Unfortunately, unethical Merchant Account Providers are constantly conjuring up new ways to hide fees and make more money off their customers. Part 5 of this series covered one way providers can be deceptive when your business runs returns. In part 12, we will further explore unethical issues related to refunds.
Processing Refunds: Recap
When you issue a refund, your customer gets back what she paid, plus sales tax, and your business is reimbursed a portion of the fees paid to your Merchant Account Provider. It’s standard procedure for your provider to only reimburse Interchange and not its markup. However, if you’re on a Tiered or Flat rate plan, you will not receive any processing fees back.
It is also typical for your provider to charge an authorization fee when processing refunds. This is a small fee applied to each transaction that shouldn't cost you more than a few cents. However, merchant statements are complex, making it easy for providers to hide additional fees on refunds.
Fees for Refunds
Your merchant statements provide a breakdown of total sales and refunds per card type. In the example below, you can see there was a $250 refund issued to a Visa card.
As a result, $35,100 in Visa transactions should be charged the processing rate. However, the fee section shows otherwise:
This provider charged the processing rate on $35,350 plus the refund of $250. This increased the fees the merchant paid plus the profits paid to the provider. Though this type of unethical billing is rare, it could significantly hurt your business if unaddressed.
Pay Minimal Fees for Processing Refunds
Issuing a refund is no fun; it’s a loss your business isn’t likely to get back. Every penny counts, so why chance incurring further losses when processing refunds? We recommend getting a statement analysis to ensure your provider is processing refunds correctly.
Surprised by this unethical billing practice? Give us your two cents below.