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The 3 best price structures for credit card processing | ERR Pricing

Posted by Alex Neir on Thu, August 26, 2010 @ 03:58 PM

The 3 best price structures for credit card processing | ERR Pricing

Best price structure for credit card processing
There are many ways to set up the pricing structure for a credit card processing account. We will discuss the 3 best price structures for credit card processingand give a detailed explanation of each.
  1. ERR Pricing: One rate
  2. Tiered: Two to five rates
  3. Interchange Plus: Every rate

The first price structure for credit card processing is called ERR (Enhanced Rate Recovery) Pricing. ERR pricing is often referred to as the simplest pricing structure as there is only one rate that is associated with the account.

This ERR rate is negotiated with your merchant service provider. We will use 1.69% as the ERR rate for illustrative purposes.

As a merchant business with an ERR rate of 1.69% for your merchant account, you will be charged 1.69% for any transaction that qualifies on The Interchange Table at 1.69% or below.

(The Interchange Table is the rate table set up by Visa, MasterCard, Discover and American Express to facilitate the acceptance of plastic as a form of payment. There are currently over 180 different interchange rates that can apply. The rate is determined by how the card is transacted – swiped vs. keyed and the type of card that is transacted – debit card, check card, rewards card, corporate card, international card) More information on interchange fees

For transactions that qualify above 1.69% on the interchange table you will be charged that rate, in addition to a surcharge determined by your merchant service provider.

For our example transactions below we will use 0.50% as the surcharge.

Transaction Amount = $100

Interchange Qualification

Interchange Rate

ERR Rate

Surcharge

Cost

Check Card, Swiped

1.65%

1.69%

0

$1.69

Rewards Card, Swiped

1.90%

1.69%

0.50%

$2.40

Check Card, Keyed In

2.35%

1.69%

0.50%

$2.85

Rewards Card, Keyed In

2.45%

1.69%

0.50%

$2.95

The ERR pricing structure for credit card processing is most advantageous for merchants that are transacting lower volumes.

What pricing structure is right for my business?

Tags: Interchange Fees, Pricing Structure for Credit Card Processing, ERR Pricing, Credit Card Processing Fees