Small business owners have cried foul over credit card payments processors using tiered pricing to calculate how much they need to pay in fees.
The merchants estimate that they may be paying as much as 60 percent more than they would if fees were calculated using interchange plus pricing.
“When tiered pricing is used to calculate payment processing costs, transactions are put into one of three ‘buckets’ or rate categories,” Deborah Walker, an independent merchant services agent in North Haverhill, New Hampshire, said. “There are hundreds of different criteria that determine which ‘bucket’ a transaction is assigned to. Tiered pricing schemes make it nearly impossible for merchants to keep track of the fees they are being charged.”
According to Walker, credit card payments processors should use interchange plus pricing, which passes the fee the processor is charged by the credit card company straight to the merchants with only a slight change. Walker said this is the only way she calculates a business owner’s credit card payment fees.
“It’s very transparent,” Walker said about interchange plus pricing. “Merchants know exactly how much profit my company is making on each transaction and that they’re not being overcharged.”
Generally, only larger merchants with the most negotiating power are able to get interchange plus pricing. Now that the market is getting increasingly competitive and merchants are becoming better informed, however, smaller companies are able to negotiate in this way, according to FeeFighters.com.