There is a myth among business owners (and office managers) that all merchant services companies are the same.
Yet, nothing could be further from the truth.
The fact is, the fees you pay are primarily based on who set up your account.
For example, if you signed up with one of the large “mega processing” companies the sales rep who took your application had no power or authority to set you up with competitive rates. And since they work on a quota system their incentive is to get your signature on an application as quickly as possible.
However, if you signed up with an independent agent the rates you pay are based on the margins they are able to get on your behalf.
How to control your costs
Credit card swipe fees for many retailers, often amount to more than their profit and often represent the third biggest expense after rent and payroll.
Merchant swipe fees are determined, in large part, by the type of credit card used — and the rates range from 1.5% to 3% per transaction.
What this means for retailers is an item that sells for $3,000 will cost roughly $75 for the transaction if the surcharge is 2.5%. When retailers draft their business plans, they rarely factor in this cost to do business.
And often wonder why their cash flow is so poor.
A closer look at what merchant account companies charge per transaction and trying to find the best option for your business is critical.
Some retailers have considered passing this fee onto consumers.
However, for years this has been prohibited by MasterCard and Visa. Yet, recently a settlement between merchants and credit card companies in July 2012 intended to defray these costs…. offers an option to pass fees along.
This settlement was the second swipe fee victory in court favoring retailers.
Subsequently, The Durbin Amendment, capped swipe fees on debit card purchases at 21 cents per transaction. This settlement doesn’t cap fees on credit card purchases but does allow a retailer to pass the fee onto consumers. Though the fee can’t be higher than what the merchant actually pays for the swipe.
This new fee, often referred to as the “Checkout Fee,” hasn’t been widely adopted.
Most retailers are trying to stay competitive regarding pricing and feel this may have a negative impact on sales. When the Wall Street Journal polled over 5000 consumers in 2012, they posed the question—”Would you pay a surcharge to use plastic rather than pay cash?”
Over 92% of respondents voted overwhelmingly “No.”
The bottom line?
Since rates and fees can vary so widely between merchant services companies, perhaps it’s time to have your current merchant account statement reviewed.
After all, any savings would keep more of your hard earned dollars in your pocket (or bank account)…
I hope you found this information helpful. Please feel free to share your comments below.
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