The following is another example of tactics used by credit card processors to entice merchants to contact them about credit card processing.  You will see this tactic in sponsored links for keyword searchs in the merchant services industry. Credit card processing companies often advertise misleading rates well below their cost.  This trick is also used in conjunction with other deceptive tactics we discuss in this series. 

Some examples of these tactics are links claiming things such as “Merchant Accounts1.39% & Free Terminal”, “Get Credit Card Processing Rates As Low As 1.18%”, “1.39% retail rate and No Setup Fees”, Merchant Account at 1%,  and many others. The list goes on.  Regulatory agencies seem to be cracking down on the advertising but not on the actual tactic of creative bin pricing, which will be discussed in detail shortly. So even if you don’t see these rates advertised, be very weary when you call a credit card processing company and they quote you these rates which are, in fact, well below their cost.  Even if the sales rep puts it on a credit card merchant processing application there are clauses in their agreement and back end systems set up to ensure that you are not going to see those rates.  Detail on this creative bin pricing is discussed below.

In the credit card processing industry there are hundreds of different card types and multiple transaction types processed through different types of credit card terminals, software and internet gateways. In a nutshell these credit card processing card types are broken down to include:

• standard debit cards
• standard check cards
• pin passed debit cards
• pin based check cards
• standard credit cards
• rewards credit cards
• signature credit cards
• mileage credit cards
• benefits credit cards
• business credit cards
• corporate credit cards
• government credit cards
• international credit cards

For each of these card levels the banks and credit card processors are charged different costs from Visa, Master Card and Discover.  To clarify this, the least expensive card is a check card and the most expensive is a high risk international card. In addition, there is different cost charged depending on how the card is processed because of the different risk levels involved.  For example, a swiped pin based debit card transaction through a credit card machine with a pin pad is much less risky and less expensive to process than a real time credit card transaction manually keyed and processed through a website on the internet.  The chances of fraud on the internet transaction may be much higher so the credit card processors are charged higher fees on those sales.

So what does all of this credit card processing jargon mean to you, the merchant?   Merchant service providers and credit card processors have several different bins to which they distribute each of the card and transaction types.  The bins are usually called qualified fees, mid qualified fees and non qualified fees, but be careful here to because many processors even disguise the names to confuse the merchant.   For each of these bins, the credit card processors charge the merchant a different fee.  The lowest credit card processing charge is a qualified fee and the middle is the mid qualified surcharge, and the highest cost being the non qualified surcharge. Pay special attention to the word surcharge because this is very important. It means that the mid qualified fees and the non qualified fees are added to the qualified fee. 90% of the time, the sales reps from the fraudulent companies do not mention these credit card processing fees.  If the merchant inquires about the surcharge it is like pulling teeth and the fraudulent sales reps definitely do not explain it thoroughly enough to make the merchant understand that these other fees are added to the qualified fee as a surcharge.   So be extremely careful and make sure you understand Mid Qualified and Non Qualified Credit credit card processing fees entirely.

Credit card processing companies use a something called a Grid which directs card types and transaction types into either the qualified, mid qualified or non qualified bin and hence determines what the merchant will pay.  See below to see examples of Standard Credit Card Processing Grids.  These are what an honest company would give to you because it puts all of the cards in the proper bins according to the card issuers. 

If you get a credit card processing deal that has you set up with this kind of Grid, then you will ensure that you are getting a fair set up when in comes to getting charged the proper rates for particular card and transaction types.  You will likely run into a fraudulent credit card processor who is going to lure you in with a very low, below cost qualified discount rate but then burn you by setting you up with their Custom Tiered Grid.  Here’s how that would work.

Upon inquiring about credit card processing you get a rep who is telling you his retail qualified discount rate is 1.15% or something very close to that. As a bargain shopper you have compared the deal and this merchant account executive seems to have the best credit card processing deal around. The other quotes are offering qualified rates ranging from 1.69%-1.79%.  Even his mid qualified and non qualified credit card processing fees are competitive.  He might even be giving you a free landline credit card machine.  And you have it in writing. This deal seems to good to be true.  Well guess what? It is!  Here’s why.

The credit card processing representative told you that your qualified rate is 1.15%, and yes you will get that.   What you don’t know is that this fraudulent credit card processor has a Custom Tiered Grid in place.  It turns out that this Custom Tiered Grid is designed so the only cards that are going to be directed into the qualified bin of 1.15% is your Visa Check Cards.  All of the Visa Debit Cards, Master Card Check Cards, Master Card Debit Cards, Discover Check Cards, Discover Debit Cards, Standard Visa Credit Cards, Standard Master Card Credit Cards, Standard Discover Credit Cards are being directed into the Mid Qualified Bin.  So while you are getting a great deal on the Visa Check Cards which will probably be less than 10% of your business,  you are getting burned on all of the other cards which are probably 60-70% of you business.  Instead of the 1.15%, all of those cards are now going to be charged mid qualified rates which are well over 2% sometimes as high as 3%.  And the kicker is that many times these fraudulent processors get extra greedy and send cards that should normally be hitting the mid qualified bin at 2-3% into the non qualified bin ranging from 3.5%-5% per transaction. It turns out that you, the merchant, have been burned big time and are paying much higher rates than you would if you set up with an honest credit card processing company with the Standard Grid.  These banks and processors make a fortune off this deceptive credit card processing activity and most of the time merchants never realize what has happened.

Here are some things you can do to protect yourself from this deceptive tactic and others.

  
First of all, read all of the fine print on the credit card processing application before you agree to the terms.  When you sign a merchant application you are agreeing to more than just the 3-5 page application.  You are also agreeing to all of the credit card processing terms and conditions contained in the 30 page Program Guide and/or the Merchant Agreement. This is where they hide things such and contracts, cancellation fees and other clauses which bind you to things to which you are unaware.  The credit card processing Merchant Agreement and the Program Guide are huge files and so it is reasonable that it is not sent along with the application.  The credit card processors are required to post these files on their website and/or send you a copy if you request it.  So before you sign check it out.

   
In the case of the Custom Tiered Grid fraudulent tactic, the single most important thing to watch out for is the clause on the actual application, directly above where you sign, in which you are actually agreeing to the Custom Tiered Grid.  It will look something like this.  

  
Client certifies that all information set forth in this completed application is true and that he has received a copy of the Tiered Grid ID Numbers, Program Guide……..

You are in fact saying that you have been sent a copy of their Tiered Grid but you have not.   It is not part of the application, or any other page. It is a form in and of itself.  If you call the fraudulent processor they will try to tell you that it is on the credit card processing application, but that is not what the verbatim you are signing and agreeing to states.  It says you have received a copy of it and you have not. Ask them for it. They will not send it. Guaranteed!!!!!  This clause is their protection so when a merchant realizes he gets burned and files a lawsuit, all they have to tell him is that he signed and agreed to the Custom Grid they have designed.

A real credit card processing application with no tricks and the Standard Credit Card Processing grid does not even mention the word grid or tiered or anything like that. The reason being is that there are no tricks, and no gimmicks. Card types will go into the proper bins and there will be no merchants complaining and filing lawsuits stating that only 10% of their cards are qualifying.  If you ask an honest company to send you their grid they will send you something that resembles the Standard Retail & Moto Credit Card Processing Grids we have depicted above. They will have nothing to hide.  A credit card processor lying to you and offering these below cost rates would never send you this grid along with the rates they are offering because it is below their cost and they will lose a fortune on your account. Buyer Beware!!!

If you require further explanation please call Toll Free: 877-964-1622 or inquire online.  We will take as much time as needed should you have any questions in regard to Custom Tiered Credit Card Processing Grids.