Robert Day is the MP at weAudit.com and the author of The Great American Heist: How Credit Card Processors Steal Businesses’ Profits.
Running a business comes with enough challenges—managing operations, serving customers and staying ahead of competitors. But there may be a silent drain on your profits that often goes unnoticed: A lack of transparency from credit card processors can cost businesses.
Every time a customer swipes a card, a complex web of fees is triggered. Many business leaders believe these fees are fixed or unavoidable. What they don’t know is that some processors take advantage of this complexity, layering in hidden charges that quietly siphon away businesses’ hard-earned profits. And if you’re not paying attention, the costs can add up.
How Credit Card Processing Fees Work
Credit card processing fees can be broken down into three main components:
1. Interchange fees: These are set by card networks like Visa or Mastercard and paid to the card-issuing bank.
2. Assessment fees: These go directly to the card processing networks.
3. Processor fees: Your credit card processor charges these, which should, in theory, cover their services.
The first two categories are nonnegotiable and relatively standardized. However, interchange fees can be managed to reduce them greatly. But processor fees? That’s where transparency often goes out the window. Many processors pad their margins by inflating interchange rates, adding unnecessary fees or using opaque pricing structures that make it nearly impossible to understand what you’re actually paying for.
Make sure you Google every fee you see on your statement and see if you can find it on the processing network’s website—not the credit card processor’s. If that fee is not on the credit card network’s site, then ask your processor to show you where it is a legitimate fee.
Some of the most common fees added on by credit card processors are:
• Risk fees
• Watts fees
• Network acquired fee
• Interchange clearing fee or interchange settlement fee
How A Lack Of Transparency Can Hurt Businesses
The lack of transparency in credit card processing can have far-reaching consequences for businesses. Here’s how:
1. Eroding profit margins: Every dollar overpaid in fees is a dollar that can’t be reinvested into a business. Whether hiring new staff, upgrading equipment or expanding operations, hidden costs limit growth potential.
2. Undermining strategic planning: If you don’t fully understand your expenses, you can’t accurately forecast your financial future. A lack of clarity makes it difficult to make informed decisions about pricing, budgets or investments.
3. Wasting time: Trying to decode processor statements or dispute unexpected charges can drain leaders’ time and energy—resources better spent on running the business.
4. Loss of trust: When a vendor isn’t upfront about their pricing, it can lead to frustration and mistrust. This can damage relationships and force leaders to constantly question whether they’re getting a fair deal.
This problem isn’t limited to credit card processing. While credit card processing is one of the biggest culprits, a lack of transparency can affect every aspect of a business. From software subscriptions with hidden renewal fees to service providers that nickel-and-dime companies with fine print, unclear terms are a common way for vendors to boost their profits.
What You Can Do To Protect Your Business
The good news is that you don’t have to be a victim of hidden fees and opaque pricing. Here’s how you can take control:
1. Review your processor statements.
Most credit card processors send monthly statements, but they can be confusing. Look for unexplained fees, rate increases or charges labeled “miscellaneous.” If you’re unsure what you’re paying for, ask your processor for a detailed explanation.
2. Insist on transparent pricing.
Choose vendors who are willing to offer clear, upfront pricing with no hidden fees. If a processor or vendor can’t explain their fees in simple terms, that’s a red flag.
3. Audit your expenses regularly.
Conduct monthly audits of your credit card processing fees. Merchant agreements often have the same clause that says you only have 90 days to catch the new fees before you agree; those are legitimate fees and they will be part of your agreement going forward.
4. Consider partnering with experts.
If the process feels overwhelming, you may want to work with a trusted partner who specializes in uncovering hidden fees. To be transparent, I run an auditing firm. However, many companies offer this type of service. So shop around and see who has the best program and offerings for you.
Just one caution: Make sure you do your homework before you sign a contract, and that can be said of any vendor you are looking to do business with. And I would also add to try to find a vendor that does not lock you into a contract.
Transparency: A Competitive Advantage
Ultimately, transparency isn’t just about saving money—it’s about building a stronger, more resilient business. By demanding clarity from credit card processors and other vendors, you’ll not only protect your bottom line but also create a foundation for long-term success.
Imagine what you could do with the money you’re unknowingly losing to hidden fees. That’s the opportunity transparency offers—a chance to reinvest in your business, grow your team and serve your customers better.
Don’t let a lack of transparency hold you back. Start by shining a light on your credit card processing fees, and you may find that your greatest growth opportunity has been hiding in plain sight.
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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