What are the REAL costs & liabilities of accepting credit cards?

Have you read ALL the small print on the Merchant Agreement you MUST sign BEFORE your business can accept credit cards? If not, you may be in for many costly surprises...

Set-up Fees. Can range from $40 to $300 just for processing your merchant application.

Monthly Fees. Depending on whether you want to process credit cards at a retail location (card present), by phone, via the internet or all 3, monthly fees range from $25 to $100.

Annual Fees. $75 is what one major provider charges. Others may be more or less.

Contract Cancellation Fees. If you decide to change merchant providers, which you might do if you find better rates, you might be forced to pay a $395 Termination Fee in the first 6 months or $295 after six months.

All your bank accounts are exposed. Most merchant agreements allow the provider to take money from your business OR personal bank account(s) for ANY fees or chargebacks they decide are unpaid AND, they can do this without your prior consent or knowledge. They can also search for bank accounts in your name and take the monies from those accounts.

Reserve funds. You can be forced to set aside or pay monies into an account to cover any possible chargebacks. The length of time for the reserve fund is also dictated by the service provider.

Inspecting your home or business. Service providers can insist on inspecting your business premises or your residence if you operate a home-based business. They can do the inspections before and during the length of your contract.

Limiting amount of your transactions. Service providers can limit the dollar amount of each transaction, number of transactions you process and the total dollar volume you submit.

Waiving your legal rights. Most merchant agreements state that in the event you have a dispute, you must fight your legal battle in the home state of the service provider AND you must agree to arbitration. Even if you sell your business, the agreement may state that you are still personally liable for any chargebacks and "any other liabilities."

Terminal Fees and damage to your credit. You may be forced to sign a multi-year lease or purchase contract to pay $THOUSANDS for a tiny calculator-sized credit card terminal that's worth a few hundred dollars. If you try to cancel the contract and have even returned the equipment, the leasing company will come after you personally. They intentionally damage your personal credit for years to come. Leasecomm, one of the major leasing companies, sends false information to credit bureaus to continue damaging your credit for years beyond the legal limits set by the federal government.

Chargeback Fees. As a consumer, you may already know how easy it is to dispute a credit card charge. When a charge is disputed, the merchant may immediately be charged a fee of $20 or more AND the entire amount of the sale is immediately withdrawn from your bank account without your knowledge or permission. You may have to wait days before an envelope arrives in your mailbox with the details of why the funds were deducted from your bank account. In addition, if you (merchant) elect to fight a chargeback, you can be charged additional fees of up to $400 for handling the dispute.

No time limit on chargebacks? Although our research and knowledge of federal law disagrees, we were recently told by one major bank that their credit card customers can dispute charges ANYTIME they want in the future AND can refile disputes if they don't like the outcome!

Checking Account Change Fees. $25 is what one major provider charges if you want your credit card monies sent to a different bank account or you change banks. Others may charge more or less.

Business Name Change Fees. $75 is what one major provider charges. Others may charge more or less.

Credit Card Transaction Fees. These are applied to EVERY transaction you process by terminal, phone or website. Fees range from $.10 to $.50 per transaction.

Reject Fees. $15 per rejected transaction.

Batch Header Fees. Additional fees for presenting each deposit of one or more sales.

Customer Service Fees. $12 per month is what one major provider charges.

Documentation Fees. $2.00 per page for providing documentation.

Statement Fees. $10.00 for the "privilege" of them sending you a detailed monthly bill.

Discount Fees. The is a percentage of EVERY transaction typically ranging from 1.5% to 7%. Percentage varies depending on your type of business, average sale amount and whether customer signed a credit card slip (also known as "card present") or you processed the sale by phone, website or other means. The amount also varies depending on the credit card used. VISA and MasterCard typically offer the lowest rates. American Express is usually the most expensive.

Authorization Fees. You must obtain authorization for ALL credit card sales. If for any reason you can not obtain it electronically, you may be charged up to $1.75 for each phone authorization.

Gateway Fees. You may be charged $179 or more in advance for access to a website that can provide credit card approvals. You may also be charged $25 per month or more depending on how many times you use the gateway for approvals.

Based on customer comments and our own experiences, the worst credit card service provider is Cardservices International. Beware: Cardservices International has agents all over the country and all over the internet. The agents or sales reps operate under many different names. You may not realize it's Cardservices International until you are signing the merchant agreement.

BOTTOM LINE: For small businesses, all these fees & liabilities can easily equal or exceed the profits you would gain by accepting credit cards. Although this list seems extensive, it is not the complete list of fees and restrictions that may be imposed upon your business and you personally. The most recent Merchant Agreement we examined was 46 pages long, not including a number of addendums.

These are reasons why businesses have discontinued accepting credit cards and many have switched to ChecksNet. ChecksNet has NONE OF THESE FEES, PERSONAL LIABILITIES, LONG-TERM CONTRACT COMMITMENTS OR INVASIONS OF YOUR PRIVACY.

If you MUST accept credit cards, there is one bit of good news. Unless your Merchant Agreement says otherwise, you CAN offer a discount to anyone paying you by cash or ChecksNet.


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