What are some of the problems with TRADITIONAL credit card processing services?

Problem #1: Traditional credit card processing services are very expensive to acquire: Many low volume businesses find the sign up cost prohibitive and thus chose not to get a merchant account. Typically, the following fees apply:

• Application fee: $25 - $99. You get no refund if you are rejected.
• High sign up fee: up to $399.
• Store- inspection fee: up to $100

Problem #2: Traditional credit card processing services are very expensive to maintain. Merchants have to pay ALL the monthly maintenance fees, even if they didn’t charge a single credit card that month.

• Monthly minimum: $25 (This is usually hidden in the small print)
• Statement fee: $10
• Equipment lease: $35-$50. The lease can go up to three years and there is no ‘escape clause.’ In other words, there is no way you can break the lease and save yourself from the exorbitant interest costs. The alternative to leasing is to buy the equipment upfront. This can cost from $400 to $1000, a price most low volume merchants cannot afford.
• Access fee: $20, if you use mobile or Internet merchant account.
• Batching fees: Varies. Merchants have to perform ‘batching,’ a procedure that requires the merchant to electronically add up the day’s transactions and submit them to the sponsoring bank. If you don’t batch, you may lose the money you charged on that batch’s credit cards. What’s more you have to pay the associated fees, even though you lost the money! Many merchants find batching unreasonable, confusing and irritating. The hassle and constant worry of needing to batch transactions are key reasons many small businesses choose not to accept credit cards.
• Transaction fees: $.30 per transaction.
• Discount rate: 2% - 5%.

KEY POINT: At first glance, it may appear that our 2.99% discount rate is high. That's simply not true. Compared to other merchant account programs, we give the best value for the low volume business.

Although other merchant programs advertise a lower discount rate, you will typically find that after all the fees are taken into account, the competitor's effective discount rate is higher than 2.99%!

Problem #3: Traditional credit card processing services have strict acceptance criteria. Most credit card processing companies have strict acceptance criteria. They require that the merchant have a storefront, near-perfect credit, many years in business, etc. These strict criteria cause a large number of merchants to be unable to get a credit card processing service.

Problem #4: Traditional credit card processing services have high cancellation fees. Cancellation fees of $295 or higher are very common. Imagine that: you have to pay money for the privilege of quitting! Not to mention that you are locked in a three-year contract.

Problem #5: Your money is not automatically deposited in your account. In addition to the batching requirements referred to earlier, often you may need to deposit credit card slips to the bank before you get your money.

Problem #6: Customer service can be poor. Typically, it’s very hard to get a real person to answer your technical or transaction related questions.

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Steve Capellini,
Author of Massage for Dummies