Is your merchant account a rip off, your effective rate will tell you!
A common question I am often asked is “How can I tell if I am getting ripped off on my merchant account?” I will most often advise the business of 3 fundamental tasks that will ensure they are not getting ripped off.
- Check the statement every month and compare it to last month
- Validate the account for PCI Compliance
- Calculate the effective rate
Check the statement every month and compare it to last month
This is a good practice as it will make sure that your merchant service provider (MSP) is not adding junk fees to your account. Some MSP’s will incrementally add small junk fees hoping that the business will not notice them. After a while the small fees add up to a large some and you are paying a great deal more than when you signed up. The simple act of reviewing your statement every month and comparing it to the previous month will identify any new fees. If you see a new fee and don’t understand what it is – call your MSP and ask.
Validate the account for PCI Compliance
Most is not all merchant service providers will charge a PCI compliance fee. (More information on PCI Compliance) The fee is typically associated to the account to cover any liability that may result from a breach of card holder data. If your provider is charging a PCI compliance fee you should always ask if they offer a compliance survey that waives the fee.
Calculate the effective rate
Your effective rate is the easiest way to get a general sense of the cost of your merchant account. The effective rate is calculated by taking the total amount in fees divided by the total amount processed.
If your effective rate is greater than 3.0% to 3.3% you are getting ripped off and should start shopping for a new provider.