one of the most notorious and little-known hidden costs ... is a processor’s ability to intercept interchange credits on refunded transactions
(PRWEB) November 22, 2011
CardFellow.com, a credit card processing services comparison website is admonishing businesses that they may be incurring significant losses in non-refunded hidden bank fees, and it’s offering a viable solution.
The issue centers on tiered pricing, which is the most common type of credit card processing pricing being used today. With this type of pricing, underlying interchange categories are grouped into pricing tiers—typically called qualified, mid-qualified and non-qualified—that are established by the processor. Tiered pricing allows processors to inflate the cost of processing by choosing the pricing level where the underlying interchange fees are routed. It also hides the true cost of credit card processing from small businesses, and it’s more profitable for processors. So with tiered pricing, businesses essentially pay their processor’s general rates without ever seeing the actual cost of a transaction.
According to Ben Dwyer, CEO of CardFellow.com, one of the most notorious and little-known hidden costs of tiered pricing is a processor’s ability to intercept interchange credits on refunded transactions. He explains: “Each time a business issues a refund, it’s supposed to receive a credit for a portion of interchange fees paid on the original transaction. However, businesses that are being billed on tiered pricing never receive this credit. Instead, their credit card processor keeps their interchange refunds.”
The potential loss from non-refunded hidden bank fees can be substantial. For example, if a retail business issues $50,000 in credit card refunds each year and Visa’s current consumer credit interchange rate is 1.76 percent, the processor could withhold $880 in credits. Over five years, the business could be cheated out of $4,400 in non-refunded bank fees. “Multiply this trend across the total credit card refund volume of all businesses that are on tiered pricing, and processing banks are making millions at the expense of small businesses,” Dwyer said.
Dwyer adds that processing banks are having no problem crying foul about the Durbin Amendment—a last-minute addition to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010—while they steal millions of dollars in non-refunded interchange fees from small businesses. He says small businesses can easily keep banks from dipping into their pockets, but most don’t know about the hidden bank charges or how to remedy the situation.
However, Dwyer says there’s a simple solution to the problem: Business can use a service like CardFellow that requires processors to use transparent interchange plus pricing. On an interchange plus pricing model, businesses pay fees and receive credit based on actual interchange rates, and processors are unable to intercept their fees. “This allows interchange credit to reach the business for which they were intended,” Dwyer said.
CardFellow is a free credit card processor comparison service that allows users to quickly and easily find the lowest processing fees. All of its processors are carefully screened before being allowed to offer quotes through the website. In addition, they are required to sign an agreement that reassures businesses that they operate under the highest standards. CardFellow provides businesses with personalized support to help them select the best credit card processor for their needs. Services are provided anonymously, and businesses are under no obligation to select a processor through the website. For more information about CardFellow or its reputable credit card processing services, visit http://www.CardFellow.com.
Launched in 2006, CardFellow.com saves businesses an average of 45 percent on processing fees by allowing some of the industry’s best credit card processors to compete for their businesses through an instant online bidding process. The website also offers support before and after a processor is selected. CardFellow.com makes it simple to sign up, receive multiple quotes, choose the best option, and save on fees. It serves registered users throughout the United States.