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Tips for saving money with merchant service providers

Checkout our list of things to look out for in merchant services to make sure you’re keeping more of your hard earned profits.

May 26, 2015

By Suneera Madhani,CEO and founder of Fattmerchant

Cheese and dough — two key ingredients in making the perfect pizza pie, but they are also slang words that represent what gets thrown away each month when it comes to merchant services. Credit card processing is a large expense for business owners, and when you’re running a restaurant, you have a full plate. Staying on top of your credit card processing bills can sometimes fall to the wayside. It’s important, however, to ensure you aren’t overpaying or being nickeled and dimed.

Craig Miller, former CEO of UNO Restaurant Corporation and Ruth’s Hospitality Group who also works with Fattmerchant, makes a great point about this industry. "The merchant services industry has long been known for having a confusing and expensive fee structure model that frustrates its customers as they struggle to fully understand their cost."

To help navigate through the confusion, here is a list of things to look out for in merchant services to make sure you’re keeping more of your hard earned profits:

1. Markups: every merchant services provider shares the same "cost" for credit card transactions, because the rates are set by the credit card companies. However, traditional providers pile on extra overages and percentage markups so they profit from your volume. Markups are the most negotiable ingredient in your merchant statement. Any percentages you are paying above "cost," or "interchange," is money down the drain.

2. Ancillary Fees: These are all of the toppings on your statement that you didn’t order … batch fees, statement fees, PCI compliance fees, monthly minimums, the list goes on. Be on the lookout for all the nickel and diming from your provider, and haggle these down to a bare minimum.

3. Contracts: Providers typically like to pepper in long-term contracts with hefty cancellation fees. If your merchant services provider were doing their job, why should they have to lock you in with handcuffs? Toss these.

4. Equipment: You should be paying cost for your credit card processing equipment. Do research on what the cost is of the equipment, and ensure your provider isn’t charging you markups here too. If you are renting or leasing equipment, or you are thinking about it, weigh out the price your provider will charge you versus the cost of purchasing the equipment outright. You should not overpay just to lease equipment that you can’t even keep. And does your terminal or POS accept EMV cards? All merchants have to update their equipment by October 1, 2015 to accept chip card technology. There will be a liability shift, and business owners (instead of banks) will be held liable for fraudulent activity. Ask your provider about what solutions they have to accept the EMV chip cards.

All of these unwanted add-ons, markups, ancillary fees, contract terms and equipment costs are negotiation pieces with your provider. There are over 28 million small-to-medium-sized businesses in the U.S., and collectively over $1.7B is left on the table in excess fees and overages charged by the credit card processors. In fact, one pizzeria started saving 43 percent a month by paying attention to these fees; that’s more than $2,500 a year for the restaurant.

Every extraneous fee adds up, so review your statement regularly and make sure you understand exactly what you are paying for. In addition, shop around for alternative payment processors; some offer unlimited processing without volume restrictions, markups, and contracts. You work hard for all that dough; your merchant services provider shouldn’t be profiting from your success. 

Suneera Madhani,CEO and founder of Fattmerchant, realized that business owners are frustrated with their provider’s due to a lack of transparency and never-ending gimmicks. She decided to found her company, Fattmerchant, with the promise to establish a transparent subscription-based merchant services model that offers financial and strategic value to the everyday business owner.