When you're a small business starting out, even a small increase in the amount you pay for merchant services can affect the bottom line.
Gene Turley, owner of Kiwi Loco, came unglued when he read his statement from Payment Systems. For an unexplained reason, there were surcharges of $99 and $299.
"None of this is in the contract," he says. "It's nothing we agreed to at the time of signing the contract."
Gene and Carol Turley started with a single store in Twin Falls in 2010. By mid-summer 2012, the business had grown substantially to the point where they needed to upgrade their credit card processing.
"We were doing about 800 transactions a month," Carol says.
Kiwi Loco owners contacted a merchant service provider and negotiated what they believed was a no-annual-fee, low-cost credit card and swipe fees agreement.
When the contract arrived, they signed and sent it off.
"That's the mistake many small businesses make when they sign up for merchant services," said Dan Harrington, president of NLP Secure, a Boise-based services provider. "They sign the agreement thinking that's it, all's taken care of. But it's not."
He says agreements are hundreds of pages loaded with clauses in fine print that basically allow providers to act unethically.
"What businesses don't know is that the service providers, once they've locked you into a 48-month contract, have the advantage," he says.
Additional fees, surcharges and compliances can be added as the service provider sees appropriate.
If the cost of credit card transactions has you looking for options, there are a few things to consider.
As a result of litigation, businesses in the U.S. and its territories can pass surcharge fees, up to 4 percent, directly on to customers that use credit cards (but not debit or prepaid cards). You must tell your customers you're adding the surcharge.
A coffee shop is transparent about it, clearly stating that purchases under $5 will be charged 3 percent more when customers use a credit card. Another shop displays a sign that reads: "All cash-paying customers will be entered into a monthly drawing for a $10 gift card." For years, gas stations have posted "Cash Prices."
Above all else, be transparent with your customers and help them understand the crunch.
BBB suggests teaching your customers to:
Æ Use cash for smaller purchases; offer a discount if they pay with cash.
Æ Use a debit card with "bricks and mortar" establishments.
Æ Use a credit card for online purchases where they can receive greater protections.
Æ Monitor their bank account and credit cards accounts watching for surcharge fees.
In addition, educate yourself about changes in the merchant services industry. Talk to your bank manager; talk honestly and openly about fees. While the banker does not necessarily control the surcharges, she or he becomes more aware of your situation.
Harrington says the more businesses know about the service provider and alternatives on the market, the more leverage they have when it comes to negotiating with a provider.