Ask This Question to Find What You Actually Pay to Process Credit Cards

March 27, 2018

Several fees are charged to merchants that accept credit cards as a form of payment. In this Modern Tire Dealer exclusive, Craig Roll, president of Tire Dealer Processing, explains how to compare fees charged by credit card processors, also known as merchant services providers.

How many calls will you get today about lowering your merchant services and credit card processing rates? Unfortunately, it seems to be a daily occurrence. But somewhere in the back of your mind many of you wonder how much you could be saving if you were able to find a card processor that simply told the truth and gave you a fair, competitive rate.

Then the voice of reason kicks in and reminds you that you have switched providers before and you didn’t see any real savings. Besides, it is such a hassle to change, so you tell the caller that you are happy with the company you have now and hang up.

If only there were a way to strip away all the double-speak, confusing terms, and slick sales pitch so that you could see the actual potential savings. Wouldn’t it be great to be able to compare the costs from your old merchant services company to one of their competitors, so you could make a profitable decision?

How credit card processing works

Here's a chart that breaks down the way credit card processing costs are layered.

Here you see that the card issuers (Visa, MasterCard, Discover, Amex, the card issuing bank) collectively charge a wholesale fee which is commonly called Interchange. It's the same for everyone. There's no getting around it. And, the Interchange rate charged for any given transaction is calculated based on the kind of card being used, the amount of the transaction, even the size of the issuing bank. It's complicated.

In fact, there are hundreds of rates based on a myriad of criteria. But, suffice it to say that Interchange is always there, and is the same for everyone. It is a level playing field. On the other hand, the processor’s mark-up is full of hidden charges, misdirection, and confusing terminology.

The secret sauce

Well, here is the one question you should ask that will cut to the chase on a merchant services sales call. “How much is your rate mark-up over Interchange?”

Chances are the sales person won’t know or won’t tell you. But the ones that will give you that information are at least being honest with you and giving you a tool to be able to compare providers. After all, would you buy from a wholesaler without comparing costs just because they said: “Buy from us and your tires will be 10% less than what you are paying now, just trust me.” Not a chance.

Make ‘em sweat

So, when you ask for their mark-up and not their rate, you take away the sales-speak and force them to give you the real deal. Of course, many salespeople won’t do this for you (some because they have no idea what they are selling, and some because they are not willing to give you their true mark-up).

Here’s an idea for you…call your current provider and ask them for their mark-up. Let them know that you are going to shop around and see if they start jumping through hoops to keep you or not. If they do, congratulations, you just saved some money. If they don’t, then send them packing.

About the author: Craig Roll is the managing partner of Tire Dealer Processing, a provider of merchant services to the tire industry and supports dealers nationwide. He can be reached at (800) 979-1516.

LinkedIn: Craig Roll