CONTENT BROUGHT TO YOU BY: Motionsoft
A quote from British novelist Roald Dahl is particularly well suited to describe payment processing fees in the health and fitness industry: "And above all, watch with glittering eyes the whole world around you because the greatest secrets are always hidden in the most unlikely places."
In the case of payment processing fees, the most unlikely place is the "standard language" used in your payment processor contract. The secret is that some payment processing firms have been getting away with charging absurd fees to facilities and their members.
Here are seven reasons to take another look at your payment processing contracts so you can understand the basics and uncover hidden fees.
Understanding the Basics
1. The Rate Game. The only rate that your business should pay for credit cards is referred to as interchange. There is no other rate and definitely not for automated clearing house (ACH) processing.
Key takeaway: Transactions do not have a base rate associated with them and cost no more than interchange (+ or -) $0.25 per transaction. An ACH should cost no more than $0.25.
2. POS vs. Recurring. The payments game is all about risk. If a person is standing in front of you, that risk is significantly reduced.
Key takeaway: A swipe transaction should run your business no more than 3.25 percent and is based on card type.
3. Submitted vs. Collected. Are your processing fees based on your total revenue collected or total amount submitted for collection?
Key takeaway: Your processing fees should reflect the funds that you processed and collected, not the total amount submitted.
Uncovering Hidden Fees and Abuses
4. Credit Card Decline Fees. We have all seen the $25 returned check fee, but when was the last time you paid a declined credit card fee? Never.
Key takeaway: Although transaction fees of $0.05 to $0.25 are applicable to any submission, a declined credit card has no other fees.
5. Automation Fees. Tools such as card account updaters help maximize first-time submissions and decrease unnecessary outbound calls.
Key takeaway: The cost of an account update is approximately $0.10. Your business should not pay a processor $1 per update per record.
6. Every Decline Has a Reason. The card associations and the Federal Reserve regulate re-bills and retries of credit cards and ACH.
Key takeaway: Don't let your receivable management company overcharge your business by resubmitting multiple times. Your business will never collect a hard decline automatically.
7. It's All About Cash Flow. Your business should never wait two weeks to get your deposit.
Key takeaway: Once your billing is processed, your receivable management company has the cash in one to two days. Demand that your business is sent your money immediately through ACH.
Wrapping It All Up
If you haven't scrutinized your payment processing fees, it's time to pull out those contracts so that you can protect your facility's reputation, members and revenue. On the member front, identify management fees that are being charged directly to your members as well as social media reviews and comments. Those reviews are out there. If there are negative reviews about your business, engage in a dialog with your member about the fees charged and facilitate a resolution with your vendor. A simple rule of thumb is that if your payments vendor makes more money when your business is making less, then you need to identify fee variables that are driving up your costs and push for a contract renegotiation.
Al Noshirvani is chief executive officer of Motionsoft. This article is based on a presentation that Noshirvani gave at the 2015 IHRSA conference in March on how to assess fee rates so that your facility doesn't fall prey to payment processing abuses. Click here to see the full PowerPoint. Not sure if your contract is riddled with hidden fees? Contact Motionsoft for a free payment processing and collections contract analysis. Our team of experts will show you how to resolve abuses and address hidden fees in your payments and software agreements.