Three Red Flags in Merchant Statements the Hospitality Industry Should Recognize

Travel and hospitality are among the top industries that suffer from overcharging and high processing fees, and companies need to be aware of which fees are negotiable and how they can impact their merchant statements.

According to a 2023 market report published by Statista, the hospitality industry is a booming market with an anticipated global valuation of $5.8 trillion by 2027. As this industry continues to grow, brands must possess the appropriate infrastructure to handle this volume of transactions. Accommodations and other aspects of the travel and hospitality industry run on reliable vendors and suppliers, and need the proper partners to handle the processing relationship between the two. Unfortunately, the complexity and sheer number of these transactions can lead to brands overpaying for the necessary functions that enable them to do business.

Many companies are unaware that many of these fees are negotiable. Payment processors intentionally create confusing merchant statements to steer their companies in the wrong direction and hide unnecessary billing fees. The most common areas where brands are overcharged on their monthly merchant statements are discount rates, interchange fees and additional fees like “risk fees” that are hiked up by the payment processor. Here are the three areas where companies can override these fees and save money by negotiating their rates.

PCI Compliance Rates

These processing fees are inevitable. The secret, however, is that these fees can be negotiated significantly. For business owners, PCI non-compliance fees can seem like a minor inconvenience, but over time these fees can accumulate and become a larger issue. A PCI non-compliance fee is a monthly penalty rate meant to encourage merchants to bring their accounts back into compliance. Most merchants are already PCI compliant due to the nature of the hardware and software they use, but without proof, payment processors are free to charge whatever they like to penalize the merchant for being non-compliant. The average charge is around $20 per merchant ID per month, which can be detrimental for brands with multiple locations. Considering how simple these fees are to remove, no business owner should settle for paying a non-compliance fee each month.

Discount Rates

Oddly high discount rates on monthly merchant statements are a general indication that something is wrong. There is an industry standard for nearly every fee on a merchant statement, and ensuring that businesses are aware of these ranges and where their monthly fee falls within them, is crucial to recognizing overcharging. Typically discount rates lie between 0.30% and 0.50% on top of interchange. For businesses to ensure they’re receiving fair pricing they must understand the true rate once this discount goes away.

Authorization Fees

In an increasingly cashless society, consumers want the choice to swipe, tap, scan, enter their PIN, or use their mobile devices to authorize payments. For a merchant, this poses the recurring issue of authorization fees. An authorization fee is charged each time a business authorizes a credit card transaction of any kind. This is the most widely publicized transaction fee and is often what payment processors refer to as their transaction fee. These fees are also known as per-item fees. Before stepping into an agreement, businesses need to have a general understanding of the complexities that make up these transaction fees. Generally, authorization fees lie at $0.10 per transaction.

Avoiding Future Red Flags

To recognize these fees and distinguish when there is a fair deal on the table, a company needs to analyze its monthly merchant statements. Unfortunately, this auditing isn’t made a priority until a problem has already occurred. Conducting annual audits and revising negotiations is key to overcoming these hidden fees and fixing the problem before it appears.

With the right support and guidance from industry experts, companies can outsmart their payment processors and bring crucial money back into their pockets. As the industry continues to grow, and with no expectation of depreciating, major brands and companies across the industry must learn to recognize these red flags and understand their monthly statements. With the right partners, brands can save millions and uncover the unnecessary hidden fees that can be detrimental to their bottom line.

ABOUT THE AUTHOR

Michael Seaman is the co-founder and CEO of Swipesum, a comprehensive payment processing and merchant services consultancy delivering innovative auditing solutions to businesses nationwide. Michael and his brother, Stephen, founded Swipesum in 2016 to serve as Chief Payments Officer for businesses nationwide, combining industry knowledge, AI and proprietary software to create a transparent payments strategy that optimizes payment processing fees. In his free time, Michael enjoys time with his three children.