Thursday, February 23, 2017

Understanding Merchant Services and Credit Cards Processing Fees

 Like most small businesses, finding the right merchant services provider can be a difficult task especially if your beginning your entrepreneurial career. Most businesses find merchant services thru a referral from another merchant, family member or friend. But how do you know if you’re really getting a great deal on credit card processing? Understanding the basics of how credit card processing works, credit processing rate structures and fee structures will give you the right information to help you make the best decision for your business.

Accepting Mobile Payments

  mobile credit card processingWhether your accepting mobile payments or you have a brick mortar store front, every successful business needs to and accept credit cards. So how does credit card processing work? Each time a customer gives a merchant a credit or debit card, an intermediary- a credit card processing firm takes the merchant’s credit card charges and funds the merchant.The processor then. sends the merchant’s charges for collection to their bank to be processed. In order for any merchant service provider to process credit cards for a customer they charge a fee on top of what they must pay their bank to get funding. So the way most credit card processors charge customers is with two types rate structures. They are the Tiered rate system, and Interchange pricing.

                                 Tiered Pricing Model

The Tiered Pricing  model allows for three  types of rate structure to be charged to the merchant that was unfortunate enough to sign this type of agreement. Looking at the graphic, the qualified discount rate is the lowest fee merchants will be charged to process credit cards. And from there, the rates get progressively higher. In theory, this might seem like a viable idea for a business. One view is that you would get an average of all three rates-right? Wrong, theses rates are bases on fees banks  are charged by American Express, Mastercard, and Visa. The problem is no two visa cards accepted at your business are exactly the same. For instance, one card may  have frequent filer miles given to the hard holder and perhaps another card offers 10% cash back on every purchase, All of the big three credit card companies have a different  different rate structure for each type of rewards card they process for service providers. The problem for merchants is they have little control over the specific card a customer is presenting for payment. Reading you statement on a tiered pricing modes, it can certainty  be confusing. Because of a lack of control of credit card processing charges, Merchants should avoid getting involved in a tiered pricing. model.

                        Interchange Pricing Model

the best way to accept credit cards for small business
The interchange rate is the fee that card processing companies get charged by their bank that fund each merchant transaction. Merchant Service providers’ markup that fee to provide service to a business that requires credit card processing, Interchange pricing is the best way to accept credit cards for small business. The processing rates are one flat percentage fee for Visa and MasterCard. The same is true for American Express except they charge more. The merchant services business is very competitive. This gives merchant an opportunity to get the services they need at reduced rates. Beware of all-inclusive interchange processing fees such as square. They often have very poor customer service.  Often, companies have hidden fees you don’t see. But ask yourself, “Am I getting a fair deal”? How do you know? Your agent for the merchant services provider said your rates  is XXXX and that’s what they are supposed be charging you on the agreement you signed. Interchange pricing leaves a lot of transparency in seeing what you’re actually paying for card processing. The Statements are easier to read and charges can be matched up with the items relevant to your merchant account agreement such as a statement fee. With greater transparency, you can calculate card processing costs and know exactly what your costs will be for the business.

Making the right decision for your business

Tiered pricing is the worst pricing structure for merchants to process credit cards. I believe interchange pricing for card processing services gives the merchant better value in addition to the best way to accept credit cards on a mobile phone Are you looking for information how to accept credit cards on website? Preferred Merchant Service is ready to provide you with technical assistance for accepting credit cards on your website offering processing rates as low as 1.25%. Working as an independent agency for IPayment merchant services, I’m able to offer you a $500 low price guarantee.  Our firm will cut your Square credit card processing fees in half guaranteed. Save time and money; sign up to accept mobile payments today.  

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