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The 3 best price structures for credit card processing | Interchange

Posted by Alex Neir on Thu, August 26, 2010 @ 04:18 PM

The 3 best price structures for credit card processing | Interchange Plus

price structures 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 four rates
  3. Interchange Plus: Every rate

The third price structure for credit card processing is called Interchange Plus Pricing. Interchange Plus pricing gets its name based on the fact that the rate charged for the transaction comes straight from the Interchange table “plus” a surcharge amount.

As a merchant business with a interchange plus pricing structure, you will be charged the Interchange Table rate that the transaction qualified at plus a surcharge amount. The surcharge amount is negotiated with your merchant service provider. We will use 50 basis points or 0.50% for illustrative purposes.

(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

Transaction Amount = $100

Interchange Qualification

Interchange Rate

Surcharge

Cost

Check Card, Swiped

1.65%

0.50%

$2.15

Rewards Card, Swiped

1.90%

0.50%

$2.40

Check Card, Keyed In

2.35%

0.50%

$2.85

Rewards Card, Keyed In

2.45%

0.50%

$2.95

International Card, Swiped

3.07%

0.50%

$3.57

The interchange plus pricing structure for credit card processing is most advantageous for merchants that are transacting large volumes.

What pricing structure is right for my business?

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

The 3 best price structures for credit card processing | Tiered

Posted by Alex Neir on Thu, August 26, 2010 @ 04:08 PM

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

pricing structure for a 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 four rates
  3. Interchange Plus: Every rate

The second price structure for credit card processing is called Tiered Pricing. Tiered pricing gets its name from the fact that there are multiple tiers set up to determine the price associated with the transaction.

Typically there are 2 to 4 tiers that are set depending on the type of business. Retail merchants usually have 3 to 4 tiers and internet business tend to have only 2. For this example with will look at are retail business.

The 4 tiers set up most often for retail business are as follows:

  • Debit
  • Qualified
  • Mid-Qualified
  • Non-Qualified

Each tier’s rate is negotiated with your merchant service provider. We will use the following for illustrative purposes.

  • Debit: 1.10%
  • Qualified: 1.69%
  • Mid-Qualified: 2.29%
  • Non-Qualified: 2.99%

Each tier’s qualification parameters:

  • Debit: Debit cards where the PIN is entered by the customer at check out
  • Qualified: Check cards that are swiped through the terminal
  • Mid-Qualified: Check cards that are keyed in to the terminal, Rewards cards that are swiped or keyed into the terminal
  • Non-Qualified: Corporate or international cards swiped or keyed

As a merchant business with a tiered pricing structure illustrated above, you will be charged the tier rate associated with the transaction regardless of the interchange table rate.

(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

Transaction Amount = $100

Interchange Qualification

Interchange Rate

Tier Rate

Cost

Check Card, Swiped

1.65%

1.69%

$1.69

Rewards Card, Swiped

1.90%

2.29%

$2.29

Check Card, Keyed In

2.35%

2.29%

$2.29

Rewards Card, Keyed In

2.45%

2.29%

$2.29

International Card, Swiped

3.07%

2.99%

$2.99

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

What pricing structure is right for my business?

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

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