You received your credit card processing statement from your bank and noticed the fees have increased. What used to be, for example, 5% is now 6.5%. What makes credit card processing fees increase could be the result of three things.
1. Excessive Chargebacks
Too many chargebacks are never good for anyone. And they can affect a merchant’s rolling reserve on a sliding scale. Here’s how:
- Every credit card processor assesses chargeback fees, usually on a sliding scale. But what merchants may not read in the fine print is that rolling reserves increase when your rate of chargebacks increase. For example, when a merchant’s chargeback frequency is under the 1 percent threshold, the rolling reserve will not change, although the merchant may incur chargeback fees.
- However, when chargebacks amount to between 1 and 2 percent of sales, the acquiring bank may increase the rolling reserve as high as an extra 5 percent — while higher chargeback fees are imminent.
- When chargebacks exceed 2 percent, a merchant’s rolling reserve could double, and the chargeback fees will likely be substantial.
“Whenever we sign on a new merchant, we ask them to read our contract in full,” said Wendy Jacques, Sales Manager at Instabill. “Merchants have to take the time and have the patience to read the fine print. Explanations for credit card processing fees increasing are in there. There is a reason merchant services providers ask merchants to initial each page when signing a contract.”
2. Excessive Refunds
Instabill merchant account experts always advise merchants to offer refunds to avoid chargebacks. But even too many refunds — more than 5 percent of sales in a week — can get a merchant in trouble too.
“If refunds go above 5 percent vs. transactions in a typical week, the bank is going to raise your credit card processing fees,” said Ms. Jacques. “Those fees will come from the next payout period the following week.”
3. Cross Border Transactions
We often get an exasperated ‘WHY!?’ when explaining the fees assessed with cross border transactions. Let us explain.
When a U.S. merchant sells a product to, for example, a consumer in the U.K., the merchant’s acquiring bank will likely raise its per transaction fee for that very transaction.
Why does it do this? The bank needs to make up the difference in value between the two currencies. Currently, the U.S. dollar is equivalent to 0.88 Euro, so the acquiring bank makes up the difference by slightly raising the per transaction fee.
That’s not to say we advise against selling cross border! Quite the opposite. Per transaction fees are minimal, but will slightly increase your credit card processing fees.
Give Us a Call – We’ll Explain it All
Instabill merchant account managers serve as your personal consultants for the life of the merchant account partnership. Consultation is available from 8 a.m.-6 p.m. Eastern time Monday through Friday by calling 1-800-318-2713 or by clicking the live chat option below.
