For over 15 years 1st National Processing has been a top provider of credit card processing, merchant accounts, credit card processing equipment and all other types of merchant services. The combination of our competitive rates, credit card equipment pricing and superior customer service makes 1st National Processing the obvious choice for any merchant looking to add credit card merchant services to their business. Our extremely competitive rates on credit card processing and equipment is not the primary reason merchants choose 1st National.  1st National’s credit card processing merchant accounts are real deals with no tricks, no hidden fees and full disclosure. What You See Is What You Get!  There are no surprises.  We have an unblemished reputation in the credit card processing industry and with the Better Business Associations as a result of our long history of honesty, integrity, reliability and dependability.   This is the reason that merchants choose 1st National for credit card processing and this is why they remain loyal and refer their fellow merchants.

Over the years the credit card processing industry has become highly competitive and unfortunately very cut throat.  In order to survive, all too many merchant service companies have resorted to crooked and intentionally misleading marketing and sales tactics in order to trick merchants into signing up for credit card processing with their companies.  These credit card processors are blackening the eye of our industry and making it very difficult for merchants to decipher an honest company from a crooked one.  Several class action lawsuits have already been filed but too many fraudulent credit card processing companies are still flying under the radar.  1st National has made it our mission to blow the whistle on these dishonest companies.   We are doing everything in our power to notify attorney general offices, government regulatory agencies, banking and finance departments and most of all existing and perspective merchants about all of the illegal practices being used by these credit card processors.  We are doing this via direct reporting of the processors to regulatory agencies, sending out newsletters, posting info on websites, participating in blogs, and by directing merchants who have been victimized to the right arenas where they can make themselves heard.

Below you will find a detailed list of the many crooked, illegal and downright dirty tricks being used by these fraudulent credit card processing companies to entice you, the merchant, into signing a merchant account application with their company. If you found this page and you are shopping for a merchant account and credit card processing, consider yourself lucky.  It might just save you from getting burned by a credit card processor that is trying to rip you off.  If you already have an account, the information contained herein will help you decipher whether you have already been victimized, ensure you are getting a fair credit card processing deal, and protect you from getting burned once your merchant account contract renews.  The single most important thing you can do is read this page and comprehend it completely before making any kind of a decision on credit card processing.  If you do not understand something, contact us we are here to help.  Our qualified merchant service advisors are available to answer any questions you may have on credit card processing and merchant accounts. Contact us at Toll Free: 877-964-1622.

We encourage you to use us as a comparison.  Our merchant service advisors will quote you on a “Real Credit Card Processing Deal”.  You will learn every single, little detail there is to know about a merchant account.  Not just about our merchant account but about fees that apply to every credit card processor in the industry. Compare our credit card processing deal to one you already have, or to what you are currently being quoted by other processors.  Show us their applications and we will point out things that will blow you away. You will be surprised by what you haven’t been told, what was intentionally withheld, and how you were straight out lied to.  See how the other processors will stumble over their words when you go back to them and say “What about this fee? And that Fee? And why didn’t you mention it until I asked?”.  Let us help you uncover the “Snakes in the Grass”. 

We at 1st National Processing are not mudslingers.  We do not mind losing business to honest credit card processing companies.  But the simple truth is that very few remain. Our mission is to once and for all put a stop to these credit card processors who have taken advantage of unsuspecting merchants for entirely too long.  They deserve nothing better than class action lawsuits being brought against them complete with fines, punitive damages and prison sentences for their executives.  These fraudulent credit card processors should lose their licenses and never be able to operate in the merchant service industry again.

None of this information we are discussing is fabricated.  These deceptive tactics are very real, completely true and extremely common.  Don’t get burned! Demand full disclosure!!  Don’t be a victim. Know with whom you are dealing. Do a back ground check. Ask for references. Check them out on Better Business Bureau Sites. What is their rating? Are they even a member? Who is their processor? And who is their settlement bank? Is it some local no name bank or a national, regulated publicly traded financial institution?  Scrutinize all credit card processing companies based using this useful information and what you find in your own background check. We guarantee you will be surprised by what you find.

To learn more about credit card processing with 1st National please view our merchant services page and our merchant accounts page.   You may also view all out our credit card terminals, POS Systems and other credit card processing equipment.  Please contact us today to apply for a credit card processing account with 1st National Processing Merchant Services. Toll Free 877-964-1622 or Apply On Line.

DECEPTIVE & FRAUDULENT
CREDIT CARD PROCESSOR SALES TACTICS

• FREE CREDIT CARD MACHINES
• MID QUALIFIED, NON QUALIFIED FEES & OTHER HIDDEN FEES
• CREATIVE TIERED GRID ID #'S “MY RETAIL RATES ARE 1.15%”
• NO CONTRACT AND NO CANCELLATION FEE

FREE CREDIT CARD MACHINES

The Truth About “FREE” Wireless Credit Card Machines

Please note: The following is a newsletter posted all over the internet in October of 2007 about an extremely deceptive tactic being used to entice merchants.  Although this information focuses on wireless credit card machines, the same tactics are used with all merchant accounts and the same fees apply except for the wireless network access fee.
 
Increased competition in the credit card processing industry has prompted many merchant service providers to resort to unfair, crooked and intentionally misleading marketing and sales tactics in order trick merchants into signing with their companies.  All too many unsuspecting merchants are falling victim to these dishonest credit card processors and getting the false impression that they are getting a fair, unbeatable, and too good to be true, deal. Unfortunately, the “Free Wireless Credit Card Machine” deal is too good to be true.  Any merchant that sets up this type of merchant account with a credit card processing company who is offering it will, in fact, get burned. The fact remains that nothing in life is free, especially a wireless credit card machine that costs all credit card processors in excess of $600.00 to purchase.  There is simply not enough monthly residual income generated off a fair and competitively priced credit card processing deal to justify these merchant service providers taking a six to seven hundred dollar up front loss.

So how and why do they do it?  They do it by having their sales reps only disclose about one third of the fees and commitments applicable to the credit card processing account.  The naked eye will see a low up-front set-up fee, a seemingly competitive qualified discount rate and transaction fee, and a fairly average monthly service fee.  These merchant account rates, combined with the “Free Wireless Credit Card Machine” an up-front savings of about $600, makes it appear to be the best credit card processing deal around.  What these fraudulent credit card processors do not disclose is an extremely long term commitment with a severe early termination fee, a very high monthly minimum requirement, excessive mid qualified fees and non qualified fees, and additional wireless transaction fees.  The truth is that a credit card processing account with this type of set-up will generate about ten times the profit than a standard account.  The merchant will actually end up paying for the terminal several times over within the 1st year, but the merchant will never own the machine. To top that off the credit card processors are protected from the merchant skipping with their equipment because they have them locked into a long term 3-5 year contract with a cancellation fee ranging from $750-$2000.  So the risk has been mitigated entirely and the deceptive tactics of using the word “FREE” is successfully generating an enormous amount of credit card processing business. 

This has had a domino effect which is driving an extremely large percentage of credit card processing companies into a panic because of their lost market share.  Too many credit card processors are therefore mimicking this deal, sacrificing their honesty and their integrity, taking unfair advantage of unsuspecting merchants all over the United States and blackening the eye of the entire industry.

We at 1st National Processing pride ourselves on honesty, full disclosure and superior service and support.  We have so much more to offer to a merchant than simply low rates and upfront fees although ours are the most competitive in the credit card processing industry.  Forty percent of our business comes from referrals of customers who have found that our word is gold and our credit card processing service is second to none. We would never consider sacrificing our impeccable reputation in a crooked attempt to generate more business.  If a merchant insists, we do offer the same “Free” credit card machine deal but any merchant who inquires gets a detailed full disclosure list of every single fee and detail that would apply to the credit card processing on that type of merchant account. They also receive our expert opinion and explanation of why it is simply not a smart business decision to opt for the “Free Wireless Credit Card Machine”.

EXAMPLE #1:  Typical Free Wireless Credit Card Machine Deal

EXAMPLE #2: FULL DISCLOSURE :  EVERYTHING THEY ARE HIDING

EXAMPLE #3: THE SMART MOVE: Buy a machine, own it and get great rates!!!

MID / NON QUALIFIED & OTHER HIDDEN FEES

Another very common tactic used buy the fraudulent credit card processors in the industry is their enticing merchants to sign quickly before they have a chance to do adequate research and become educated.   They do this by advertising and quoting extremely low, below market credit card processing rates.  The problem is, just like the free credit card machine scam, the merchant is only being told about on third of the fees that will apply to their credit card processing account.  So while the merchant might be getting a good deal on the front end fees such as the qualified discount rate, the transaction fee, and the monthly statement fee, they are being charged almost triple for all of the other credit card processing fees that apply to the account.  And to top that off they are signing a long term contract, with a severe cancellation fee and a monthly minimum.  The following are credit card processing fees which are commonly hidden:

• MID QUALIFIED SURCHARGE
• NON QUALIFIED SURCHARGE
• MONTHLY MINIMUM
• PIN BASED DEBIT CARD NETWORK FEES
• WIRELESS TRANSACTION FEES

In this section we discuss these very important fees that apply to every credit card processing account in the industry. No bank or credit card processor is exempt.  If you are a merchant who is new to the credit card processing industry, this will educate you completely so you can make an informed decision when choosing a merchant account.  If you already have a credit card processing account, study this anyway and have a look at your statement. And if you cannot understand your statement call your credit card processor and ask them about each and every one of these credit card processing fees.  We bet you’ll be surprised.  See below for a detailed description of the commonly hidden fees mentioned above.  If you require further explanation please call Toll Free: 877-964-1622 or inquire online.  We will take as much time as needed make sure you understand completely.

MID QUALIFIED SURCHARGE: Pay careful attention to the word “Surcharge” because it is, in fact, just that.  It is a credit card processing fee that is added to, on top of, your qualified discount rate. Don’t be fooled by a sales representative who tells you otherwise because it is a fee that every single credit card processor in the industry does have and they will charge it to you, the merchant.  And if you call 10 credit card processing companies, 9 won’t mention it.  If you are savvy enough to ask, about 9 out of ten credit card processors will purposely explain it in a way to mislead you into thinking their rate is lower than it actually is.  For instance, they will say “My mid qualified fee for credit card processing is 1.5%”.  And if you compare that to the credit card processing industry average mid qual rate of 2.49% you might think you are getting a great deal; an entire percentage point below the average.  But what the 1.5% mid qual credit card processor neglected to inform you is that the 1.5% is, in fact, their surcharge and it will be added to their qualified discount rate of 1.79%.  So now the grand total you will pay for every mid qualified credit card processing charge is 1.79% + 1.5% = 3.29%, which is almost an entire point higher than the industry average.  So let this be a lesson to you.

What exactly is a Mid Qualified Surcharge?  The mid qualified surcharge is a higher credit card processing fee charged to merchants for Rewards Cards, Mileage Cards, Signature Cards, Benefits Card or any other cards that offer the cardholder incentives for use.  The credit card companies are spending a significant amount of money in the form of travel, gifts, cash back and other incentives in order to entice the cardholder into using their card.  The increased costs of these credit cards are passed on to the credit card processing banks and providers.  The credit card processors in turn pass the higher fees over to the merchants in the form of a mid qualified credit card processing surcharge.  And as discussed this credit card processing fee is, in fact, a surcharge, that is added on top of the qualified discount rate.  The type of credit cards that will fall into this bin represents 30-40% of a merchant’s credit card processing, a significant cost on the merchant account. This is the reason why these fraudulent credit card processing companies can sell below market and below cost qualified discount rates.  They simply charge 2-3 times more for the mid qualified credit card processing fees to cover any loss they incurred. As you can see, it is extremely important for merchants to know that they will be charged a mid qualified credit card processing fee and they need to be sure they know exactly what is being charged. 

If you require further explanation please call Toll Free: 877-964-1622 or inquire online.  We will take as much time as needed make sure you understand the Mid Qualified Credit Card Processing Surcharge completely.

NON QUALIFIED SURCHARGE: Here is again. Just like the Mid Qualified Credit Card Processing Surcharge, pay careful attention to the word “Surcharge” because it is, in fact, just that. And don’t be fooled here either by a sales representative who tells you otherwise because this is also a fee that every single credit card processor in the industry does have and they will charge it to you, the merchant.  It is another credit card processing fee that is added to, on top of, your qualified discount rate. This, too, is a credit card processing fee that 9 out of 10 companies will not mention.  And buyer beware because if you do ask, the credit card processing reps will purposely explain it in a way to mislead you into thinking their rate is lower than it actually is.  For instance, they will say “My non qualified fee for credit card processing is 2.5%”.  And if you compare that to the average non qual rate in the credit card processing of  3.5% you might think you are getting a great deal; an entire percentage point below the average.  But what the 2.5% non qual credit card processor neglected to inform you is that the 2.5% is, in fact, their surcharge and it will be added to their qualified discount rate of 1.79%.  So now the grand total you will pay for every mid qualified credit card processing charge is 1.79% + 2.5% = 4.29%, which is almost an entire point higher than the industry average.  So let this be a lesson to you.   This same trick is used in conjunction with the mid qualified credit card processing surcharge which is discussed, in detail, above. 

What exactly is a Non Qualified Surcharge?  The non qualified surcharge is a higher credit card processing fee charged to merchants for Business Cards, Corporate Cards, Government Cards, International Credit Cards or any transaction that does not have the correct Address Verification and Fraud Prevention Data entered properly. These types of cards represent an increased cost to the card processors due to the fact that businesses and governments most often do not carry balances on credit cards and as a result the card companies do not earn the interest they normally would. To make up for this lost revenue, the card companies charge higher fees to the processor and the merchant.  And the cards that have improper AVS and Fraud prevention data present a much higher credit card processing risk so merchants are charged a higher fee to mitigate that risk.  And as discussed the non qualified credit card processing fee is, in fact, a surcharge, that is added on top of the qualified discount rate.  The type of credit cards that will fall into this bin represents 30-40% of a merchant’s credit card processing, a significant cost on the merchant account. This is the reason why these fraudulent credit card processing companies can sell below market and below cost qualified discount rates.  They simply charge 2-3 times more for the non qualified credit card processing fees to cover any loss they incurred.  And when they combine this dirty trick with the same on the mid qualified surcharge, the processors have now fraudulently boarded an account that will generate about 5 times more revenue than a standard, competitively priced merchant account.  As you can see, it is extremely important for merchants to know that they will be charged both a mid qualified and a non qualified credit card processing fee and they need to be sure they know exactly what is being charged.
 
The 1st step to protect you from this scam is to understand that every company in the credit card processing industry does have these fees and must list the fees on their merchant application.  Be aware that the processor might even get more tricky and try to call it something else other than a mid qualified or non qualified surcharge, but there will in fact be additional credit card processing surcharge fees listed somewhere on the merchant application.  Secondly, now that you are aware that this fee does apply to all accounts, immediately discard the information from any credit card processor who neglected to mention it to you.  Their neglect was intentional, I promise you.  And finally, do not simply take the word of the sales representative as to what their mid qualified and non qualified credit card processing surcharges are.  Scrutinize their merchant application. Read the fine print.  Make sure you understand what the total credit card processing surcharge is, meaning add it to the qualified rate.  If it contradicts what the representative told you, shred that companies information too because they scammed you intentionally. 

If you require further explanation please call Toll Free: 877-964-1622 or inquire online.  We will take as much time as needed make sure you understand the Non Qualified Credit Card Processing Surcharge completely.

MONTHLY MINIMUM: If you come across processors offering “Free Credit Terminals”, “Credit Card Processing Accounts with No Monthly Fees”, or “Retail Merchant Account Rates at 1.15%”, make sure you are aware of and fully understand a credit card processing monthly minimum because you are going incur one.  One thing you need to understand is credit card processors incur extensive costs when boarding your account. Aside from the cost of pulling your credit and maybe a D & B report, they are also charged a set up fee from the bank, the acquirer, and the wireless carrier, if applicable, for any approved credit card processing account.  Now add that to their cost on the credit card machine ranging from $100-$1000 depending on the type, and the processor has now suffered a significant up-front loss to board your credit card processing account.  Don’t forget their assumed risk that you might take that free terminal and disappear forever. And if they are giving you an absurd credit card processing retail rate of 1.15%, well below cost, the credit card processor will lose money on many sales you process.  On top of all of this, every credit card processor is charged a monthly fee for each merchant on board.  Based on all of this information it doesn’t take an accountant to understand that it would be impossible for these credit card processors to allow you to have a credit card processing account with no monthly fees, and/or with free equipment. If just wouldn’t not make any sense.  What if your business plan did not work out and you did zero credit card processing business?  On top of the up front loss the credit card processor will make nothing or even lose more money if they signed you with a below cost rate.  But despite all of this, you still see credit card processors all over the industry offering these deals which would seem to be a losing endeavor.  But the truth is, they are not losing because they have secretly had the merchant sign and agree to a monthly minimum which guarantees the credit card processor a monthly credit card processing income whether or not the merchants processes at all. 

A credit card processing monthly minimum is one of the dirtiest tricks a credit card processor can play on you.  99% of the time they will not mention it to you.  If you ask about it, and they are forced to tell you, you will be notified that your credit card processing monthly minimum is $25(Sometimes as high as $35).  The average merchant will here this and say, “Oh, no big deal. I can do $25 in credit card processing with my eyes closed. That is less than 1 sale.” Well guess what.  This is the exact response for which the credit card processors are searching.  The reason being is a $25 credit card processing monthly minimum is not just one sale of $25 spread across all 4 major credit cards.  It is actually a $25 qualified credit card processing requirement on Visa and Master Card Credit cards only.  So if your qualified discount rate is 1.69%, you would have to do approximately $1480 in Visa and Master card credit card sales to meet your monthly minimum $1480 x 1.69%= $25.01.  So instead of the one $25 sale you were anticipating, now you are looking at almost $1500 in sales to hit the credit card processing monthly minimum. What happens if you do less than $1500 in sales?  Let’s assume you did $1000 in Visa & Master Card sales.  That would represent $16.90 in credit card processing ($1000 x 1.69% = $16.90).  At that point the processor would tack on an additional $8.10 to achieve the $25 credit card processing monthly minimum.   With this guarantee it ensures the processor will make at least $25 a month, $250 per year and $750 over the life of each credit card processing account so they play their games and offer below market rates, free equipment, and no monthly fees.  So read every merchant application the program guide in detail.  The credit card processing monthly minimum is there, and sometimes it is purposely hidden in very fine print. If you don’t see it and you mistakenly agree to it, you will be bound to the $25-$35 credit card processing requirement for the life of the account. BUYER BEWARE!!

If you require further explanation please call Toll Free: 877-964-1622 or inquire online.  We will take as much time as needed make sure you understand the Credit Card Processing Monthly Minimum completely.

PIN BASED DEBIT CARD NETWORK FEES: There are 2 types of debit cards and check cards in the credit card processing industry.  Most of them have the Visa, Master Card or Discover logo. As long as they have the logo, these cards can be accepted with the standard credit card processing set up. No Pin pad is required.  The merchant will simply swipe the card through the machine and it is processed just like a credit card according to the qualified credit card rates or off line debit card rates, if applicable.  The other type of debit cards and check cards do not have a Visa, Master Card or Discover logo. These represent about 10% of the debit cards and check cards in the industry and cannot be accepted through the standard credit card processing set up.  To accept these cards without a logo the merchant must have a credit card processing account set up with Pin Based debit.  A Pin Based Debit credit card processing account can be used through a credit card terminal with an internal or external pin pad.  Upon swiping of the card, the cardholder is prompted to input their personal identification number into the Encrypted Pin Pad to complete the transaction. Pin based processing can also be used for debit cards and check cards with the Visa, Master Card or Discover logos.  It has the lowest risk of fraud and chargeback in the credit card processing industry and as a result costs the least to process.  Therefore merchants get a preferred rate when processing these cards using this method.  But a merchant must be very careful because one of the dirtiest tricks in the industry is to mislead merchants into thinking they are getting a better pin based debit card rate than they actually will on the credit card processing account. Please see below for details.

Credit card processing accounts that have pin based debit card services typically carry an additional monthly service fee, over and above the standard monthly statement fee and monthly minimum, if applicable. This monthly fee ranges from 5-10 dollars, so be on the look out for it. It is rarely disclosed.  But even more important than the monthly fee is the additional transaction fee and the back end network fee that will apply to all pin based debit card and check card transactions on your credit card processing account.   You might be saying, “What, a back end network fee? No one ever mentioned that.”  This is very common and it is also one of the dirtiest tricks in the credit card processing industry.  The fraudulent credit card processors purposely neglect to mention these back end fees to make their credit card processing deal seem much more appealing.  They will quote you pin based debit card processing rates ranging from 15 cents to 35 cents but will never mention anything else.  They are hoping you will hear low rate and sign the credit card processing application immediately without doing ample research and scrutinizing their application.  And most merchants fall for this trick because they overlook the fine print on the credit card processing application, the program guide and the merchant agreement.  On the application you will find a section stating the pin based debit card transaction fee which will be very obvious, but in extremely fine print there is a clause that specifically states “Plus Applicable Network Fees”.  If you look further into the 30-40 page credit card processing program guide and or merchant application there is a section that elaborates on the “Network Fees”.  In an nutshell, each one of the debit card networks STAR, INTERLINK, NYCE, ACCEL, MAESTRO, PULSE, SHAZAM, AND JEANIE will all charge you their own additional transaction fee, a percentage, and a switch fee if you use their network for a debit or check card authorization.    The additional transaction fee ranges from 5 cents to 20 cents, the switch fee ranges from 2 cents to 4 cents, but worst of all the additional percentage ranges from ½% to 1 ½ % of the sale amount.  So the merchant that thought he had a credit card processing account with a flat pin based debit rate of 25 cents, actually has the best case scenario of  32 cents transaction fee and will incur a minimum of ½ % of the sale.  The worst case scenario on a credit card processing account with pin based debit can be as high as 49cents per transaction and 1.5% of the sale.
 
The combination of the processors transaction fees and the additional back end network fees can make the credit card processing account with Pin Based Debit much less cost effective than one without.  So make sure you crunch numbers and do your math.  Understand that all banks and processors are subjected to these additional back end network fees.  If they actually gave you a credit card processing account with a pin based debit flat transaction fee of 25-35 cents, they would be absorbing all of the back end network fees and losing a fortune.It doesn’t take an accountant to understand that is would be impossible.  If you speak to a processor and they quote on a credit card processing account with a flat pin based debit rate know, that they are purposely not being forthcoming and outright lying to you.  BUYER BEWARE!!

If you require further explanation please call Toll Free: 877-964-1622 or inquire online.  We will take as much time as needed make sure you understand the Credit Card Processing Account with Pin Based Debit completely.

WIRELESS TRANSACTION FEES: Be highly aware of this credit card processing fee because it is another sneaky little trick used by the fraudulent merchant service providers.  If you are a merchant and looking for a wireless credit card processing account then you are going in incur a wireless network access fee in addition to your standard monthly bank statement fee.  Much like a cellular phone, your wireless credit card processing device will be connected to one of the wireless data networks, either CDMA, GPRS or Mobitex The processors have a cost with each of these carriers ranging from $10 - $20 and these costs are carried over to the merchant in for form of wireless credit card processing fees.   If you get a competitive quote, you will be looking at monthly fee ranging from $15-20 depending on the network.  Most companies, even the fraudulent ones, will quote you like this.  With the wireless credit card processing quote from the honest companies this will be a flat monthly fee, with no roaming, no long distance, and unlimited use.  But the fraudulent companies will sneak in something called a wireless transaction fee without ever mentioning it.  This credit card processing fee is in addition to your standard transaction fee and it is typically around 10 cents.  So now every time the terminal connects to the system to process any kind of a function, the merchant will not only be charged the standard transaction fee of 25 cents, but also the additional wireless fee of 10 cents bringing the grand total for credit card processing to 35 cents.  This is an extremely high fee and can add up quickly especially you consider it will be assessed for any sale, refund, void, batch, basically any credit card processing function whatsoever. If you speak to any credit card processing company about a wireless account scrutinize the application for the fine print specifically stating the additional wireless transaction.  If you find it and they neglected to mention it, understand that it was intentional, they lied to you and you have been victimized.  Stay away from that fraudulent credit card processing company.   BUYER BEWARE!!

If you require further explanation please call Toll Free: 877-964-1622 or inquire online.  We will take as much time as needed make sure you understand the Wireless Transaction Fees completely.

CREATIVE TIERED GRID ID #'S
"MY RETAIL SWIPE RATES ARE 1.15%"

Pay close attention on this one because it is actively being used by credit card processors all over the internet to entice merchants to click on their link and contact them about credit card processing.  You will see this deceptive trick all over the sponsored links for every key word search in the merchant services industry. Credit card processing companies are advertising fraudulent rates well below their cost.  This dirty trick is also used in conjunction with every other deceptive tactic we discuss because it is very easy to disguise and makes the credit card processing deal look much better than any thing else out there. Some examples of these tactics are links claiming things such as “Merchant Accounts1.39% & Free Terminal”, “Get Credit Card Processing Rates As Low As 1.18%”, “1.39% retail rate and No Setup Fees”, Merchant Account at 1%,  and many others. The list goes on.  Regulatory agencies seem to be cracking down on the advertising but not on the actual tactic of creative bin pricing, which will be discussed in detail shortly. So even if you don’t see these rates advertised, be very weary when you call credit card processing company and they quote you these rates which are, in fact, well below their cost.  Even if the sales rep puts it on a credit card merchant processing application there are clauses in their agreement and back end systems set up to ensure that you are not going to see those rates.  Detail on this creative bin pricing is discussed below.

In the credit card processing industry there are hundreds of different card types and multiple transaction types processed through different types of credit card terminals, software and internet gateways. In a nutshell these credit card processing card types are broken down to standard debit cards, standard check cards, pin passed debit cards, pin based check cards, standard credit cards, rewards credit cards, signature credit cards, mileage credit cards, benefits credit cards, business credit cards, corporate credit cards, government credit cards, and international credit cards.  For each of these card levels the banks and credit card processors are charged different costs from Visa, Master Card and Discover.  To clarify this, the least expensive card is a check card and the most expensive is a high risk international card. In addition, there is different cost charged depending on how the card is processed because of the different risk levels involved.  For instance a swiped pin based debit card transaction through a credit card machine with a pin pad is much less risky and less expensive to process than a real time credit card transaction manually keyed and processed through a website on the internet.  The chances of fraud on the internet transaction are much higher so the credit card processors are charged higher fees on those sales.

So what does all of this credit card processing jargon mean to you, the merchant?   Merchant service providers and credit card processors have several different bins to which they distribute each of the card and transaction types.  The bins are usually called qualified fees, mid qualified fees and non qualified fees, but be careful here to because many processors even disguise the names to confuse the merchant.   For each of these bins, the credit card processors charge the merchant a different fee.  The lowest credit card processing charge is a qualified fee and the middle is the mid qualified surcharge, and the highest cost being the non qualified surcharge. Pay special attention to the word surcharge because this is very important. It means that the mid qualified fees and the non qualified fees are added to the qualified fee. 90% of the time, the sales reps from the fraudulent companies do not mention these credit card processing fees.  If the merchant inquires about the surcharge it is like pulling teeth and the fraudulent sales reps definitely do not explain it thoroughly enough to make the merchant understand that these other fees are added to the qualified fee as a surcharge.   So be extremely careful and make sure you understand Mid Qualified and Non Qualified Credit credit card processing fees entirely.

Credit card processing companies use a something called a Grid which directs card types and transaction types into either the qualified, mid qualified or non qualified bin and hence determines what the merchant will pay.  See below to see examples of Standard Credit Card Processing Grids.  These are what an honest company would give to you because it puts all of the cards in the proper bins according to the card issuers. 

If you get a credit card processing deal that has you set up with this kind of Grid, then you will ensure that you are getting a fair set up when in comes to getting charged the proper rates for particular card and transaction types.  But the probability is that you are going to run into a fraudulent credit card processor who is going to lure you in with a very low, below cost qualified discount rate but then burn you by setting you up with their Custom Tiered Grid.  Here’s how that would work.

Upon inquiring about credit card processing you get a rep who is telling you his retail qualified discount rate is 1.15% or something very close to that. As a bargain shopper you have compared the deal and this merchant account executive seems to have the best credit card processing deal around. The other quotes are offering qualified rates ranging from 1.69%-1.79%.  Even his mid qualified and non qualified credit card processing fees are competitive.  He might even be giving you a free landline credit card machine.  And you have it in writing. This deal seems to good to be true.  Well guess what? It is!  Here’s why.

The credit card processing representative told you that your qualified rate is 1.15%, and yes you will get that.   What you don’t know is that this fraudulent credit card processor has a Custom Tiered Grid in place.  It turns out that this Custom Tiered Grid is designed so the only cards that are going to be directed into the qualified bin of 1.15% is your Visa Check Cards.  All of the Visa Debit Cards, Master Card Check Cards, Master Card Debit Cards, Discover Check Cards, Discover Debit Cards, Standard Visa Credit Cards, Standard Master Card Credit Cards, Standard Discover Credit Cards are being directed into the Mid Qualified Bin.  So while you are getting a great deal on the Visa Check Cards which will probably be less than 10% of your business,  you are getting burned on all of the other cards which are probably 60-70% of you business.  Instead of the 1.15%, all of those cards are now going to be charged mid qualified rates which are well over 2% sometimes as high as 3%.  And the kicker is that many times these fraudulent processors get extra greedy and send cards that should normally be hitting the mid qualified bin at 2-3% into the non qualified bin ranging from 3.5%-5% per transaction. It turns out that you, the merchant, have been burned big time and are paying much higher rates than you would if you set up with an honest credit card processing company with the Standard Grid.  These banks and processors make a fortune off this deceptive credit card processing activity and most of the time merchants never realize what has happened.

Here are some things you can do to protect yourself from this deceptive tactic and others.
 
First of all, read all of the fine print on the credit card processing application before you agree to the terms.  When you sign a merchant application you are agreeing to more than just the 3-5 page application.  You are also agreeing to all of the credit card processing terms and conditions contained in the 30 page Program Guide and/or the Merchant Agreement. This is where they hide things such and contracts, cancellation fees and other clauses which bind you to things to which you are unaware.  The credit card processing Merchant Agreement and the Program Guide are huge files and so it is reasonable that it is not sent along with the application.  The credit card processors are required to post these files on their website and/or send you a copy if you request it.  So before you sign check it out.
   
In the case of the Custom Tiered Grid fraudulent tactic, the single most important thing to watch out for is the clause on the actual application, directly above where you sign, in which you are actually agreeing to the Custom Tiered Grid.  It will look something like this.  
  
Client certifies that all information set forth in this completed application is true and that he has received a copy of the Tiered Grid ID Numbers, Program Guide……..

You are in fact saying that you have been sent a copy of their Tiered Grid but you have not.   It is not part of the application, or any other page. It is a form in and of itself.  If you call the fraudulent processor they will try to tell you that it is on the credit card processing application, but that is not what the verbatim you are signing and agreeing to states.  It says you have received a copy of it and you have not. Ask them for it. They will not send it. Guaranteed!!!!!  This clause is their protection so when a merchant realizes he gets burned and files a lawsuit, all they have to tell him is that he signed and agreed to the Custom Grid they have designed.

A real credit card processing application with no tricks and the Standard Credit Card Processing grid does not even mention the word grid or tiered or anything like that. The reason being is that there are no tricks, and no gimmicks. Card types will go into the proper bins and there will be no merchants complaining and filing lawsuits stating that only 10% of their cards are qualifying.  If you ask an honest company to send you their grid they will send you something that resembles the Standard Retail & Moto Credit Card Processing Grids we have depicted above. They will have nothing to hide.  A credit card processor lying to you and offering these below cost rates would never send you this grid along with the rates they are offering because it is below their cost and they will lose a fortune on your account. Buyer Beware!!!

If you require further explanation please call Toll Free: 877-964-1622 or inquire online.  We will take as much time as needed make sure you understand the Custom Tiered Credit Card Processing Grids. 

NO CONTRACT AND NO CANCELLATION FEE

Any merchant is search of a credit card processing account needs to be 100% aware that merchant service agreements carry contracts and early termination fees.  This is yet another very important piece of information that the fraudulent credit card processing companies will purposely neglect to mention. The reason that they do not mention this fee is because the average credit card processing contract is extremely lengthy, typically 3 years, and the average early termination fee is at least $350. This type of commitment can deter a lot of merchants from signing.  So the processors make their deal look great by using any or all of the previously mentioned fraudulent tactics and make it look even better by not mentioning the contract and ETF fee, or by outright lying and saying they do not have one.  The simple fact is that the fraudulent credit card processors need the contract because it is their insurance policy against a merchant leaving when once they discover all of the shady tactics which were used to entice them into signing up for the credit card processing account.  Along the same lines, when these credit card processors are forced to immediately increase rates because they set up the credit card processing account below their cost and at a loss, the exorbitant ETF fee will deter merchants from canceling and if the merchant does cancel the company will recoup some of the up front loss they incurred on the account.

Keep in mind that credit card processing is a very high maintenance, service oriented industry.  High maintenance requires qualified employees who need higher than average salaries. The fraudulent companies who give everything away and set up accounts below cost are dealing with a double edged sword.  Not only do they incur a severe up-front loss, but they also significantly increase the call volume in their customer service departments due to all of the irate customers calling in because they realized they have been burned on their credit card processing account.  And because these companies already have such a high up front loss and are now being bombarded with high inbound call volume combined with severe lawsuits and legal fees due to fraudulent tactics, they cannot afford to pay enough qualified employees to properly service their credit card processing accounts.  So as a result their customer service is horrendous.  And this is yet another reason why they absolutely have to have a long term contract with an extremely high ETF; To protect them from horrible service and deter improperly serviced merchants form canceling. 

So make sure you are fully aware that if you are signing up for a credit card processing account you will be signing a contract and there will be an early termination fee.  Even if you get set up with a fair and honest company, they will most likely require at least 1 year from you.  There are costs involved when setting up your account such as credit checks, D & B reports, and activation fees that must be recouped and 1 year is usually sufficient. 

If a company tells you they do not have a termination fee, they are lying and they are relying on creative language in their credit card processing agreement to mislead you into thinking they are being truthful with you.  Here are the clauses from a credit card processing program guide or merchant agreement that bind you:

1)The credit card processing agreement will become effective on the date it is approved by our underwriting department  From the date of the approval, the initial term of this credit card processing agreement will begin and will continue in force for three years.  After that, it will continue until it is terminated by either party using written notice.

This is the 1st part of them binding you.  So if you went with a credit card processing company who claim they do not have an Early Termination Fee, you have to ask yourself the question, “Why are they still locking me into a 3-5 year contract”.  What is the point of the contract if there is no termination fee?  Why would they not just say “No Contract”? The reason is you are being contractually obligated to all of the fees pertaining to the credit card processing account and then some for the life of the merchant agreement.  The clauses below will show you all of these credit card processing fees to which you are agreeing even without an Early Termination Fee.

2)Terminating this credit card processing agreement for any reason,you continue to bear complete responsibility for all Credits, chargebacks, adjustments &  fees that result from processing Card transactions pursuant to this Agreement and  other amounts  due or become due under this Agreement.

This is very vague. It mentions credits and chargebacks from credit card processing and those are self explanatory.  But is also mentions adjustments and fees which could mean anything, statement fees, monthly minimums, wireless access fees, gateway fees etc.  And you are responsible for these for the life of the credit card processing agreement which is 3 to 5 years in most cases which translates to hundreds even thousands of dollars. 

3)Neither expiring or terminating this Credit Card Processing Agreement will terminate any obligations or rights of parties according this Agreement which will survive or be perpetual or irrevocable. All provisions within will survive the expiration or termination of this Agreement. Any and all obligations by you to pay or reimburse us for any obligations associated with transactions you have submitted to us will survive terminating this Agreement.

So once again, even without a termination fee you are agreeing to pay any and all obligations associated with the credit card processing agreement. And if you terminated you are bound for the life of the contract.

4)The client will be in breach of this Agreement if they improperly terminate it prior to the expiration of the term of the Agreement, or if the processors terminate this Agreement  prior to the expiration term of the Agreement due to an Event of Default.  In either case, the processors will suffer a significant loss and injury that is very difficult or impossible to estimate accurately. According to this, both parties agree that the amount herein is a reasonable estimate of the probable loss of the processor. That amount will be paid to processors within 15 days after merchant’s receipt of the total amount due, calculated and sent to them by the processor.  If the the Merchant terminates this Agreement within the 3 year term of this agreement, merchant will be charged an early termination fee, if indicated on the credit card processing application and agreement. The Merchant’s obligation to the Monthly Minimum Processing Fee will end once the processor receives the Termination Fee.

What this says is that the credit card processors will incur a loss if you terminate early or are terminated early.  The will not know that loss until after the fact, but they will come up with a number afterwards and you will be bound to it.  Sounds very one sided.  It also says if you cancel you will pay a monthly minimum fee up until the point when you pay a termination fee. So if the credit card processing rep is claiming he is waving your termination fee, make sure you understand you are still in a long term agreement and are still bound to hundreds even thousands of dollars worth of fees.

To protect yourself from getting burned by a credit card processing company who is claiming they do not have an early termination make sure you thoroughly understand these clauses and what they are, in effect, binding you too.  It a processor told you there is no ETF, but sends you a credit card processing agreement with these clauses and failed to explain them to you, be advised they did it intentionally.  If you are bound to the fees of a three year credit card processing agreement  and you have a $10 statement fee you just agreed to automatically pay them $10 x 36 months or $360.  What about the monthly minimum of $25 they slid in on you? $25 x 36 months = $900. OUCH!!  BUYER BEWARE!!!

If you require further explanation please call Toll Free: 877-964-1622 or inquire online.  We will take as much time as needed make sure you understand the Credit Card Processing Contracts and Early Termination Fees.