Reduce Credit Card Processing Costs When Shopping for a Merchant Account Provider.
A processing fee is charged when you accept credit cards in your business, from setup to processing. Unfortunately, the processing fee is not the same for all providers. While one provider may charge for service items, another may charge for setup and administration or even reporting and compliance.
This raises the importance of finding the right merchant service provider that offers cost savings and helps reduce credit card processing costs.
When you look for a provider, the following tips will come to your rescue:
- A rock bottom price may seem lucrative but it’s important not to be fooled by low pricing. You do not want to fall into such traps only to find yourself dealing with unreliable service or other hidden charges.
- An integrated payment solution is designed to help make time and cost savings. Choosing such a system will reduce data entry errors and will help in reporting.
- It is important to read the fine print and understand all fees, even one-time fees, involved before signing any contract.
- Are there charges or penalties for terminating the contract? Is there any non-refundable fee involved?
- The provider you choose should be able to work with you for the growth of your business and not try to charge you a lot more when your business grows.
These tips will help you understand how to reduce credit card and processing costs, without breaking the bank.
During comparison shopping, do not forget to ask providers a few questions to make sure you get the right match. Ask them about:
- Monthly fees
- Non-qualified rates
- PCI compliancy and non-compliancy fees
- Annual fees
- Monthly minimum
- Cancellation fees
Setup cost is the biggest upfront cost merchants have to pay when setting up merchant accounts. Other costs may include Credit Card or Point of Sale equipment and software. Most providers do provide an online Virtual Terminal if you do not have a storefront and don’t need to swipe credit cards. Printing and connection functionality often determine the price range.
Keep these points in mind:
- You do not want to pay additional charges for terminal functions that are redundant and of no use to you.
- It is best to choose processing software if you have an online business and will most likely NOT be swiping cards.
- Enquire from your provider if your existing terminal can be reprogrammed or traded in.
- Leasing terminals isn’t really necessary these days but if you choose to make sure you are aware of any cancellation fees.
What about Rates?
The transaction cost depends on your personal and business risk, total amount of monthly sales, and card absent sales percentage. Lowered transaction risk will reduce the rate to be paid. It is important to understand the science behind different rates for each sale in order to get the best rate.
- When you process a card a processing rate is charged, which is known as the qualified rate. Vendors often quote this rate when you ask about rates but not the other fees. This is tiered pricing and it comes with qualified, mid-qualified and non-qualified rates. The price goes higher with each one.
- Processing a reward card typically will give you a mid-qualified rate and sometimes a non-qualified rate.
- Manually keying a card into a terminal and not swiping will bring either a mid or non-qualified rate. This can also come when no AVS (Address Verification Service) is established, missing information, or failure of the merchant to settle their daily batch within the time frame since the time of authorization.
- When your transactions don’t meet the qualified or lowest rate requirements, you get a downgrade. You can get the lowest rate for every transaction by ensuring that each transaction meets the qualification requirements. It is important that your opening and closing staff are trained in auditing transaction totals for errors. They should understand how to close out daily credit card transactions when the day comes to an end.
- When the completed transactions are sent to the acquiring bank for payment, the process is known as batching. In order to get the best rate on all of your everyday transactions, it is important to batch out every 24 hours. Failure to do so may raise the risk of your transactions being downgraded, thus further leading to dispute.
What is an Interchange Fee?
An interchange fee is the exact cost that each card provider charges for that transaction. Experienced merchants and large ones are on interchange pricing. They receive the exact cost plus a mark-up. The total cost or effective cost is almost always lower than any tiered pricing plan. Tiered pricing takes the average cost of the entire interchange involved for each card and interchange gives the exact cost.
In the event of a cardholder disputing a transaction, a chargeback occurs, resulting in the transaction being returned to the acquiring bank. Any delay in response to a chargeback inquiry may raise the risk of a timeliness fee. This could also result in the loss of the entire sale. Do not hesitate to ask your prospective provider about their modus operandi when it comes to dealing with chargebacks.
Not All Cards Are Created Equal!
Processing of some credit cards costs more compared to others. Make sure your transactions meet maximum qualifying requirements.
Debit cards are widely in use today, as they can be used both as a credit card and debit card.
- Processing of online transactions are charged at a higher rate compared to swiping.
- Reward cards and business cards are processed at a higher rate. Someone has to pay for those rewards and extra business services and that is the merchant
- Debit cards processed as a credit card compared to normal credit cards are typically at a lower rate depending on whether the card was issued at a major bank or small bank. Cards issued at smaller banks cost more.
- Debit cards processed offline through the ATM network are a lower rate and usually involve a flat fee per transaction.
- If you want to reduce your transactions cost consider accepting ACH/eChecks and offer more payment options to your clients.
In order to get the best rates for your business, it is important to shop around and to make sure you know of every single charge upfront.
Contact Us for more information on Credit Card Processing, or eChecks and ACH Transactions. Or take us up on our FREE Merchant Account Analysis offer. We’ll analyze your merchant account rates and let you know how to Save! If you are ready, you may be able to Switch and Save!