Merchant Account Rates Demystified
From time to time I hear from business owners about their frustration with the merchant account rates they are paying each month.
The reason?
How about a lack of clarity regarding their merchant account statement and the rates they actually pay.
Generally speaking, the cost for accepting credit cards is generally more involved than most people realize. Or were ever told.
And the main culprit stems from how most merchant accounts are sold.
Typically on “rate” alone.
So what’s the problem?
There is much more to accepting credit cards than a single rate. Let me explain…
Merchant Account Rate Structure
The reality is that merchant account fees you actually pay are based on a relation of these factors:
- The rate structure your account is set up with
- How you process a credit cards
- Your business type
- The type of credit cards you process
Yes, it gets complicated quickly.
Let me explain each point by working backwards (if you don’t mind)…
Credit Card Types
The type of credit card you accept affects your rate. Now, there are a ton of different card types, and quite frankly many times you will not be able to distinguish them even if you accept credit cards face to face.
A few different card types are:
- rewards cards
- corporate cards
- world cards
Business Type
Additionally, the type of business you have may have an effect on your overall rates. For example, grocery stores have very competitive rates versus traditional retail.
Some other categories that have “special” discounted rates are pay at pump, hotels, and “emerging markets.”
How You Accept Credit Cards
As I mentioned earlier, how you process credit cards matters a great deal. Transactions that occur “face to face” (i.e. “swipe rate”) typically have the lowest fees.
Needless to say, having an online merchant account will mean that generally speaking you will pay more than if you had a retail store front.
Why the difference?
It’s all based on risk.
And for merchant account providers risk means the chance that a given transaction is fraudulent. So, with that in mind, the greater degree of risk involved, the more your rates will be.
One more factor related to cost is when you “batch out” your transactions.
If you fail to batch out at the end of the day, the transactions for that day are all bumped up one rate category, from “discount” to “mid-qualified.”
If you have a retail merchant account and you don’t need to adjust for tips, it makes sense to have your credit card terminals set to “auto batch.”
That way you won’t be penalized if you forget to batch out at the end of a long day…
Rate Structure
When we talk rate structure this is where people’s eyes tend to glaze over.
Rate structures are determined by your merchant account provider in relation to how you need to accept credit cards. The options are:
- Two Tier (for online accounts)
- Three Tier (retail accounts)
- Four Tier (retails accounts with special pricing for “Qualified Debit”)
- Interchange Plus
Interchange plus can often be the most competitive, and is often reserved for high volume account. On the retail side of things, however, there’s a chance you’ll pay more for typical transactions (“Discount” Rate).
Is your head spinning yet?
The bottom line is that what you will actually pay is an interaction between ALL of these factors.
And quite frankly most people don’t really want or care to know all of this.
When you get right down to it, you just want to get a great deal, right?
The key for getting the best merchant account is based on having a little bit of knowledge, and…
Choosing a Merchant Account Provider
If you need to set up a new merchant account, there are a couple of ways for you to get started.
You can click on the link below to get free rate quotes from qualified providers, saving you time and aggravation:
CLICK the link and compare free
merchant account quotes today >>>
Or if you have any credit issues, you will probably need to work with someone who specializes in high risk merchant services.You can learn more about how they can help you by clicking the link.
To get free rates quotes from high risk merchant account providers simply click on the link to get started.
The choice is yours…
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Other merchant account issue you’d like to share?
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From time to time people ask me how to accept credit cards online.