Merchant Credit Card Processing Fees Explained: Part 2 of 3

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You can read our first post in this series on merchant credit card processing fees here. Continue below for information on tiered pricing that can be difficult to understand but is important to explain if you’re looking for the best in processing services.


Qualified Pricing Explained

Adding to the difficulty of understanding merchant credit card processing fees is the qualification system that is used to categorize transactions and determine the underlying Interchange rate on each sale.

There are over 125 interchange categories that have different fees based on how a card is processed, what kind of card is being used and the nature of the merchant’s business. What many don’t realize is that merchant credit card processing providers condense these 125+ categories into three tiers – qualified, mid-qualified, non-qualified. They average out the many Interchange rates in each tier and then add a margin. With this kind of system, the average tier rate is often higher than the actual Interchange rate would be for the given transaction. That’s like putting a dollar in the vending machine to buy a 75-cent candy bar and not getting any change.

Sometimes that margin can be quite substantial, resulting in a discount rate and surcharges on the merchant that adds up to double or more than the Interchange rate.  Mid- and non-qualified Interchange rates may only go up a few basis points on MasterCard but may increase by 200 basis points on the processor side. The merchant might be paying up to 3.5% and 35 cents per transaction.  Surcharges are not desirable and tiered pricing sucks because you do not realize that you are paying more than what is advertised.


Size and Age Matter to Your Merchant Credit Card Processing Fees

The bigger the company and the higher the total dollar amount of transactions processed each month, the more room there is for negotiating fees. Businesses doing about $20,000 or more a month in transactions should be able to negotiate something known as an Interchange Plus fee. Under this breakdown, you pay the actual Interchange rate for the classification of a transaction (plus a very small additional flat fee).

Smaller businesses, and businesses new to processing credit cards, usually have to settle for some makeup for a three-tiered pricing structure (qualified, mid-qualified and non-qualified rates), but that doesn’t mean they have to settle for sky-high discount rates. Talk to several providers about credit card processing fees and negotiate the best possible rates before making your final decision.


Service is Important

Avoid dealing with independent salespeople who know little about the merchant credit card processing industry or your specific industry.  Instead, look for organizations with great reviews online that understand your business and the credit card processing industry.  Make sure that your processor has the staff available to offer support when you need it.

Pro tip: call the provider you are considering and ask if they have an emergency contact number and then verify it works by calling to see if your call gets answered or if you get voice mail.  If it’s 5:00 pm and you have a queue of customers waiting to check out and your terminal goes down, you don’t want voice mail.  You need someone to solve the problem right away.


What You Sell Matters

Sometimes the combination of what you sell, where you sell it, and very high volumes of sales in short periods of time can limit your options for obtaining – and keeping – a merchant account. If you sell high-ticket items over the internet or sell products or services that the merchant account providers consider “risky”, your options for getting a merchant account or changing providers may be limited.  Be sure any merchant credit card processing providers your questions and are fully aware of and able to handle your needs before you make a change.


Beware of the “Lowest Rate” Claims

A lot of providers will advertise that they offer the “Lowest Rates” in our industry.  Remember, though: this is all relative and can get out of control quickly with tiered pricing structures.   Look for a company that has a price guarantee, not a rate guarantee.  This means they understand the value of your bottom line to reduce your costs, not just give you the best rate but to also factor in your business type, equipment, and any other fees that may affect what you pay.  Look for a company that CLEARLY advertises its pricing and puts all of the fine print in one place for you to see.   Look to make sure they say “NO SURCHARGES”  so you are not combining rates.

I Want the Best Rate

Make sure you’re receiving the best rates in merchant credit card processing and contact Payline today. A dedicated representative will walk you through your current processing statement and highlight the areas in which you could be saving some significant amounts of money.

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