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How to Make Sense of the Noise Surrounding Credit Card Processing Programs

Posted by Sherry Howell on October 18, 2024

Understand the ins and outs of merchant services, Dual Pricing programs, and your options as a business owner.

I speak to facility owners almost every day and ask them to share the things keeping them up at night. So often they express concerns over everything from rising labor costs to insurance all the way to credit card processing. It’s no secret that these costs pile up, and as a small business owner, we believe you deserve all the tools possible to help your business thrive.

Merchant services has long since been an unsavory topic in business and with so much misinformation and just plain crummy advice out there, we wanted to take an opportunity to sit down with Leslie Legel, renowned merchant services expert and director of our widely used CenterEdge Payments platform. Read on for our interview with Leslie to help you gain a better understanding of your merchant services options, program types, and the impacts on your business.

Sherry: Why is merchant services such a controversial topic?

Leslie Legel: The truth is that for years, merchant services have been controversial due to high fees, lack of transparency, and market dominance by a few large companies. Merchants often face complex, hidden charges while having limited alternatives, leading to concerns about anticompetitive practices. Additionally, issues like chargebacks, fraud risks, and regulatory barriers make it harder for small businesses to operate profitably. Not to mention – the way these programs continue even today to be marketed and sold can be off putting at best, cutthroat at worst.

Sherry: Why does it seem like many software solution providers are also offering merchant services programs?

Leslie: Ultimately, software solution providers offer merchant services to have better control over feature alignment, deliver a streamlined support experience, and eliminate friction points throughout the guest journey while opening up a new revenue stream and creating a stronger relationship with their users. This is a win for all parties, except, of course, when the fees levied are excessive and place their users in unhealthy processing relationships.

CenterEdge began offering these solutions to meet the needs of our clients who had expressed long-term frustration with third-party processing partners. Issues like rate creep, hidden fees, and lack of support were negatively impacting our clients, and we knew we needed to jump in and help in a new way. When done well and with integrity and transparency, a combined solution gives merchants peace of mind that they have a partner with their best interests in mind.

Besides the cost savings, a combined solution also ensures that your software and your merchant services program stay in sync and, more importantly, up to date on merchant services guidelines and compliance-related issues.

Sherry: How do operators know if they should choose a combined software and payments solution?

Leslie: Like I said before, a combined solution can be a great fit to save merchant costs. It can also save a merchant critical time when there are issues because they only have a single provider to call. But like with any other vendor partnership, you need to make sure the relationship is working for you. Is the vendor partner-oriented? Do they listen to your feedback? Do they act in your best interests? In the payments industry, it’s also critical that your provider stays on top of changing laws and regulations so they can tweak programs quickly, as things can and do change often in the payments landscape. Navigating changing guidelines is something I spend a lot of my time engaged in as the director of CenterEdge’s program.

Sherry: There’s a lot of question out there about Dual Pricing. Can you explain what it is and how it differs from other types of programs?

Leslie: With regards to merchant services, in a Dual Pricing approach, you’re able to offer guests the benefit of a discount when paying in cash, helping you offset processing fees substantially. When you employ a Dual Pricing approach with an integrated system, it delivers transparency for the guest. Your guest will see both the standard price and the discounted cash price displayed side by side, making the options clear while handling all the math and reporting.

Our Dual Pricing approach is also different from a surcharging program, where a guest is presented with an add-on fee for using a credit card. Dual Pricing is more appealing because discounting a cash transaction presents a positive alternative to standard pricing rather than a negative in charging extra. It’s worth mentioning that Dual Pricing is available in all 50 states and applies to all credit and debit transactions, unlike surcharging, which has a number of restrictions.

This also differs from Interchange plus pricing, where businesses pay a fixed markup over the actual interchange fees set by card brands like Visa, Mastercard, Discover, and American Express.

Sherry: So is Dual Pricing just charging guests a higher price for using a credit card?

Leslie: No. This isn’t 1990. Credit cards aren’t new. In the US, nearly all businesses have been widely accepting credit cards for 25 or more years. And the more consumers began using credit in the last three decades, the more credit card pricing has become standard pricing, and that’s not likely to change. What’s changed is that over time, costs to merchants have continued to rise and new guidelines and trends have now made it more possible to offset some of those costs with programs that incentivize guests to pay differently to reap cost benefits, if they choose to. Transparency and choice are the key components of a good approach to credit card processing. It’s a win for guests; they can pay less if they choose, and it’s a win for merchants, some of whom tell us they’re saving $50,000 a year.

I’ll meet with clients who ask if just raising prices across the board is a better answer. And you could definitely do that if you want. But there are several things to consider. If you’re just increasing your rates, you’re raising them for everyone, regardless of method of payment. This eliminates the guest’s ability to choose and could result in negative guest feedback. Not only that, but increased prices also mean increased processing costs, which are not at all offset like they would be in a Dual Pricing model.

With costs on the rise, it stands to reason that price-conscious guests would view a discounted option more favorably than seeing an overall increase in pricing. To that end, many of our clients began asking for a Dual Pricing option specifically so they didn’t have to raise prices across the board.

It all comes back to choice.

CenterEdge’s Dual Pricing allows them to give guests the choice in how they pay in a clear, transparent manner with a smooth technological experience at the point of sale and online. And sure, you could give discounts yourself at the point of sale but you would be in for a nightmare implementing it consistently at the front line, reporting it accurately, and reconciling your accounts. That’s a mess I don’t think anyone wants to sign up for when there’s an automated way to take the guesswork out.

Sherry: But how do guests feel about paying different prices for credit cards versus cash?

Leslie: I think it’s important to understand a couple of things. Guests like choices, and if you offer them the choice in a standard card price or a discounted cash price, they’re going to choose the option that makes the most sense for them.

Remember, people have different objectives when it comes to using credit cards. There are literally dozens of points and rewards programs that reward consumers for everyday spending. Travel, beauty supplies, Starbucks, cash back; the programs are virtually limitless. So when consumers are deciding whether they want to pay a standard card price or receive an immediate discount if they pay in cash, there’s a lot more than the price that goes into the decision-making process.

Aside from that, many from the nation’s top FECS, who, by the way, offset their processing costs by an average of 96%, have told us repeatedly that guests don’t push back at all, with no notable increase in cash transactions.

Sherry: Do businesses have to adopt a Dual Pricing approach to save money on credit card processing?

Leslie: No. In fact, we didn’t even offer Dual Pricing when CenterEdge rolled out merchant services five years ago. We spent countless hours listening to our clients expressing their desire for a program like Dual Pricing to help offset their credit card processing costs.

But again, we believe that our clients should also have a choice in how they process cards. Today, we offer both a Dual Pricing and an Interchange Plus program, and we help educate those interested on the benefits of both, leaving them free to choose which program makes the most sense. We believe in a transparent, low-cost approach to credit card processing and we have never changed that mindset. Our non-Dual Pricing clients still benefit from low rates, no hidden fees, and the service that we’re known for. We’ve had our clients’ backs for 20 years, and that’s not going to change.

Conclusion

Hopefully, by now, the merchant services landscape is a little less murky, but we’re always here for you! Below you’ll find a number of resources dedicated to this very important subject, and feel free to call us any time to talk with one of our experienced payments professionals.

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