Credit card processing fees (or merchant account fees) are typically the most misunderstood aspect of accepting credit cards at your business. It’s perfectly understandable.
And the reason is simple, because it’s more complicated than you might think.
Not to mention, it’s probably the one aspect of opening a merchant account that gets skipped over, glossed over, or plain lied about by a number of sales reps out there all trying to win your business.
How do I know this?
Well, in working with business owners for the past few years, the single most asked question I get is…
“What’s your rate?”
And when I hear this question, there’s one thing I’m real sure about. Okay, maybe two.
First, that the business owner doesn’t really know what he or she is paying. Second, that more often than not I’ll be able to save them a significant amount on their monthly processing fees.
Credit Card Processing Fees Explained
The true cost to accept credit cards for your business is based on two, and only two, factors. Remember, we’re only talking about Visa and MasterCard here. American Express and Discover are different, even though merchant account providers can set you up with them as well.
Okay, those two factors affecting your rates for accepting Visa and MasterCard are…
- How a card is processed
- The type of card processed
That’s it. Before we discuss these in detail, can you spot one item noticeably absent from the list? I’ll give you a little hint… think about monthly revenues.
To set the record straight once and for all, monthly volume does NOT affect your rate. I don’t care where you may have heard this, it absolutely has nothing to do with your credit card processing rate.
Ever.
The Truth About Processing Volume
Now, if you’re talking about AMEX, processing volume does matter. As your volume increases, you may qualify for a reduced fee, but only IF you reach certain thresholds based on your industry type. When accepting Visa and MasterCard, however, it’s a different story.
Or at least, it should be.
See, there’s only one little problem when I talk about your processing volume for Visa and MasterCard, and the rates for accepting credit cards at your business. Just because Visa and MasterCard do not base their fees on processing volume does NOT mean that your merchant processor follows their lead.
Which means, just because your actual processing rates are on based on volume, does not mean that you will not pay more.
On a number of occasions I’ve heard from business owners who were told from their merchant services provider that their fees were going up. And the reason given for the rate increase was because their “volume” wasn’t sufficient enough to maintain their current rate.
Now, a company may blame their rate increase on your volume. But that’s just a convenient way to increase profit margins at your expense, and then turn around and blame you for it.
Real nice, right?
Needless to say, this is hardly good business practice. In our next article we’ll cover in more detail the two factors affecting credit card processing fees. So keep an eye out for it, okay?
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