Great question! IT DOESN’T HAVE TO BE.
In short, processing is comprised of 2 rates: that issued by the credit card associations (known as interchange), and the processors cost of doing business (or the mark-up). Interchange should ALWAYS be the bulk of what you are paying, but processors cannot operate for free (just like your business), so they must mark up. The mark up not only includes the “officey” things like paperwork and such, but you should be able to get a LIVE person on the phone or in person 24/7 regardless of your issue.
Want to know where the bulk of your fees are going? Figure out your effective rate! To do this, divide one month’s total processing fees (include any daily fees if you have them) by that month’s volume. Multiply by 100.
Your effective rate should roughly be between 2% and 3.50% if the bulk of your fees are being paid for interchange (depending on your business model; ie face-to-face businesses should be towards the lower end of that scale). If you have gotten an effective rate higher than 3.5%, there is a large mark up on your account. And the mark up is the variable portion of the rates! That’s right; when businesses say they are “shopping” their rates, the mark up is the only part that can be shopped since interchange is the same rate charged to all processors.
Here’s something else to note: you may qualify for special pricing! Yep, that’s right…did you know that? Do you have an average ticket under $15? Are you a non-profit? Is your credit card volume more than $100,000 per month? Are you on interchange pass thru or tiered pricing? The list goes on, and the answers to these questions can have a huge impact on your business’ bottom line.
And, here is something very important to note that I run across with disturbing frequency when I am meeting with prospective clients: many of them are not classified correctly! If you are accepting credit cards in a non-face-to-face environment but have been classified as a “retail” account (which means the majority of your business is face-to-face transactions in our world), you automatically will get the highest rates possible on every transaction you run. On the flip side of that, if you are actually a retail business but have not been classified as such, it’s highly likely that ALL of your rates are too high.
Lastly, I’m here to tell you there is NO SUCH THING AS A FREE MERCHANT ACCOUNT. And, if a processor seems too good to be true, 9.9 times out of 10, they are. Either rates will balloon after the first few months OR you will never , ever ,ever be able to get a live person for customer support or tech issues. OR you could be experience both, which would be double the fun :(.
Find someone who is educated in the industry and ask question after question; they can be a great resource and asset for your business!
If you have questions or just want to talk rates, shoot us a line or call us by clicking on this page: http://www.precisionpaymentsystems.com/contact/
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