How rewards cards can cost you thousands if you don't read the fine Print!

60% of the credit cards issued in the United States today are rewards based cards. Issuing credit cards is very competitive so the banks have designed Rewards cards to give the cardholder discounts on purchases, and perks such as free gifts based on usage so that they'll use their card.

As these types of cards grow in popularity more and more merchants will be seeing these types of charges on their monthly processing statements.

The good thing about rewards cards is that consumers are using them which means merchants will benefit from more credit card usage. The downside is that it is more expensive to process these types of cards, which means merchants could be forced to pay higher rates than necessary by some processors.

One of the common mis-understandings between merchants and card processors is the rate being quoted.

When a merchant seeks a new merchant account they are always quoted a qualified rate such as 1.69% for swiped cards and 2.24% for non-swiped cards.

What isn’t discussed is how other card types will be charged such as rewards and business cards.

If you're swiping credit cards most processors have a 3 tier system, which means you'll pay a higer rate for rewards based credit cards such as 2.5%.

If you're not swiping cards most processors have a 2 tier system which means rewards cards should come in at the same rate as your qualified rate. However, some providers will install a mid tier level or even downgrade rewards based cards adding 1 - 1.9% above the qualified rate you were quoted. Some even add an addition $0.09- $0.13 per transaction resulting in higher rates and fees than anticipated.

If you see a really low qualified rate like 1.99% you can count on steep downgrades. 1.99% is technically underwater, which means these providers have created the illusion of the best rate available. The truth is an additional tier will be implemented so that all rewards cards downgrade forcing you to pay a higher rate than necessary typically 2.95% to 3.95%

PowerPay America doesn’t downgrade rewards cards for non swiped transactions at all. Instead the rate we quote, typically 2.24%, will be the same for rewards cards.

The only time we downgrade rewards cards is for swiped based merchants as we use a 3 tier system.

How disturbing would it be to learn that the majority of your cards are downgraded and you can’t do anything about your processing relationship because you signed a long term contract requiring a steep termination fee to get out?

Don't forget, PowerPay America never charges a termination fee!

 I can get a rate of 1.1-1.54%

This is a common trick designed to get your attention so that you'll believe you've been quoted the lowest possible rate. It's used everyday to make a new merchant feel like there's no need to explore other processing offers because you think you've found the lowest possible rate available. The truth is, these types of rate quotes are only for supermarkets or visa check cards purchases and not traditional card sales. When you look at the contract you'll find a section that shows mid and non qualified tiers resulting in much higher than advertised rates for the majority of cards you will collect.

Processors using these tactics ALWAYS have hidden fees, long term contracts, termination fees, annual fees, inflated rewards and business card rates and more than likely other false hooks like a Free terminal gimmick.

I can get an Internet order rate of 1.99%

This trick is designed to get your attention so that you'll believe you've been quoted the lowest possible rate. It's used everyday because it makes a new merchant feel like there's no need to explore other processing offers because you think you've found the lowest possible rate available. With the advent of rewards cards processors using these tactics are willing to take a small loss for the few qualified transactions processed as they know they will make it up on downgraded rewards based transactions. Take a closer look at the schedule of fees section within the contract, you'll find a section that shows a non qualified tier resulting in much higher than advertised rates.

Processors using these tactics ALWAYS have hidden fees, long term contracts, termination fees, annual fees, inflated rewards and business card rates and more than likely other false hooks like a Free terminal gimmick.

I can get a Free Terminal

Remember the old adage - if it sounds good to be true...

Terminals cost money and they're not free. These programs are just gimmicks designed to get your attention and make you feel like you are getting a "sweet" deal. The fine print in these programs usually requires participation in merchant account clubs which is a clever way to get you to lease the terminal. Companies offering these types of programs ALWAYS have hidden fees, long term contracts, termination fees, annual fees and inflated rewards and business card rates. You never technically own the terminal and if things don't work out with the processor you'll need to return it.

I found a cheaper gateway

Authorize.Net is the #1 payment gateway in the industry. Several processors own their own payment gateway which is why they may be cheaper than an Authorize.Net account. The problem is that virtually all shopping carts and software applications are designed to work with Authorize.Net because Authorize.Net is the most universal and best system you can buy. Proprietary gateways often have Authorize.Net emulators so that they'll work. These emulators are often buggy and the service and support can be lacking. If things don't work out with the processor you may find that you have to rebuild your entire online payment system which is a costly proposition.