How Much Do You Really Pay For Credit Card Processing?
Why we decided to partner with Wepay
In October 2012 we started our search to find a credit card processor for LabStar dental lab software. We started researching nearly 20 companies, from the biggest “first tier” processors (First Data) to some of the smallest “3rd tier” processors (Marathon Solutions). After a few weeks we settled on 10 finalists and arranged meetings to negotiate the best possible fees for LabStar subscribers.
What we found was surprising. We created a chart to compare fees but it soon became too big to fit on one page—apart from the misleadingly named “discount rate”, none of the fees matched up in name or description. Even the discount rate, which most small businesses assume to be what they pay, wasn’t standard. In fact it’s just a starting point because the actual rate depends, among other factors, on the type of card your clients use. For example corporate cards generally have higher fees. So do rewards cards (beloved of dentists) or other point systems because the cost of those “rewards” is passed onto the merchant. Swiped cards—“card-present transactions”—generally cost less than keyed-in cards or payments that a customer enters online. If a customer enters an incorrect address or verification code, the processor may raise the fee. Unfortunately while it’s virtually impossible for small businesses to know in advance how much they’ll pay for a certain card type, it’s nearly guaranteed to be higher than the rate the credit card company told you.
In addition to variable processing fees, merchant account providers also assess a variety of monthly or line-item fees. We found fees such as “GATEWAY FEE”, “SUPPORT FEE,” “ANNUAL PCI DSS COMPLIANCE FEE,” “MONTHLY SUPPORT FEE,” “PASS THROUGH FEES,” “TRANSACTION FEES,” “BATCH DEPOSIT FEE”, etc. American Express generally charges at least half a percentage more than other credit card companies, and merchant accounts pass this fee directly to their merchants. An informal survey of LabStar users revealed an average monthly rate, after all fees were included, of 3.25%. Most were surprised (and some were shocked) at how much they actually pay in fees to credit card companies.
It’s probably no surprise that credit card companies intentionally hide their actual fees, but we were surprised at the prevalence of sub-standard technology at big financial institutions. Many of the biggest processors used old technology and creaky (mostly 90s-era) interfaces for their merchants. Their “APIs”—the way LabStar talks with other software—were poorly documented and would have been difficult to work with. There were two companies, however, that stood out from the rest: Wepay and Braintree. Both charge a flat fee regardless of card type. Interestingly, both were technology companies first and financial companies second—the exact opposite of the other payment processors. And in an industry with very little competition since opaque pricing is the standard, they’ve unexpectedly introduced competition by offering something different: transparent and competitive pricing.
We ultimately chose Wepay because of competitive fees, great customer service, and straightforward technology. One of our earliest customers has also used Wepay for a couple years allowing us to directly observe how they solved problems. And we’re also pleased they’re open to lowering the rate even further as more LabStar customers start using them for payment processing. We’re looking forward very much to working with Wepay, and we believe our customers will too.