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How do I save money with CC processing?
Hands down this is a difficult industry to understand. Each processor has their different rates and fees. The tricky part is knowing the type of rate you are being charged. Some merchants use ERR pricing, others use Tiered pricing, and yet others use Interchange. In addition, there are fees that get tacked on to the processing fee such as batching fees, settlement fees, account on file fees, etc. How do you know when you are getting the best rate possible in order to maximize your savings? My advice is to research the trends out in the market. Who is offering what rate and what type of pricing is attached to that rate?
ERR and Tiered pricing look at the type of card that is being swiped or entered. Is the card a rewards card? Is it a corporate card? Is it a normal credit card? Although the type of card your customer presents is out of your control, the credit card processing companies charge you on this factor regardless. A regular card is considered to have a Discount Rate. Rewards cards are considered to have Mid-Qual Rates. And the corporate cards are considered to have Non-Qual Rates. Discount Rates tend to be the lowest rates while the Non-Qual Rates tend to have the highest rates. Again, the types of cards being used are out of your control, but you will be charged the applicable rate. You as a merchant need to be aware of the types of transactions your customers are most likely to do.
• What is your average transaction? Is it more likely for your customers to use rewards cards or regular credit cards? A typical consumer is more likely to use a rewards card on transactions over a certain dollar amount. My belief is that if your average transaction runs around $200, the majority of your transactions will be either Mid-Qual or Non-Qual Rates thus yielding you high processing rates.
• What types of items do you sell? Do you sell office supplies or office equipment? If so, most of your clients will most likely use corporate cards to purchase their items. These Non-Qual Rates tend to be the most costly rates when you are locked into an ERR or Tiered type of pricing.
Interchange pricing, however, charges you one flat rate for all transactions regardless of the card being used. The rate that you agree to when you sign your contract is the rate that you will be charged per transaction. The Visa and MasterCard charges are simply passed through to the merchant. This pricing structure is simple. There are competitive Interchange Rates out in the market, so make sure you do the research and price out the competition.
Finally, make sure you read the rates and fees schedules. Don’t be fooled that all you’ll be charged are the processing rates. If a processor is trying to tell you otherwise, they are most likely lying. Make sure there aren’t any hidden fees in the schedule. Ask for full disclosure prior to signing anything. Typical fees include batching fees, monthly minimums, statement fees. All these fees are negotiable, especially if you are a high volume merchant.
Read the fine print, shop the competition, and ask for full disclosure on rates and fees. Don’t be afraid to ask questions and/ or suggestions specific to your company so that you get the best pricing structure available to you.