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
Whether 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 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;
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