Among the arcana of the black magick that makes the credit card processing world go around is the obscurely named interchange fee. In short, the interchange fee is paid by the acquiring bank (the merchant’s bank) to the issuing bank (the bank issuing the customer’s credit card). The interchange fee is the largest component of the various fees attached to credit card processing and is usually composed of a flat fee plus a small percentage of the transaction; these fees average approximately two percent of each transaction in the U.S. Even though this might seem like a small percentage of credit card processing transactions, the total amount of interchange fees collected in the U.S. in 2008 was about $48 billion.
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Credit card processing is a service that is needed by most businesses today, but providers of merchant services still have to compete for business, even though some of them seem to forget that fact. All credit card processing companies still have to deal with the same key players: Visa, Master Card, American Express, and Discover. They deal with those four companies on a pretty level playing field where the difference comes in is how they deal with you, the merchant. Do not believe the claims of so-called wholesale credit card processors, they have to do business with the big four the same way as all the others.
Leasing equipment is a favorite way for credit card processing companies to extract more money from their customers. The offer of terminal equipment for no money up-front might sound like a great way to reduce start-up cost, but terminal equipment can be obtained reasonably without having to pay $25 or more each month, which can add up to a really expensive terminal over time. Low-ball rates should be red flags; if the rates offered seem too good to be true, look out for hidden fees which can more than eliminate any savings you think you might be getting. Do not get locked into a long term deal with high cancellation fees. These are designed to make it more expensive for you to leave if you do not like the service you are getting; there are plenty of credit card processing providers that do not charge a cancellation fee.
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If credit card processing companies process transactions for items that infringe on trademarks, can they be held liable? Thanks to Gucci, this is a question that will have a chance to be answered in court. August 5, 2009 Gucci America Inc., a subsidiary of Paris based PPR SA, filed a federal lawsuit against several credit card processing companies in New York Southern District Court for being party to trademark infringement. This action stems out of a 2008 lawsuit against Laurette Company, Inc. for operating a website which sold counterfeit Gucci merchandise. This latest action against Frontline Processing Corporation, Woodforest National Bank, Durango Merchant Services LLC, ABC Companies, and John Does was brought because these companies, as Gucci America said, “not only supply the necessary marketplace for such transactions, they are full partners in those counterfeiting activities.”
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