By: Elie Y. Katz, President and CEO, National Retail Solutions (NRS)
Small businesses rely on payment processors to handle transactions, but not all service providers operate ethically. Recognizing warning signs can help protect your company from costly scams.
1. Hidden Fees That Drain Your Profits Without Warning
Many dishonest merchant providers attract businesses with competitive rates, then introduce undisclosed charges later. These hidden fees often manifest as security fees, monthly minimums, or PCI compliance charges that weren’t mentioned during initial discussions. Some providers use complex transaction-based pricing that’s difficult to understand and calculate, deliberately obscuring the actual cost of their services.
These costs typically appear buried in lengthy contracts or complex monthly statements. A common tactic involves placing important fee disclosures in tiny print or using technical terminology that most business owners wouldn’t recognize. Before signing any agreement, request a complete fee schedule and ask the representative to explain each charge in detail.
2. Service Promises That Sound Too Good to Be True
Be cautious of providers making unrealistic promises about their offerings. Some claim they can guarantee approval for any business regardless of credit history or industry risk, which isn’t possible. Others might promise the absolute lowest rates in the industry without specifying conditions or limitations.
Many exaggerate their product capabilities, claiming advanced features that don’t exist or work poorly in practice. These false promises create expectations the processor can’t fulfill, leading to operational problems and financial losses. Always verify claims through independent research, industry comparisons, and speaking with the processor’s current clients.
3. Fraudulent Operations Designed to Steal Your Information and Money
Some scammers create fake companies that pose as legitimate merchant service providers. These operations exist solely to steal sensitive information or collect upfront fees. They often advertise rates far below market standards to lure unsuspecting businesses, then request hefty “deposit fees” or “setup charges” before disappearing entirely.
The fraudulent operators lack verifiable physical addresses, have minimal online presence, or use generic contact methods. They pressure businesses to provide bank account information quickly, claiming special rates are only available for a limited time. Legitimate payment processors rarely require substantial upfront payments and will give ample time for due diligence.
4. Low Rates That Go Up After You Sign Up
Sales representatives sometimes quote exceptionally low processing rates during initial conversations but reveal much higher charges only after you submit paperwork or sign agreements. To create confusion, they might intentionally use complicated pricing structures that combine tiered pricing, interchange-plus, flat rates, and various surcharges.
When you realize the actual costs, you may already be locked into a contract with severe termination penalties. Always insist on receiving written quotes that clearly outline all fees and rates. Compare this documentation against the final contract, and question any discrepancies before proceeding.
5. Contract Terms With Long-Term Traps
Predatory processors include problematic terms in their contracts to maximize profits and prevent businesses from leaving. Many include early termination fees that can cost thousands of dollars if you try switching providers before the contract ends. Some use auto-renewal clauses with extremely narrow cancellation windows, often just 30-60 days before the contract end date.
Equipment leases represent another common trap, forcing businesses to pay several times the actual value of processing terminals over multi-year commitments. These contracts frequently continue even if you cancel the processing service. Read every contract provision carefully and negotiate the terms before signing.
6. Vanishing Customer Service When Problems Occur
Inadequate service leaves businesses vulnerable when technical issues or disputes arise. Predatory processors often make support challenging to reach, with long hold times and representatives who lack the authority to resolve problems. When processing errors occur, responses may be delayed for days, disrupting cash flow and customer relations.
Many offer minimal assistance with chargebacks or fraud disputes, leaving businesses to navigate complex resolution processes alone. Before committing to a provider, test their customer service by calling with specific questions during different times of day. A quality processor provides responsive, knowledgeable support regardless of when issues occur.
Watching for these warning signs helps you avoid dishonest payment processors. Good merchant providers use transparent pricing, fair contracts, and reliable support without deception.
About National Retail Solutions (NRS)
National Retail Solutions (NRS) operates the leading point-of-sale (POS) terminal-based platform and NRS Pay credit card processing for small and mid-size independent retailers. With thousands of active terminals across the USA and Canada, the robust, custom-built POS system includes features such as inventory management, sales tracking, and marketing tools, empowering store owners to compete and thrive against the competition. NRS is a subsidiary of IDT Corporation (NYSE: IDT).
