Why are the changes taking place?
In 2015 & 2016 EU regulation came into place to align charges for processing card payments in the European Economic Area (EEA). The most significant being on interchange rates across Europe as all EU countries aligned their domestic credit card fees (down from 0.8% to 0.3%) and debit card fees (from 8p fixed to 0.2%). This phase of regulation was also designed to increase transparency of fees to merchants, by offering the choice of Interchange plus plus pricing to all merchants, as opposed to the standard blended price offering. Interchange plus plus pricing clearly states the element of your card processing fee that goes to Visa or MasterCard, plus the card issuers, and highlights what element of the fee is charged by your merchant services provider for their service in processing your payments. (See our “pricing methods” blog for more details on Interchange plus plus pricing).
Your merchant services provider is not restricted under the EU ruling in what they decide to charge your business, however they must offer you the option for Interchange plus plus pricing and not just blended pricing. The unusual thing about the EU regulation is that although your merchant service provider is being charged 0.5% less for processing your personal credit cards, they have no obligation to pass on the recent interchange reduction of up to 0.5%. It’s only with interchange plus plus pricing where your guaranteed to see the full reduction, or use an independent expert to review your blended pricing, to ensure the reductions are included.
As a result it’s a good time for a business to review merchant services and also consider other pricing options.
So, what should you be doing?
Be alert and know what you’re paying – Now is the time to read carefully any correspondence you receive from your merchant services provider. In particular, check your merchant services statement and any correspondence received in the last 12 months to see if the lower charges have been offered or applied.
“Marry in haste, repent at leisure” – Contracts can be for up to 5 years and although you can move your card processing the cost of cancelling is very likely to be prohibitive. So, before signing any new contracts or signing with a new merchant services provider, whether directly or through a sales agent, ensure you find out what their policy is on early cancellations and any future changes in pricing.
Seek independent expert advice – A good specialist will take their time to understand your business and provide options that are most suitable for your requirements.