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Why There Are No Truly Free Merchant Accounts

Consider for a moment that one of your employees comes to you with what they consider to be a brilliant strategy: Stop charging for your product or service and just give it away for free instead. When you question their logic, they insist that this approach will increase your sales by tenfold. After all, just imagine all the customers you’d have when everything is free!

Is this employee due for a promotion or the unemployment line? Maybe a class in Business Management 101 would be in order.

Just as every merchant is in business to make a profit, so are the merchant account providers that they contract with to process their credit card transactions. Payment processors have expenses just like you do, including employee salaries, rent, utilities and other overhead costs. Suffice to say, if a processor were to truly offer free merchant accounts, they would not be in business for very long.

Facts are facts: Like any other facet of doing business, credit card processing costs money. To stay in business, processors not only need to cover their costs, but to turn a profit as well. The fees associated with a merchant account are simply the cost of doing business with your processor, the credit card networks and the card issuing banks. Luckily, your merchant account provider deals with the networks and banks so you don’t have to.

Merchant account processing rates and fees generally break down along these lines:

  • The discount rate accounts for the major chunk of your processing fees. Included in the discount rate are the interchange rates (set by the credit card companies and paid to the banks) and assessment fees paid to the credit card companies i.e. Visa, MasterCard and Discover.
  • Transaction fees are incurred each time a credit or debit card is swiped, dipped or tapped, whether the sale is approved or not.
  • Additional charges associated with merchant accounts may include fees for set-up, POS hardware and software, early termination, PCI compliance, monthly statements and chargebacks.

The old saying “You get what you pay for” may be trite, but it’s very true. Companies offering "free merchant accounts" often rely on hidden fees, “teaser rates” that soar over time, limited or no customer support, and restricted access to your funds in order to make their money. Is “free” really worth these headaches and hassles?

At Tailored Transactions, we don’t think so. That’s why we won’t lure you in with any false promises of a free merchant account. What we will do is work with you on a transparent and professional basis to create a customized merchant account that meets all your payment processing needs at the lowest possible cost.

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