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Billback charges: What they are and how to avoid them

Learn how to identify this sneaky processing fee in your monthly bill.

Updated

Running a business can be rewarding and exhilarating, but also — tough. And the last thing you need are billback charges weighing down your bottom line. Your processor could be tacking on this hidden fee without your knowledge.

What is a billback charge?

Billbacks are charges on your statement that you weren’t billed for in the first place.

Payment processors add billback pricing to your statement to cover the cost of transactions higher than the flat rate. But, because not all credit card transactions are subject to the same rate, you’re responsible to pay that difference.

Say credit cards like Visa and Mastercard charge you a non-negotiable 1.75% for all of your credit card transactions, but some transactions from business, gift or reward cards come with a 2% rate. The processor bills back that difference on your next statement.

But you can avoid these complicated billback charges.

Why am I being charged this fee?

Billback charges are part of the billback pricing model — one of many pricing methods payment processors can use. Providers that use billback pricing typically market their service as a simple flat-rate fee. Processors may not disclose that they charge billbacks — or complicate or hide them in the fine print. This leaves merchants in the dark about what and how they’re being charged.

Billback charges make it difficult for you to understand exactly what you’re paying because fees are delayed by a month. You need to compare two sets of monthly statements side by side to piece together what you’re actually being charged.

How to tell if you’re being charged billback.

Billback pricing can masquerade under a number of names:

  • Blended rates
  • Reduced rates
  • Enhanced billback
  • Enhanced reduced recovery

But the real trick is recognizing billback charges on your monthly statement. Be on the lookout for the following letter codes listed under your monthly interchange charges: BB, EBB or ERR. If you see these letters nestled into an ambiguous-looking surcharge, you’re likely paying billback charges. If you’re unsure, call your processor directly and ask.

Do all providers charge billback?

No, not all payment processing providers charge billback. Pricing methods like interchange-plus pricing are generally more transparent about wholesale and markup fees for each transaction than flat-rate pricing.

Billback charges are unnecessary and avoidable. If you’re unsure, ask your provider about its pricing method or learn more about how payment processors charge transaction fees.

How much do billback charges cost?

Billback charges vary by transaction, which is precisely what makes this fee so difficult to identify.

Let’s say your processor charges you a flat rate of 1.75% per transaction. A customer comes into your store and makes a $300 purchase using their business credit card. On that $300 sale, you pay a flat rate of 1.75%, or $5.25.

But here’s the catch: the business credit card your customer used doesn’t qualify for the 1.75% rate promised by your payment processor. It’s actually subject to a 2% rate. So next month, you’ll see a fee listed on your processing bill for $0.75. That $0.75 is the billback charge for the missing 0.25% of the transaction your processor never charged you for.

How can I avoid paying billback charges?

The best way to avoid paying billback charges is to use a provider that doesn’t charge them. Opt for a processor that uses transparent interchange-plus pricing, like:

Data indicated here is updated regularly
Name Product Contract required? Processing time High-risk merchants accepted?
Fattmerchant
No
Next day for qualified businesses
No
Businesses that process more than $10,000 monthly can save with Fattmerchant's interchange+ pricing.
Payment Depot
No
Next day
No
Avoid surprises with subscription-based pricing.
Helcim
No
Two business days
No
Conveniently packaged into three service tiers for in-person and online sales.
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Compare up to 4 providers

Bottom line

Billback charges are confusing and make managing your monthly payments difficult. To avoid these fees, find a payment processor with a transparent pricing model. If you’re unhappy with your processor, our breakdown of the best payment processors can help you find a better solution for your business.

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