The processing fees charged by the credit card companies are something that most of the people find very hard, if not impossible to understand. This is because there are lots of different types of fees charged depending on different aspects and factors.
All these may vary the the final amount that you pay on your credit card each time you use it. Therefore, both for a consumer and a vendor it is important to know about how these fees vary so that the average amount spent by the card holder does not have a big impact.
Industry experts say that the pricing policy of the credit card processing companies typically plays a big role in the free credit card processingfees. They therefore suggest that one should know and understand the difference between interchange plus and flat rate processing fees and how it is impacted by the average sale value of the business.
Choosing an interchange plus merchant account provider
When your customers make a big purchase or tend to make one you can save a lot of money on the credit card processing fees. For example, for a $100 sale an interchange plus merchant account provider will be a better choice but for sales that revolve around $10, a flat rate provider will offer you a far lower credit card processing rates.
Before you get any further, you should know at this point that you should have a fair idea about the difference between flat rate and interchange plus pricing. This will help you to know which type of provider is best for your business. Choose a merchant account provider according to:
- The type of card you intend to use
- Your average sales volume
- The simplicity in processing rates
- The availability of free POS feature and
- The account fees which should ideally be nil.
Ideally, you will find that deciding on an interchange plus service provider is much better in comparison to a flat rate service provider and certainly a tiered fee service provider.
Use the baseline rate
If you are a small business owner and are looking for an interchange plus service provider you should look at the baseline rate to make the right choice. Choose one that:
- Works with low volume sales
- Advertise and offer a lower rate
- Has no monthly minimum sales requirement.
In addition to that you should also keep an eye out for the monthly fees that are typically charged by these service providers. Is not very uncommon for an interchange plus merchant processor charge ongoing monthly fees such as:
- Monthly processing fees: This is a fee that is charged over and above the percentage rate charged for each transaction as well as the fixed rate fees. Moreover, a few providers may also charge an annual fee.
- PCI compliance fees: The Payment Card Industry standards state that the merchants accepting credit card payments need to meet specific security standards. They charge a separate PCI compliance fee which is typically built in to the monthly fee.
- Customer service fees: This is the fees that are charged by the service providers especially for the phone based customers for their service support. It can also be charged for live chat or email service support as well.
However, the amount of all these fees may vary considerably based on the type of provider you choose. Therefore, make sure that you ask as many questions as possible before you sign up to be better off and prevent overpaying the merchant service provider.
Other fees to look out for
In addition to the above there are a few other fees that you should look out for when you choose an interchange plus service provider. These fees are the upfront fees charged such as the setup and cancellation fees. However, there are also a few other fees apart from these common ones.
- Training fee: This is the fee charged by the credit card processors to guide you through the process and help you use the specific system that you have purchased.
- Customization fee: This is the charge for customizing the existing system of the credit card processor to fit in with your specific needs.
- System integration fee: This is another special fee charged by the credit card processor for integrating their software if you need with your ecommerce solutions and accounting software.
If you know that the potential providers will not charge these fees from you, you can easily avoid any surprising costs onto your merchant account statement. Do not just simply ask about these fees and be satisfied with their verbal answer. Make sure that you get all of these no-fees agreements in writing.
Negotiating for a credit card processing fee
You should negotiate with the credit card processing company on your processing fees especially if you do a large volume of credit card processing on a regular basis. However, when you negotiate for your fees especially with an interchange plus provider, you must know:
- How to go about it
- When you will need to pay a fixed percentage rate
- When to negotiate for a lower percentage rate
- When you will have to par fixed fee for each transaction and
- When to negotiate for a lower fee for each transaction.
Remember, while negotiating with your credit card processor you can either ask for a lower fixed percentage rate or a lower per-transaction fee or even both.
Summing it up
If the average sales value is high, you must consider lowering the fixed percentage rate. This will prevent it from hitting your bottom line. On the other hand, if you make lots of low value sales you should ideally choose to lower the fixed fee.
Lastly, it can be very confusing to understand the fees on a credit card statement but if you follow the key areas of the merchant statement, you will find that it is easy for you to know what you are exactly paying and whether or not it is higher than what you really should be paying to your credit card processor.