Think You’ve Uncovered All the Hidden Credit Card Processing Fees? Think Again

Chances are you’ve heard of Square, a credit card processing system that works with mobile devices.

This system is full of convenient payment options, especially for small businesses that offer customers the option to pay by credit card.

But, as it turns out, Square may also be charging your business too many hidden fees, depending on your average sale amount.

As a business of any size, it’s important to keep in mind the many hidden fees that pop up with Square, and nearly every other credit card processing system.

We want to highlight some of the ways your business could be paying more hidden fees than necessary, and what you can do about it.


Simple pricing, complicated fees.

Like every credit card processor, Square has a system in place to pay a percentage of each purchase to the bank issuing the customer’s credit card — in addition to fees from the card company itself (e.g., Visa, MasterCard, American Express).

This means each time a customer swipes a card, Square sends money to the bank and money to the credit card company.

The bank fee is the interchange and the card fee, typically a much smaller fee, is the assessment.

Square charges a flat rate of 2.75% of each transaction to businesses like yours that use their system to process credit card payments.

This is not a perfect system, however.

Sometimes the bank fees and credit card fees end up being more than 2.75%, and in that case, Square loses money on the transaction.

With an average sale of about $5.00, companies like Starbucks benefit from this pricing and fee structure because of Square supplements the difference.

(A lower average sale means Square pays the higher fee, not your business.)

This absolutely works in Starbucks’ favor because of their sheer volume of sales.

Without getting into number crunching, suffice it to say that if Square loses 11 cents for every cup of coffee Starbucks sells, Square shells out an extra $106 in processing fees for every 1,000 transactions.

Over time and sales, this deficit can certainly add up.


What can your business learn from this?

At the risk of noting the obvious, we want to point out that Square isn’t the only credit card processor that pays both the interchange and the assessment.

All of your credit card processors have a system in place to compensate for these fees.

Do you know how much each of your merchant accounts are charging you?

Something else to consider: what is your average sale? Is it low enough that the flat rate your business pays the credit card processor is better than the actual sum of the interchange and assessment added together?

As with the Starbucks case, if your customers’ average purchases are under $10, you may be coming out on top of the fees.

However, if your average sale is more than $10 (where Square is concerned, anyway) you’re the one supplementing the bank and credit card fees.

So, now that you know how Square calculates and pays for credit card transaction fees, what about all the other merchant services you use?

Do you know the fees for each transaction and your break-even point? If not (and we understand, it’s a lot to keep track of) there may be hidden fees lurking behind each payment system your business uses.


How do you uncover hidden fees?

First, evaluate your payment processing systems.

What percentage of each sale are you being charged?

Are you using the merchant services that make the most sense for your business’s average transaction amount?

You can’t avoid these fees, but you may be able to find processors whose fees are most proportionate for your credit card transaction averages.


Next, are you paying hidden monthly fees?

If you’re not careful, you could be paying monthly usage fees on top of transaction fees.

This is especially common if you reach a certain volume level or the maximum number of transactions.


Are you paying a terminal fee, or a virtual terminal fee each month?

Some credit card processors slap on monthly fees just for using their physical or virtual equipment.

If you have more than one physical terminal, are you being charged for each one separately?


What about a statement fee?

Some companies charge you for obtaining physical copies of your monthly or yearly statements.

Be sure to choose e-statements to eliminate these fees.


Finally, chargeback fees could be draining your bottom line.

Chargeback fees on disputed purchases or returned items can quickly add up and credit card processors don’t like that, so they charge additional fees to you, the merchant if chargebacks occur more than they should.

And, if you’ve encountered a significant amount of credit card fraud in your industry, these fees can become even higher and impact your bottom line, as well.


We can help you manage ALL the hidden fees.

The financial experts at MyWatchmen know exactly what to look for when it comes to hidden fees, chargebacks, and cost control.

We have been uncovering hidden fees associated with transaction processing, chargebacks, and compliance fines for more than 10 years.

We can help your business increase its bottom line and take the guesswork out of managing your financial systems.

When you partner with the experts at MyWatchmen, we also optimize the security of your accounts to eliminate the risk of jeopardizing sensitive customer data.

When it comes to managing your merchant accounts, we do it all, so you can run your business and focus on sales and promotions rather than fees and disputes.

The comprehensive cost control services we offer directly improve your bottom line.

If we don’t help you increase your bottom line, you pay nothing for our services.

That’s how simple it is to partner with MyWatchmen, and that’s how confident we are in our financial expertise.

Give us a call at 1-888-256-2845 or schedule at time to meet with us at your convenience.

Related Posts

Leave a Comment