I recently stumbled upon a really great article in Digital Transactions magazine from June 2008 by Marc Abbey, a managing director at First Annapolis Consulting and an expert on credit card processing, entitled The Threat to Price Stability in the Small Merchant Market.

If your business depends on credit card payments you should read that article, but here are the highlights:

• Competition for new customers is increasing ( **great** news if you accept credit cards)
• Pricing for large customers has decreased by 8%-10% per year for the last 10 years
• Prices for smaller customers have not decreased because, while the list prices has decreased, extra fees have increased
• Merchant acquiring (credit card processing) is a business with large scale economies and low variable costs – in other words, the profit margin from adding a new customer is very high, which means that they have a strong incentive to add new customers
• Owners of small businesses do not pay much attention to their credit card processing fees, which leads to an inefficient market – in other words some businesses get better deals than other businesses, depending on how good they are at shopping.
• Business owners don’t pay enough attention to extra fees, which allows the processors to grab extra profits by sneaking in extra fees the business owners don’t notice (for example 37% of processors charge a more than 1% downgrade markup)
• Processors have grown rich charging extra fees, but that is about to change as the environment gets even more competitive and business owners learn how to see through pricing tricks
• More and more processors (around 30%) are using interchange plus pricing, which is more transparent and offers less opportunity for hidden fees (previous article Why You Want Interchange Plus Pricing) and those processors are gaining market share rapidly

If you are a business owner that accepts credit cards, it pays to shop carefully (previous article Strategies for Cutting Processing Costs).  If you want help shopping, we can help, the FeeFighters Marketplace has a dozen of the best credit card processors bidding for your business, every customer who uses the marketplace gets a great deal without wasting a lot of time shopping.

Extra fees like those described above are illegal on the FeeFighters Marketplace.