Payments Systems – Why Credit Card Processing can be so Expensive

Our analysts have been searching high and low on the internet for the types of credit card processing that bed and breakfasts use.  Services like Securepay or RezOvation are touted.  RezOvation does not actually provide credit card services, but facilitates links to external merchant processing solutions.  But why are these solution so expensive?  Read on below for the answer.

Instant World Booking (BedBreakfastTraveler.com) now offers IWB Payments.  This payments system is unique among all the other providers in that it requires:

  • No merchant accounts
  • No payment gateway
  • No bank or credit applications
  • No credit card processors

In short, IWB Payments handles all the complicated and otherwise costly processing for you.  All you need to do is charge your guests with convenience and confidence.  Read more about IWB Payments here:

http://www.bedbreakfasttraveler.com/payments-systems.php

As for the other services, merchant and credit application fees, discount fees, address verification fees, payment gateway fees, monthly reporting fees, setup fees, monthly service fees, pci compliance fees, etc. can add up quickly.  And yes, you will be charged most if not all of these fee categories for credit card processing.  This is not to mention the complex process of handling cardholder disputes, and a chargeback fee (about $30 or more) for every disputed transaction.

With external credit card processing used by services like Securepay, RezOvation, and others these fees are billed in bits and pieces, and it can be difficult to add them all up.  This is why you may be surprised to learn that these costs in some cases can add up to 10%-15% or more of your monthly charge volume.

Here’s just one example of how credit card processing costs can add up for a bed and breakfast or inn.  Consider a simplistic example.  Let’s say a bed and breakfast charges 10 credit cards per month.  The average discount rate or their charges is 4%.  This is not the total cost of processing, of course, but just one of the cost categories mentioned above.  Now, if just one of the 10 charges for a month is disputed by the guest, the amount charged is automatically returned to the guest by the credit card processor.  However, the discount fee is NOT returned to the bed and breakfast for disputed charges.  This means the overall discount rate for the month goes from (10 transactions x 4%) / (9 successful transactions) = 4.44%.  So, the average discount rate for the month increases from 4% to 4.44%.  That’s an 11% increase.  This of course does not include the non-refundable $30 chargeback fee that the bed and breakfast will be charged for the dispute.

IWB Payments is a simple to use credit card acceptance program that may be right for your bed and breakfast or inn if you want to avoid the administrative headaches and high costs of maintaining your own merchant processing account.

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5 Responses to "Payments Systems – Why Credit Card Processing can be so Expensive"

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