All merchants pay processing fees to a credit card processor, but all companies hope that the processor will stick to the agreement they signed and not charge any different fees.
While this is typically the way, some processors, including WorldPay have been accused of doing the opposite. They are charging fees to customers that aren’t in the agreement. In 2017, there was a class-action lawsuit against them stating that over 200,000 merchants were overcharged due to hidden fees.
While WorldPay settled the lawsuit, merchants today say that they are up to the same tactics. Here’s what you should know.
What is WorldPay Doing?
While it’s hard to put a finger on it exactly since their practices are far from uniform, WorldPay has a habit of adding on additional fees without disclosing them.
WorldPay has two types of fees – the card issuer fees that every processor charges and their own processor fees. Here’s where the problem lies – they randomly increase their processing fee but roll it into one transaction fee so unless merchants dig into the charges line by line, they won’t know.
Here’s the other problem.
The upcharges aren’t consistent. There’s no way to tell or predict what they might charge a merchant. Sometimes the same merchant gets charged different fees too. It’s mostly on rewards cards, but again, there’s no rhyme or reason to it so merchants have a hard time predicting their fees and most are unpleasantly surprised when they see their monthly statements.
How They’re Getting Away with It
You might wonder how processors could get away with charging fees that weren’t in the agreement, but it comes down to the complexity of the agreement. If the agreement is too hard to understand, processors can get away with ‘sneaking’ other costs into the charges.
Processors like WorldPay use interchange-plus pricing. If you aren’t familiar, this means the processor charges the interchange costs charged by the card issuer plus a markup which is usually a percentage of the transaction plus a flat fee.
While interchange-plus pricing is usually the preferred method for merchants, with processors like WorldPay, they are not disclosing the interchange fees charged to them by the card issuers. This gives them ‘wiggle room’ to add to the interchange fees so it doesn’t look like they’re charging more than the said in the agreement, when in fact they are doing just that.
They get away with it because most merchants aren’t aware of the true interchange fees. They assume their merchant is being honest with them and charging them only what the card issuers charge. Upon further review though, the numbers were inflated.
How Hidden Fees Affect Merchants
Hidden fees aren’t pleasant for anyone. Merchants rely on consistency with fees so they can properly plan their business. A business with low profit margins can be vitally affected by the unexpected higher fees, causing them to cut corners elsewhere.
Without the ability to manage the fees, businesses can’t rely on growing their business or even being able to operate as they normally would. The hidden fees could mean the difference between a business that stays operable and one that doesn’t.
Even if it’s only a small percentage increase, every bit counts. If you are charged 0.20% more than what you agreed on and your sales are $100,000, that’s $200 for every $100,000 charged and that’s from ONE merchant. Think about how many merchants WorldPay deals with and you can see how it’s a big problem.
What Merchants can Do
Unfortunately, it’s not just WorldPay using these types of practices, which means merchants must be aware of how to protect themselves when choosing a payment processor.
It goes without saying that you should read the fine print on every processor’s agreement before signing on the dotted line. But sometimes that’s not enough. Read the reviews and find out which processors are transparent with their fees, and which leave room for more fees that aren’t quite made transparent.
Here are the common fees to watch out for.
Pay close attention to the transaction fees and find out what they include. Most processors include the interchange rate, assessment fee, and the processor’s markup. But no two processors are the same.
Ask if this is what’s included in the transaction fee and what’s not included but could be added on later.
Always ask about service fees. Many processors charge a monthly fee to cover the cost of services, but they might not include all services. For example, a processor may have a monthly minimum you must meet, or they charge a service fee, or they may charge batch fees, funding fees, PCI compliance fees or any other fees they feel are necessary.
Set-Up and Other One Time Fees
Some processors charge fees to set up your system, for service calls, or other fees. Ask about chargeback fees, PCI compliance fees, and payment gateway fees. These fees may be a one-time fee or an occasional fee, but they eat into your profits so you should know them.
It’s important for every merchant to ensure that they read the fine print of their agreement AND know the interchange costs.
Don’t take an agreement at face value. Look at your charges line-by-line and compare them to what was agreed upon when you signed up with the processor. If you suspect shady practices, question it. But hopefully you are able to sign on with a processor that doesn’t have shady practices, and everything works out the way you anticipated.
If not, report it and look for a different processor. One that will disclose all the fees, even if they are higher than competitors, and be honest with you about the true cost of accepting credit cards at your business.