill merchants, inflate fees, insert junk fees, inflate interchange fees, and so on. However, to be clear, this case does not change any of that, nor does it make the processors play fair going forward. Instead, just the opposite will most likely be the case. I think anytime someone gets caught cheating and has to give money back, they are more likely to find a new way to get it back. 

We have seen more of an uptick in deceptive billing practices over the last few years than ever before. Once they actually pay out $5.5 billion, watch their stock and see if it hits rock bottom, or will it be like nothing even happened? Again, I think the latter, which means they made all the money right back. 

If you are here, you are hoping to get money back from the credit card processors on this class action lawsuit and while that most likely won’t happen, you can take advantage of our Free Audit and find out how much your credit card processor is overbilling you and find out how much you may be able to recover from previous overbillings directly from your processor. 

If you are not ready to get your free audit, no problem; take a look around our site. The more you learn about us, the more you will soon find out why we are America’s #1 Credit Card Processing Auditing Firm. 

Or click here to check out what Kevin Harrington from the NBC hit TV show Shark Tank had to say about us.

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(This article was originally written for the Forbes Business Council. Click here to read the article on Forbes.com)

For example, I encountered a real scenario where the interchange rate was 0.76%. However, the processor was charging an additional 0.65% on top of Visa’s 0.76% interchange rate. Meanwhile, the merchant thought Visa was charging them 1.41%.

How It Works

Processors don’t usually mark up the base interchange rate (the rate charged for basic non-rewards, non-commercial card transactions) since this rate is listed on the merchant’s agreement, and they may notice that rate bump.

They only mark up the transactions that downgrade. For those who may not be as familiar with credit card processing jargon, a downgrade is when a transaction does not settle at the lowest tier/rate; for example, a transaction that could settle at 1.90% would downgrade to 2.95% if not enough data was entered at the time of the sale. This usually takes place when the merchant has the wrong equipment, payment gateway, setup, etc.

This means the processor’s profits go up when transactions downgrade. In short, the processor is incentivized for a merchant to get things wrong. Yet, most merchants turn to their processors for help.

A smart processor may help the merchant fix some of the downgrades while leaving the majority of the transactions to downgrade. The worse a transaction clears, the more profit for the processor, the very people teaching merchants how to process. This means that if the processor sets the merchant up wrong, the transactions will downgrade, costing the merchant more money and making the credit card processor more money.

In 2016, a class-action lawsuit was filed against Vantiv Integrated Payments over “claims the company charged customers unauthorized and marked-up fees.”

What Companies Can Do

If you are interested in hiring a specialized auditing firm for credit card processing fees, look for a firm that guarantees its work, doesn’t require a contract and does not take a percentage of the savings. (Disclosure: My company helps with this, as do others.)

Keeping a close eye on your statements in May and November is crucial due to the adjustments in interchange fees by Visa and Mastercard every April and October. Despite these adjustments being minimal—usually less than 0.01%—processors often use them as an excuse to hike their own fees, attributing the increases to the processing networks.

When you notice an increase, don’t accept vague explanations from your processor. Demand detailed breakdowns of how these changes impacted your fees. It’s essential to scrutinize each fee listed on your statement. For example, you can Google terms like “risk fees” to verify their legitimacy and ensure they aren’t fabricated by your processor.

If they are legitimate fees, you should be able to find the fees on the processing network’s websites, not a blog or a processor website. But even that can be tricky, as “risk fee” is a real fee, but it is very, very small—as in, less than one cent in most cases. However, processors can make up a fee with the same name and charge a very large amount. That is their fee, but it is not the same fee that is shown on the processing network’s page.

By staying vigilant and informed, you can protect your business from unnecessary charges and avoid overpaying due to unjustified fee hikes.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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Credit card companies make it difficult for credit card transactions to settle at the lowest interchange fees by adding stringent rules. However, they came up with a solution to fix this for you called I/C (Interchange Clearing) Fee, or another processor calls it CCIS (Commercial Card Interchange Service). It is when the credit card processors fix the transaction for 75% of the savings.

See below for what it looks like on your statement.

Before you think this is a good deal, let’s do the math and shine the light on this a little more…

If a merchant runs a $500 transaction that was going to downgrade from missing data, they will insert the missing data before sending it off to the processing networks. By doing this, the transaction will settle at a lower interchange fee – on average, about 85 basis points less, saving the merchant $4.25. The processor will take $3.19 and give the merchant $1.06 and say the merchant should be happy. After all, if not for them, they would have lost $4.25.

However, third-party companies will also do this and their fee is only 5 basis points. So, let’s do the math on that:  .05% of $500 is only $0.25, so the third party will save you the same $4.25 and they will take $0.25 and give you the $4.00.

Option A – Use your processor who is creating the problem to fix the problem and you keep $1.06.

Option B – Use a third party that helps fix your interchange and you keep $4.00.

I think it is an easy decision. The only exception is when your ERP or POS blocks third parties to increase profits and prevent you from getting help.

Click here to schedule a call to learn how easy it is to fix this.

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