Hidden Credit Card Processing Fees

Are You Paying Hidden Credit Card Processing Fees?

Some business owners have a good understanding of their merchant account, but many are not as familiar with their monthly statement and their real costs as they should be. As a result, most merchants fail to notice hidden credit card processing fees. The fact is that many credit card processors include hidden fees in your monthly statement. While there may be a valid and even obvious explanation for certain costs, sometimes merchant service providers charge their clients unnecessary fees by burying them in the notoriously confusing merchant statements.

Find Out What To Lookout For

Here’s a breakdown of hidden credit card processing fees and costs that you should look out for when reviewing your merchant account statement:

Assessment (or Brand) Fees

Visa, MasterCard, and Discover charge between 0.087% to 0.904% on all processed volume. In most cases you will see “Assessments”, “Dues and Assessments” or “Brand Fees” as line items in your statement. If they are not included on your statement, rest assured you are paying for them in some way, but the fee is hidden.

Some merchant service providers discretely increase that rate by simply showing the total amount charged for those items on your statement and not displaying the actual rate. To check whether your assessments are getting unnecessarily increased, take the total charged for, say, MasterCard Dues and Assessments and divide that by the total amount of MasterCard volume processed. If that number is greater than 0.087% then you are probably paying too much.

Interchange Fee

Interchange is a necessary fee that all merchant service providers charge their clients. It’s often listed as a pass-through cost on your statement, but occasionally interchange is marked up by the merchant service provider. There are several hundred different interchange rates, which are determined by card type (debit card, rewards card, corporate card, etc.), how the card is accepted (swiped, inserted or keyed) and even by your industry type.

The Interchange Fee is a necessary evil and, in fact, the Interchange Fee typically makes up the greatest part of your merchant services expense. Unfortunately, because the Interchange Fee is so complicated, few merchants understand it. Even business owners who have had a merchant account for years often don’t understand what interchange is, and how it works, so figuring out they are being overcharged is next to impossible.

The best way to understand whether the Interchange Fee you are being charged is reasonable is to contact other merchant services providers to see if they can explain what each interchange rate is and whether yours is being marked up before being presented as a pass-through cost. Doing this just might also get you a better credit card processing deal.

Daily Discoount

Most merchant service providers take out their processing fees monthly on one specific date. This helps when reconciling your books and makes monitoring your credit card processing expense easier. Some providers, however, set merchants up on “daily discounting” system, where they take their fees daily. This hurts the merchants’ cash flow and makes already confusing merchant statements even more confusing.

Some providers charge merchants to get monthly discounting instead of daily discounting. If you see that, make sure you argue forcefully to get your fees debited monthly – or find another provider. In the end, daily discounts just keep you in the dark and hurt your cash flow. Insist on monthly discounting and don’t pay an extra fee for it.


Merchant service providers typically try to entice business owners by claiming that they offer the best rate. Although some do offer low rates for their clients, many claims are misleading. Rather than explain the terms and conditions right away, some merchant service providers advertise an attractive rate only to reveal later on that it only applies to certain types of transactions, specifically in-store transactions in which a debit or non-rewards credit card is used. Any “non-qualifying transactions” (that is cards which are rewards cards or premium cards) result in a surcharge, which is usually significantly higher than the rate they promoted as the “best rate.”

If you want to know what you’re actually paying for credit card processing, take the total amount of the fees you paid for credit card processing in a given month and divide that by the total amount of volume you processed. That percentage is your “effective rate,” and represents precisely what it costs you to accept credit and debit cards for payment. Compare this with the “best rate” you were offered and you’re likely to see a difference.

Rate Creep

The credit card processing standard contract typically provides for a multi-year term. What few merchants know is that standard contracts contain a provision that allows your provider to notify you—even in a discreet message on your merchant statement—of a rate increase. This is a frequent source of hidden credit card processing fees. Be sure to READ your monthly statements for notices of rate increases (most providers will simply waive them if you call to object) or periodically check your effective rate to see if you are suddenly paying more for your credit card processing.

Application Fee

This item will not appear on your merchant statement, but would be an item on the merchant services application/contract that you sign. This fee may range from $0 – $500. In almost all cases, if asked, a merchant service provider will waive this one-time fee, as it is pure profit to them. Remember to ask to have this hidden credit card processing fee waived.

Service Packages

Some merchant service providers justify charging you more per month by offering a “service package”. These service packages supposedly include additional services and perks, but it’s actually just a ploy to get you to pay more money each month, because the “extra” amenities you’ll receive should already be provided through a standard merchant account. Even if there is small benefit to signing up for such a package, it’s probably not worth the extra cost, it’s just another hidden credit card processing fee.

Early-Termination, Contract Closure & Leasing Fees

Almost all processors have a 3 to 5 year processing contract, with cancellation fees ranging from $250 to $5,000 or more. At Canada First you are guaranteed that you can cancel your contract, without penalty, at any time.

You should also be aware that merchants who sign equipment lease agreements can face large equipment buyout rates before the end of their designated term. Learn why you should avoid terminal leases.

Cost Plus Pricing For Transparency

By passing the cost directly to you and only charging for a single markup, Cost Plus Pricing gives you significant savings while creating a very transparent arrangement with your processor (you know our cost and margin!)

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