By Erica Houskeeper on May 23, 2019
Billback pricing is a sneaky surcharge fee that shows up on your monthly statement. The trouble is, these surcharges are anything but transparent as they are difficult to calculate, confusing to understand, and negatively impact your bottom line.
The Billback Definition
Billback pricing is an additional processing charge made on a prior card transaction. According to your merchant agreement, certain transactions may prompt an additional processing charge, such as purchases made by a gift or rewards card, a keyed instead of a swiped card, or a business card purchase.
Since billback pricing information appears on the following month’s statement, merchants need back-to-back statements to determine their total processing costs. Charges for one month are typically split over two months — therefore, merchants need two months of statements to calculate their rate for a particular month. Also, these surcharge fees are not easy to recognize unless you know what to look for on your statement.
How Billback Pricing Works
Billback pricing is when your account is billed for the current month at the standardized rate, and the previous month for the difference between the standard and the actual rates.
Let’s say your processor quotes a flat rate of 1.69% for all of your transactions for the month. Some transactions— purchases made with a keyed card or gift card, for example — will have higher rates than others. Even if the processor is charging you 1.69% for every transaction, not all of those transactions will end up qualifying for that rate.
That’s because the processor is charging you 1.69% for every transaction for that month regardless of what interchange category the transaction qualifies for by your processor. The following month, the processor will review your transactions to see what rates they qualified for and charge you the difference on your next statement.
These fees are conveniently left off the following month’s statement so you can’t determine the rate you are paying for the markup. Without two consecutive statements, you can’t see the exact rates you’re paying.
How to Identify Billback Pricing on Your Statement
When it comes to billback pricing, you might hear other terms mentioned, such as enhanced billback, enhanced recover reduced, blended rate, and mixed rate. Essentially, they all mean that your merchant services provider is tacking on an additional markup that increases your fees.
The enhanced billback and enhanced recovery reduced methods include an additional markup to the next month’s recouping fee. That means you’re charged the difference to make up for the real cost of the non-qualifying transactions on the following month’s statement, plus a hidden markup.
In a billback situation, you should see BB, EBB, or ERR abbreviations on your statements under a section called “Interchange.” Search for those terms on your statement to find out if you’re on a billback or enhanced billback system.
The Problem with Billback Pricing
Any variation of billback is terrible for business and your bottom line. Anyone with fluctuating or volatile sales volume can get a nasty shock if they have a big month followed by a slow month. Unethical providers will promise you an appealingly low rate to do business with them, but fail to mention what’s to follow in terms of surcharges.
No matter what a provider might tell you, there is no billback advantage for merchants as the pricing structure favors processors over anyone else.
Billback is a roundabout and confusing pricing structure that lacks transparency and is not easy to understand. That alone is reason enough to switch to a processor that provides the clearest pricing available.
Contact Sekure Merchant Solutions to receive the most transparent pricing structure available.