Many people shopping for credit card processing services seem to be focused on 2 factors: Rate and Transaction cost.  I would propose that there is a lot of other fees they should be concerned about other than these 2 items.

First, rate can mean many different things.  Which rate are you looking at?  Debit Rate?  Qualified Rate? Non-Qualified Rate? The better question to ask as you are shopping is: “What is your pricing structure?” Because the pricing structure is what determines how your rates are applied.  And you’ll notice I said “rates” not “rate.”  If you want to play a rate game, then go ahead and settle for the confusing and hidden fee structures of 3-Tier, ERR, Non-Qualified and Mid-Qualified.  If you want the simplest and most straightforward rate structure for accounting purposes and also the same rate structure that Fortune 500 companies demand, then ask for Large Corporate Pricing (but be aware that Best Merchant Rates.com is one of the few companies that offers Large Corporate Pricing to anyone).

Second, how are you paying for your credit card terminal?  Do you even need a physical terminal?  Has your processor offered to set you up with a virtual or internet/PC terminal?  This is very important because terminals are not always necessary and they can be quite expensive if you don’t shop around.  You might also consider leasing a terminal- which is very beneficial for many businesses.  But don’t ever agree to a terminal lease price of more than $50.00.  In fact, for the average credit card terminal, a $30 payment is sufficient over a 48 month period.  And make sure the lease comes with a free next-day replacement warranty.

Third, how concerned should you be with transaction cost?  Have you inquired about Authorization cost (because they are 2 separate costs)?  If you are a law firm or service provider that might only do 1-2 transactions per day, then why battle over transaction costs?  It’s not going to matter much to the processor because they can virtually give it away when you have so few transactions.  Pick and choose your pricing battles.  You should focus your negotiation on other fees that will affect your bottom line a lot more significantly than 40-60 transactions at $0.20 per month.

Finally, when looking at a credit card processing provider, ask yourself this question: “Have they offered me the best deal up-front, or did they only offer me the best deal after I battled them, shopped around, and was forced to do a lot of homework.  It’s very important in any industry to find a company that gives you a great deal up-front.  This says a lot about how they are going to treat you once you are a customer.  A Fight Up-front = a Fight on the back-end.

Have you ever noticed how many types of credit cards are offered out there? Credit cards to help you build or rebuild your credit history, credit cards for students, credit cards with rewards, credit cards with 0 interest. As a merchant who accepts credit cards, what does this mean to you? Well, it depends on your processor and their method of billing for these transactions.

Most processors offer one of three types of billings for credit card processing: 1.ERR 2. Large Corporate Pricing (Interchange) 3.Tier Pricing. As if understanding all the ins & outs of credit card processing wasn’t difficult to navigate through already, some processors make it even more difficult by throwing ERR & tier pricing at you. With ERR and tier pricing you are charged based on the type of card your customer is using. You get charged a:
1. qualified rate for a “regular” card
2. non-qualified rate for those business cards or keyed in transactions
3. mid-qualified rate for rewards cards or keyed in transactions
As if that wasn’t enough, you can get charged a non-qualified or mid-qualified rate if you don’t settle your batch within a certain allotted time frame, usually 48 hours after authorization is received. Now…most transactions will fall within the non & mid-qualified types of transactions and it just so happens that these types of transactions yield the highest rate charges to the merchant. You should note that if you average $100+ transactions, it’s probably a good bet that you’ll be charged a non or mid qualifed rate because most customers will want to earn points or miles for these high ticket transactions. There is no way of the merchant controlling the type of card they are accepting, that’s really up to the customer, so why should the merchant be charged a higher rate for these transactions?

That’s why Large Corporate Pricing is the easiest to work with. The merchant gets billed a flat rate regardless of the types of cards their customers use. It makes it easier for a merchant to understand their billing because their cost of processing is based on the volume of processing times the agreed upon rate during sign up. Most processors also charge a batch fee, settlement fee, statement fee, etc. These fees are negotiable, but it’s the method in which you are being charged for the cards you accept that you want to look out for. Make it easier on yourself and go with a company that provides Large Corporate Pricing. Why penalize yourself for something you have no control over?