Five questions a former processing executive says to ask before signing

Robert L. Day spent more than a decade in the card processing division of a commercial bank, as an executive at Fifth Third Processing Solutions, later Vantiv and Worldpay, now part of Global Payments. Writing in Entrepreneur, he sets out the questions he hopes merchants never ask.

The backdrop is a cost line that has tripled. US merchants paid $62.1bn to accept credit and debit cards in 2009 and $198.25bn in 2025, according to Nilson Report figures published by the Merchants Payments Coalition.

The published rates did not do that. When the Government Accountability Office studied interchange in 2009, Mastercard's highest interchange rate was 3.25%; Day puts it at 3.30% today, five basis points in 17 years. Visa's top rate has gone from 2.95% to 3.15%, and he says most Visa transactions still clear at 2.95% or less.

More card payments explain much of the growth. Day's argument is that they do not explain why an individual merchant's effective rate creeps up while the networks stand still. That gap, he writes, is processor markup and the fees stacked on it.

His own numbers: interchange is the wholesale cost every processor pays and should account for 80% to 90% of what a merchant pays. A competitive markup can be as low as 0.02% to 0.05%, while commonly reported markups run 0.15% to 0.90%.

On $2m of annual card sales, he calculates, the difference between a 0.50% markup and a 0.05% markup is $9,000 a year, before any add-on fees.

Question one: is my rate fixed, or can you raise it without my signature? Day says nearly every merchant agreement lets the processor change fees and terms on notice alone, and that notice usually arrives as fine print in the message box on a monthly statement.

Timing helps it disappear. Visa and Mastercard release rate changes twice a year, in April and October, with more than 200 rules and rates changing at once. A processor increase landing in the same cycle is hard to spot.

Question two: will you show me your markup separately from interchange? Interchange-plus pricing puts the wholesale cost on one line and the processor's margin on another. Tiered and flat-rate pricing blend them. Ask the follow-up too: is interchange passed through at cost, or padded?

Question three: what happens if I want to leave? Look for early termination fees, liquidated damages clauses that bill you for the processor's projected profit on the remaining term, and equipment leases that outlive the processing contract. Then find the auto-renewal clause; Day says some processors have pushed the cancellation notice period out to 90 days before renewal.

Question four: which fees on my statement do you control? The card brands set interchange and network assessments. Day says items such as an "annual PCI fee" or a "regulatory compliance fee" sound official and are often pure margin. Ask for every line to be labelled pass-through or processor-set, because the processor-set ones are negotiable.

Question five: will you put every verbal promise in writing? The pitch he describes is a low effective rate quoted by a rep that evaporates after 90 days, or a price-match promise nobody can locate a year later.

Day's procedural point matters as much as the questions. He tells merchants to get every answer in writing and signed by an officer of the company, on paper rather than by email or phone, on the grounds that it should hold up in court.