As is the nature of any business, sometimes unexpected fees pop up.
But do you ever wonder why you’re sometimes hit with that unexpected annual credit card fee out of nowhere? What is this fee, and why is it added to the bill?
When companies accept credit cards as an available payment option, they work alongside a frontend merchant processor organization that can process that credit card information, account for the payment data, and ensure it transfers into your bank account.
This provider’s job is to ensure that the data is secured and encrypted, processed anonymously, and recognized by banks as quickly as possible.
As you can imagine, these merchant processors operate similarly to some utilities in a highly regulated environment. They are a single checkpoint for the flow of cash across almost every industry and most transactions.
Due to their position, these merchants have been recently regulated to provide what is known as a merchant audit. This audit analyzes every credit card transaction an organization accepts every month to ensure that there are no abnormalities that should be reported to the authorities.
It’s not just a single credit card type that is hit with these annual fees, but EVERY SINGLE TRANSACTION TYPE a merchant processor comes across. If a business accepts credit card payments, they are getting hit with an associated audit fee.
That audit can be incredibly costly for these processors since they must report on every transaction.
So, where do they go to get assistance with those reporting fees? Often, they will go to the much larger and more advanced credit card companies themselves.
Why Are Merchant Companies Charging For Reports And Credit Card Companies Report Fees
When merchant companies are charging for credit card reports, the reason is that the credit card companies are now charging the merchant companies for the audit reports.
Again, this means that the merchant companies must make an impossible choice to provide the reports for all their customers OR pass this on to their customers.
Credit card companies charge for the reports because they need to make money too. They are charging the merchant companies to help cover the costs of providing the reports.
Reports that keep track of your credit card transactions to ensure they’re correct and accurate, and this is something that the credit card companies have been doing for a while now.
It is also important to note that credit card companies are not just charging merchant companies for reports. They are also charging them for all the other services as well.
This includes things like chargebacks and fraud. Credit card companies need to make money to continue providing these services.
Like any other service in the working world, said service must adequately compensate for the task being handled to ensure they can continue providing the service in the future.
It is important to note that credit card companies are not the only ones charging for reports. The merchant companies are also charging for them.
This is something that they have started doing recently. This is because credit card companies are charging them more for reports.
The merchant companies are charging for the reports to offset the service cost of the reports, so they can continue offering the service for your organization. They need to do this to cover the costs of providing the reports.
So, What Can YOU Do To Help Curtail Credit Card Fees?
Audit fees are not avoidable since the regulations will likely stay the same for a while. However, there are other fees that you can work towards mitigating.
One such fee is the Europay™, Mastercard®, and Visa® (EMV), is now being charged when a card with a chip is swiped first instead of inserted.
Credit card companies have enhanced digital security on cards by introducing EMV chip cards. This added benefit is used to justify the fee that companies are enforcing to get customers to use the chip instead of swiping.
We’ve compiled a short list of some of the most frequently asked questions when it comes to chip-enabled credit cards:
- What is a chip-enabled credit card? A chip-enabled credit card is a card that stores your data on a small computer chip on the card rather than a magnetic strip on the back of the card. Cards are now being issued with chip technology. You'll receive an enhanced level of security as well as global acceptance.
- How does chip technology protect my information? Every time you use your card at a chip-enabled terminal, the embedded chip generates a unique transaction code. This prevents stolen data from being used fraudulently.
- Where can I use a chip-enabled card? You can use chip-enabled cards at millions of places that accept Visa® credit cards, at home, and abroad.
- Can I still swipe my chip-enabled card to pay? If a merchant is not yet chip-enabled, you can continue to swipe your card.
- Will I have to pay any fees to use a chip-enabled card? There are no additional fees to use a chip-enabled card. However, if your Merchant is chip-enabled and you have a chip and choose not to use the chip, the credit card companies are now assessing a new fee
However, if the chip-enabled card is declined or has an error and then swiped, a fee does not apply. This also means that online payments using the same card or cards with chips being inserted do not qualify for the EMV fee.
And though you can’t completely prevent customers from paying with a physical card swap, you can encourage them to settle in other ways!
Here are just a few options available as an alternative:
- Prompting customers to sign up for ACH payment
- Utilizing a lockbox service to accept physical cash and checks as payment
- Using an online customer portal to pay with the same credit card
- Inserting a credit card’s chip instead of swiping for the charge
Any of those payment options are safe from the EMV fee since there’s no physical card swap occurring for the charge!
Conclusion
Businesses that utilize credit cards as a payment option will sometimes experience an increased cost, in the form of a one-time annual fee, due to new merchant audits and processing fees.
The fee is only accounted for when a physical credit card swipe occurs with their provided reader rather than for other payment options.
Hopefully, with this newfound merchant processing audit fee information, you can be ready for the following annual audit fee to hit your account!
