Don’t be Fooled by Bogus Merchant Service Price Reduction Offers!

March 10, 2011 - PRLog -- First of all, don’t let yourself be fooled by the headline.  There are many legitimate merchant service providers that are offering to analyze your credit card processing rates and fees, and can and will save you money, as well as provide you with a factual and ethical analysis that will show actual savings to your business.

Most of the rest of this article is addressed to those that fit into the “buyer beware” category.  I’m not writing this as a marketing piece or PR piece for our company, US Merchant Systems.  I’m just providing some facts that are pertinent to any business that accepts credit cards and desires to do so as competitively as possible.

Recently, I had the opportunity to review an analysis performed for one of our US Merchant Systems clients, by a competitor.  The analysis was presented to a business that processes roughly $400,000 per month with our company.  The analysis presented from our competitor didn’t make sense to our internal analyst, who then presented the information to our VP of Sales.  Ultimately, this ended up on my desk for review and information purposes.

On the competitor’s analysis to our client, the competitor represented that they would save our client in the neighborhood of $12,000 per year on their processing costs.  This did not make sense to our company, since the total amount of overall margin of profit was less than the amount the competitor proposed to save.  Now, to a novice, someone that doesn’t understand our industry, one might think, “well perhaps the competitor has lower costs”- however that’s not the case.  The fact is that the majority of the costs that we incur in merchant processing are generated from Interchange.

Interchange is the cost that a merchant processing company, such as US Merchant Systems, pays to the credit card companies- ie: Visa, MasterCard, Discover, which includes a portion (the largest portion) which goes directly to the bank which issued the card to the consumer.  Interchange rates are identical for every bank and processor.  In other words, we all pay the same thing.  The only difference in cost is usually generated via the cost of processing (per transaction fees) and these rarely vary by more than a penny or two.

The bottom line is that this competitor presented an analysis to our client which claimed the total amount of fees the client would be paying with their company, if they were to switch, was less than the actual cost of Interchange.  This means the competitor would not only be losing money based on the Interchange cost, but would further eat the cost of any transaction and miscellaneous fees they would incur, at a cost to them of thousands per year loss, hence, leading me to the conclusion that I should write this article for the following reasons:

1.   Either the competitor deliberately misled the client in the analysis, and in the end, the client would not realize anywhere close to this savings, or
2.   The competitor was errant in his analysis, and ultimately the credit card processor would be forced to raise the rates so as not to lose money on the account.  

There’s no way to know for sure, however, more than likely it was the second scenario- and here’s why I believe that to be the case:  

There are many salespeople in the credit card industry that simply are not properly educated or skilled enough to understand all of the nuances related to pricing a merchant service account.  One small mistake on their part could lead to thousands of dollars of miscalculation.  Regardless of whether the competitor made an innocent, although costly mistake, or it was intentional, I’m writing this article for the edification of all business owners that don’t want to make financial decisions under false pretenses.  

In our company, we use skilled analysts that have apprenticed under other skilled analysts, and, admittedly, even the most skilled analyst may occasionally make a mistake.  However, as a rule, we provide accurate data to business owners concerning the cost of merchant processing and the potential savings.  There are numerous categories of interchange and dozens of various statement formats, and it’s vital to make sure that the individual performing the analysis is highly skilled in this area.  Otherwise, a business owner can make a decision, and perhaps end a good business relationship and end up with a less ethical one.  No one wants that.

So, my advice is to ensure you are dealing with a company that is ethical and knows their trade, and that you receive a quote that is true, and you know it’s true- and do business with a company that will back up their offer or make good if there was an error.

By Stuart H. Rosenbaum
CEO, US Merchant Systems, LLC
www.usms.com
800-655-USMS

# # #

US Merchant Systems is headquartered in Fremont California & was founded in 1992. Since the companies beginning USMS has grown into a major national provider of merchant services having served the needs of more than 100,000 businesses throughout the US.

Visit www.usms.com for more information on our large array of products and services available for merchants of all types.

Not a business owner? US Merchant Systems offers an affiliate program where we will pay you $100 for each business you refer that signs with us!
Details at www.usms.com/index.cfm/id/45/lang/english/affiliatepartnerprogram