Thank you for pointing that out. Is this something that the bank discusses with you when you are considering a merchant account or is this a case of buyer beware?
Hi Melinda. It isn't so much a matter of 'buyer beware' as it is a matter of it being the buyer's responsibility to do their homework before they enter into price negotiation. In this case, buyers need to understand that Commercial Banking and Payment Processing are two totally and altogether separate industries, so anybody talking payment processing with their commercial banker is talking to someone who probably doesn't know much more about payment processing then the merchant does. That's why they should be talking to a knowledgable merchant services consultant, not their commercial banker. Not to mention the fact that getting merchant services through one's local bank only increases the cost to the merchant by virtue of adding an unnecessary middleman to the pricing equation. This is again, as already mentioned, because payment processing is a totally separate industry and the only role played by the banker is that of a paid referrer, and guess who ends up covering the referral cost? Generally, it's much wiser for merchants to deal directly with the payment processor aquirerer rep or ISO and avoid the middleman. To answer your question about daily vs monthly: Not all processors offer monthly discounting, and not all merchants will qualify for it, since it does present a higher risk and higher cost scenario for the processor. It's all about packaging a pricing schedule. Processors can 'package' lower rates by including less costly and less risky daily processing instead of monthly, and merchants who base their decisions solely on the lowest rate often find this attractive, even though in the long run such an arrangement actually increases the processing expense of the merchant. Processors who DO offer monthly discounting are obliged to quote higher rates to cover the increased risk, which often is viewed as a competitive disadvantage. Merchants who are smart enough to know the difference are in a much better position to make better choices. Merchants who base their decision solely on the basis of who offers the lowest rates are the ones who unwittingly shortchange themselves by unknowingly subjecting themselves to higher cost daily discounting.
I am a veteran of the merchant services business. I have found that in the process of selecting a merchant services provider, most merchants tunnel vision only on the 'rate' issue; that is, the quotation with the lowest rate wins. The truth be told, there are many other factors equally or more important that are generally ignored. One of the more important concepts merchants generally ignore is the issue of "daily vs. monthly accounting". In other words, some processing plans deduct their processing fees on a DAILY basis, whereas others deduct their fees only once MONTHLY at the end of the billing cycle. Obviously monthly accounting means the merchant enjoys the use of his money for the entire month instead of paying it instantly to the processor, which for some businesses can be a major boon to cash flow (especially if that merchant is operating on borrowed money from a line of credit, and paying interest on it). For more information on Daily vs. Monthly accounting, please go to http://www.merchantservices-help.com/processing.html#discounting