How To Start & Grow Your Business

Play Your Cards right: 7 Tips if Your Small Business Accepts Credit Cards

Lesley Fair
Jan 19th, 2015
  • Estimated reading time: 6 min read
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    1Watch out for fraud and billing scams. 2Billing companies usually will negotiate on fees. 3Read before you sign and take a copy with you.
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Finance Misc.

Business concept with document, usa dollars, pen and calculator Photo Credit: Es75 Shutterstock

Paying with plastic is a convenience for consumers, but a cost for companies. So small businesses are always looking for a penny to pinch in what they pay to process credit and debit cards. Enter unscrupulous pitch people who resort to impersonation, erasures, fine print, half-truths, and flat-out lies to get a business owner’s signature on a contract. When you’re pricing processing, the FTC has advice on protecting yourself from a B2B bamboozle.

These tips aren’t based on speculation or what-ifs. They reflect the experience of many small business owners who were targeted by an outfit called Merchant Services Direct, which just settled separate lawsuits filed by the FTC and the Washington Attorney General’s Office. The company – also known as Sphyra Inc. – was an independent sales organization (ISO) that sold businesses the services to accept credit and debit card payments.

According to the FTC, Merchant Services Direct made a host of deceptive claims and misled merchants about the fees and costs for its services and equipment. As part of settlements with the FTC and AG, the defendants behind the operation will pay $175,000 and will have to change the way they operate in the future. For example, before a business signs a contract, the defendants will have to provide a separate document disclosing all fees, charges, and rates.

What tips can other merchants take when shopping for processing services?

1. Know who you’re dealing with. Some shady sales agents weasel their way in by falsely claiming to work for your current credit card processor. We’re just here to “update your paperwork,” they say. Others suggest it’s a routine account review “to make sure you’re getting the best rate.” One technique to stymie a scammer: Insist on ID and keep their contact information for your records.

If the person claims to be with your current processor, call the company directly to verify, using a phone number you know to be legitimate. Sales people who are on the up and up will understand your vigilance.

2. Listen for code words that could be telltale signs of fraud. Some sales agents promise they can reduce your payment processing costs by “cutting out the middleman” and offering “direct” or “wholesale pricing,” often citing supposed changes in the law. That’s bunk. All agents selling processing services are middlemen and there are no wholesale prices. Interchange rates – the rates you pay for the payment network (e.g., Visa, MasterCard, or Discover) – are the same for most merchants and generally are non-negotiable.

3. Arm yourself for effective negotiation. Business owners can bargain from a stronger position if they’re savvy about what is negotiable. Differences in pricing stem from two variables: 1) the types of cards you accept (for example, debit cards or rewards cards); and 2) the fees that payment processors and others in the card payment processing sales chain charge for their services.

The rates above interchange (called the “discount”) and many fees are negotiable or will vary from one payment processor to another.

4. Investigate what’s FEES-ible. As small business owners know, purchasing payment processing services isn’t like buying bananas by the pound. What you pay can be a complicated calculus of numerous variable fees. Common fees to look for include:

statement fees
authorization fees
voice authorization fees
address verification fees
retrieval fees
chargeback fees
account on file fees
batch/ACH fees
online reporting fees
annual fees
semi-annual fees
application fees
PCI fees
compliance fees
early termination fees.

These fees are often negotiable. If a sales agent tells you he or she can waive a fee or that you won’t be charged for a certain fee, get that promise in writing. Keep a copy in case you’re charged later for something you were told was free.

5. Read every word before signing. Once you sign a merchant application, it’s a binding contract. If a sales agent insist you have to sign to “get a quote” or suggests it won’t be a contract “until approved,” show ‘em the door. It goes without saying that you need to read – and understand – every line of every page before signing, but there’s a reason it’s particularly important in this context. Underhanded sales agents have been known to bury unfavorable clauses in a jumble of fine print, hoping you won’t notice.

Furthermore, just studying the contract may not be enough. Sometimes the document will refer to “Terms and Conditions” or “Terms of Use” that appear only on the company’s website. As business owners have found out the hard way, some questionable companies pull a “gotcha” by keeping mum within the four corners of the contract, but revealing inflated fees within those online “terms.” One strategy to protect your pocketbook: Insist on a separate written Schedule of Fees for your files.

6. Point of Sale (POS) equipment: To buy or to lease? Sales agents may try to lease you POS equipment to swipe cards or may offer you “free” equipment. Checks the contract terms carefully. Leases can be very pricey and you often end up paying thousands of dollars for equipment you can buy for much less. Many leasing contracts can’t be canceled – meaning you have to keep paying even if you switch payment processors or decide to close your business.

Another tactic favored by fraudsters: offering “free” equipment but burying fine-print terms in the contract requiring you to cough up for monthly “insurance.” Others bill businesses for the full purchase price if they switch processors and don’t send the equipment back immediately.

If sales agents say you have to buy POS equipment from them to use their services or get their rates – or demand an “unlocking” fee for using your own POS equipment – look elsewhere. Many payment processors will let you use the equipment you already have if you switch to their services.

7. Before the sales agent leaves, get copies of every document you sign. Some unscrupulous sales agents persuade business owners to sign documents that still have key terms left blank. Others have been known to use white-out to change terms after the fact. If a sales agent refuses to give you copies of all documents right then and there – or tries to put you off with a promise to send them later – trust your gut that fraud may be afoot. Your best protection against an erasure, alteration, or forgery is having your own copies in hand before the sales agent leaves.

This article was written by Lesley Fair and Nadine Samter and published on the Federal Trade Commission blog,

 The FTC’s Bureau of Consumer Protection enforces laws that protect consumers against unfair or deceptive practices.