subject: Your "rate" Is Not The Most Important Factor When Setting Up Your Merchant Account [print this page] Obviously your "processing rates" are a very important factor when examining your company's merchant account. But if this one thing is all that you are focusing in on, you can still very easily end up overpaying. Your "processing rates" are only a portion of the overall costs involved in accepting credit cards. What is most important is your "bottom-line" also known as your overall "effective rate".
Your "bottom-line" is made up by a combination of potentially costly factors such as:
* Equipment Costs and Leases
* Annual Fees
* Transaction Fees
* Start-Up Costs
* Batch Header Fees
* Monthly Minimums
* PCI Compliance Fees
* Rewards & Commercial Card Surcharges
* Early Termination Fees
* Monthly Statement Fees
Don't Get Caught Up In All The Hype
Far to many company's will boldly advertise and promise you "One Low Rate". If you have been price comparing different company's, then I am sure you have already seen these types of misleading promises. When you are seeing rates advertised as low as 1.03% or 1.19% etc., that is ONLY going to apply to a swiped consumer debit or check card. They are misleading you into believing that you will be receiving that "LOW" discount rate on all of your transactions and that is simply not true.
There is NO STANDARD SINGLE RATE that can be quoted or used for a price comparison. Currently Visa and Master Card have over 165+ interchange rates which are applied according to card type, transaction type and business type. These 165+ interchange rates are then broken down by many other processors into pricing categories such as "Qualified", "Mid-Qualified" and "Non-Qualified", with the lesser qualified transactions i.e. Keyed-In, Rewards and Commercial cards being charged a significantly higher rate due to "downgrading" into the "Mid or Non Qualified" categories.
One thing you need to take note of, is that there is no such thing as a "Qualified" interchange rate. The word "Qualified" is simply a term which many processors use as a "teaser rate" to sell their service. A lot of times business owners are misled into believing that they are only receiving a single "Qualified" rate on all of their transactions. This couldn't be farther from the truth. "Qualified" transactions only include SWIPED consumer debit cards and SWIPED consumer credit cards that are Non-Rewards based. Every other transaction will be downgraded to either a "Mid" or "Non" qualified category, meaning that you will be paying a substantially higher processing fee on those sales. This can cost merchants thousands of extra dollars in unneeded expenses every month and year.
When choosing a merchant services provider for your business, have them fully explain and breakdown ALL of the rates and fees that will be applied to your merchant account. Have them go over each rate and fee listed on your Schedule A which is provided to you with your merchant application. You have every right as the business owner to know exactly what your paying and why!
