Most business owners are in the dark regarding how their credit card processing fees are calculated. As a result, the credit card processing industry makes millions each year overcharging businesses and raking in cash from hidden fees. The best way to make sure your business is not getting ripped off is to choose pricing that is as transparent as possible: if you don’t understand what’s going on in your credit card processing statement, there is a problem. Fortunately, there is one way to make sure your pricing is transparent, and that is choosing interchange plus pricing.
When comparing credit card processors you’ll find that many processors give rates like 1.5% or 2% (called the qualified rate). These are signs of tiered pricing—meaning you’ll most likely get ripped off. With tiered pricing, the rate quoted is not the rate which you’ll get for the vast majority of transactions. In fact, most transactions will “downgrade” into much higher tiers, called “mid-qualified” or “non qualified,” and rates will be much, much higher. One way to make sure you’re not getting tiered pricing is to ask your sales rep, “Does that rate apply to every single transaction?” or “What happens when a rewards card is swiped?” That’s where you will catch the downgrades.
Interchange plus pricing on the other hand is made up of two different parts. Interchange is the fee that Visa/MC set for each transaction (and is set in stone) and the “plus” part is the processor markup, or how much the processor charges on top of interchange for their services. With this structure, the markup will be the same no matter what kind of transaction takes place. The quote will look like this: Interchange plus 0.08% plus $0.10. That’s it, there should be no other costly downgrades or fees, and you have the ability to estimate how much your credit card processing costs will be each month.
With interchange plus pricing, you will have the transparency and control over your credit card processing fees that most small businesses owners were not able to have in the past. It used to be that only large companies with payments experts on staff were able to negotiate and get interchange plus pricing from processors, but increased competitiveness in the marketplace means that processors must offer it to small businesses to remain competitive. Although they will not offer it right away, processors usually have the ability to offer interchange plus pricing, so make sure to ask for it when you are shopping for a credit card processor.
FeeFighters.com is the comparison shopping site for credit card processing. Just like getting multiple quotes for airfare using Expedia, FeeFighters lets business owners compare top quality processors on an apples-to-apples basis and makes sure they get the best deal by not having any cancellation or hidden fees, and only interchange plus pricing.
Image Credit: Credit Card Processing Blog