Beware of Rate Reduction Gifts from your Current Credit Card Provider

I’m sure the vast majority of merchants feel that their merchant account provider is far more likely to increase their rates or invent new fees rather than offer an unsolicited rate reduction for the merchant’s years of processing loyalty.

The reason merchants feel this way is because the industry has shown this to be the case.  The credit card processing industry has proven to be an industry where loyalty has little or no value.  In fact, a merchant who has been blindly processing with the same provider for several years shouldn’t be surprised to find out they may be grossly overpaying for their processing service.

I’ve also mentioned before that there is consolidation taking place in the credit card processing industry.  Some of the larger providers are buying smaller providers.  This is not necessarily a good thing for merchants as it can lead to less competition and more misleading tactics especially for merchants who now find themselves locked into one or two providers by their software or gateway company.

People who read my articles understand that a “rate reduction” does not necessarily mean a “cost reduction”.  Also, this is not an industry where the providers generally reach out to their merchants and offer an unsolicited reduction in cost.  Therefore, merchants need to be on-guard if their provider does offer an unsolicited rate reduction because it could end up being a cost increase, especially if their provider has been purchased by another company.

Beware of unsolicited rate reductions from your merchant account provider

One of tactics that I have been seeing occurs after a smaller provider is purchased by another provider.  The new provider will send out addendums to their newly acquired merchant base offering a lower rate.  The addendum may still have the old provider’s name on it.  On the surface the addendums may look like a cost reduction but it can be far from that.

I have had merchants contact me wondering why their processing cost has gone up by $1,000s or $10,000s per year after their provider was bought out.  The reason is because these addendums may come with verbiage that offers a minor reduction in the provider’s discount rate, for example from 0.20% + $0.10 to 0.15% + $0.10.  However, deep in the new Terms & Conditions, the merchant agrees to surcharges that can be over 1.00% in some cases.  I have seen the new surcharges apply to over 90% of the merchant’s sales in many cases.

Just as importantly, the new Terms and Conditions may now have a Liquidated Damages clause that requires the merchant to pay the new provider the average revenue they make on the account each month times the number of months left on your contract.  I have had merchants call me almost in tears because they learned that it will now cost them $1,000’s or even $10,000’s to get out of their contract if they now want to change providers.

The credit card industry has proven to be an industry where processing loyalty has little or no value.  Merchant account providers generally do not reach out to their merchants and offer to a true cost reduction unless they are forced to do so because another provider is offering a lower cost to the merchant or the merchant insists on a cost reduction.

If you receive an unsolicited rate reduction offer from your merchant account provider, every warning bell should go off.  You should treat it as though you are receiving an offer from a new company and have MerchantFeeSavers conduct a free and confidential audit.

Has your merchant account provider been purchased by another company since you started processing with them?

The average merchant I ask this question doesn’t know if their provider has been bought.  Sometimes they will say that the customer support number has changed or that the statement has changed.  These can be signs that the provider has been bought.  However, it may also mean that their current provider has simply moved the account to another processing service.

Merchants should always know if their merchant account provider has been purchased because pricing and Terms and Conditions may change after a buy-out.

Merchants should always do a quick effective rate check on their statements each month.  To do this, simply divide the monthly cost by the processing volume, for example $1,846.56 in cost divided by $92,300 in monthly processing = 2%.  If the merchant finds the effective rate suddenly jumps from 2% to say 2.40% or if the rate continually increases each month from say 2% to 2.10% then 2.20%, etc., than the merchant needs to have MerchantFeeSavers conduct a free and confidential audit.


  1. Beware of unsolicited rate reductions
  2. The credit card processing industry continues to consolidate
  3. Conduct an effective rate analysis every month

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