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Affordable Credit Card Processing | We have you covered

Are you looking for an affordable credit card processor? More often than not affordable and credit card processing don’t seem to fit well together. This is partially due to the fixed cost imposed on merchants to accept credit cards called the interchange rate. The second cost factor is the additional rates and fees imposed by your processor.

Now the term affordable is subjective. What is affordable for some may be expensive for others so let’s begin with a base line of affordability. When auditing a merchant account it is important to calculate the effective rate for your processing. The effective rate is calculated by dividing your monthly processing fees by the total volume processed. This number should be below 3.0% for low risk retail merchants.

So, that being said, anything above 3.0% becomes more expensive than it should be and therefor more unaffordable.

The beauty of the effective rate calculation is the fact that it is a retrospective look at all the rates and fees your business is charged. Lots of providers offer seemingly incredible deals on processing rates only to hit you with exaggerated ancillary fees to make up the difference.

So if you truly want an affordable credit card processing solution, stop negotiating the individual rates and get commitment from your processor that your effective rate be 3.0% or less. Then you know you are getting the most affordable merchant account possible.

Let Maxx Merchants review your processing and we’ll guarantee your effective rate is 3.0% or below* while also providing the best in class customer service and support.

*Certain restrictions apply

Merchant account effective rate: what you pay to process credit cards

Merchant Account Effective Rate

Adding merchant services capabilities to any business can significantly boost its bottom line. Ease-of-doing business not only makes the shopping experience more favorable for consumers, but it can contribute to ongoing repeat business. One of the features to understand when either adding or updating your current merchant services account is the effective rate charged.

So, what exactly is this charge and how should it equate into the overall decision making process about which vendor to leverage for your business?

Effective Rate Basics

In simplest terms, the effective rate refers to the NET percentage of a business’s sales that will be charged for the ability to accept credit cards; credit card processing fees.

For example, if a business receives $15,000 in credit card sales in any given month, and their total processing expense is $450; its effective rate for that month was 3.1%. While this calculation is very basic and straight forward, there is another consideration to be aware of; the qualified discount rate.

If you are offered a qualified discount rate, which is very common and an excellent option to consider, this is the base fee rate to be assessed. Once surcharges and other merchant account fees are added back into the equation, you arrive at the net effective rate. When determining your fees, be sure to break them out individually so you can assess each one independently.

Calculating your Estimated Effective Rate

For established businesses, this calculation will be fairly simple; take your average monthly credit card sales x the effective rate from the merchant services provider, to arrive at your average monthly processing fee. Newly established businesses or businesses with inconsistent sales will have a slightly more difficult time arriving at this calculation. In these instances, factoring a higher monthly average than anticipated will make it easier for the business to budget costs.

While an effective rate is indeed a cost assessed, it is often a small price to pay for the end value offered to your customers and ultimately to your business for this added payment option.

Where do my credit card fees come from?

The credit card fees associated to your merchant account come from various sources and together represent the effective rate you pay to process credit card through your business. The sources of your credit card fees can be grouped into the following categories.

• Interchange Fees
• Dues and Assessments
• Processor Markup
• Processor Service Fees
• Junk Fees

Interchange Fees

Interchange fees represent the true fixed cost of processing a credit card transaction. The definition of Interchange is: the network of interconnected financial institutions set up by the major associations (Visa, Master Card, etc) to facilitate the use of a plastic card to make payment. (More information on Interchange) These fees are fixed by the associations and can’t be negotiated.

Dues and Assessments

These fees are also fixed by the major associations, non-negotiable and applied to your merchant account every month. Currently Visa and Discover have dues and assessment of 0.0925% and Master Card has dues and assessments of 0.095%.

Processor Markup

The processor markup represents the beginning of negotiable credit card fees. The processor’s markup is discretionary and represents the cost the processor is charging for the services they are providing. The markup can be bundled with Interchange or separated out depending on the pricing structure that is offered. (More information on credit card pricing structures)

Processor Service Fees

The service fees charged by your processor are also negotiable and represent the additional costs you will be charged by the processor. These fees include but are not limited to; monthly statement fee, monthly minimum fee, per transaction fee, batch fee, PIN debit fee, address verification fee, annual fee, account access fee,  PCI verification fee, termination fee, chargeback fee, set up fee, application fee, reprogram fee, etc

Junk Fees

Junk fees represent the credit card fees that are bogus. It is a common practice among some credit card processing companies to advertise very low rates and fees to attract businesses to sign up. Once the business signs up the processor slaps on enough junk fees to make up for the below market advertised rate. What makes this practice even more deplorable is that the fees are described very carefully as to make them sound legitimate. For example: Interchange BIN location, Interchange recalculation, Association access, etc.

With any merchant account it’s important to understand that you have a lot of negotiation opportunity and by simply knowing what to ask you can save your business a great deal of money when it comes to credit card fees.

For a review of your current fees or to set up a new account please contact our friendly staff at (800)917-8026.

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.

1. Check the statement every month and compare it to last month
2. Validate the account for PCI Compliance
3. 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.

Other items to consider when evaluating a merchant account.