Credit Card Processing Calculator
Over the past several years many credit card processing calculators that estimate a business's monthly processing costs in an attempt to make the task of comparing merchant accounts transparent have popped up on various web sites. A credit card processing calculator sounds like a useful tool at first, but the reality of creating one that's accurate is another story.
As I'll explain later, the nature of credit card processing rates and fees make the logistical obstacles of creating an accurate calculator prohibitive if not completely restrictive. Even with an interchange plus pricing schedule, results can be far from the mark. Most rate calculators are nothing more than a marketing gimmick that should be dismissed as half-hearted attempt at finding a silver bullet to summarize merchant account rates. However, newer more comprehensive calculators are showing some promise and they have their place in a merchant's arsenal of tools to use when comparing merchant accounts, but it's still a relatively small place at that.
The largest obstacle on the road to creating an accurate calculator is predicting into which of the hundreds of different interchange fee categories an individual transaction will qualify. The criteria used to determine qualification is equally illusive. This guessing game is difficult enough on an interchange-plus pricing schedule and inconsistent buckets make the task virtually impossible when calculating fees on a tiered merchant account fee schedule.
For example, a detail as minor as the speed at which a credit card is swiped can cause an electronic card reader to miss track data causing the transaction to downgrade. The number of different credit cards consumers use is another issue. In the best case scenario, a merchant that's fluent on the subject of interchange fees couldn't glanced at every card that they accept in a given month and categorize it as CPS/rewards 1, commercial level II, etc. These are just two of an endless array of variables that stand in the way of calculating interchange qualification on individual
Nevertheless, the calculators press on... In an effort to guess which interchange categories will most often apply to a particular merchant's transactions, calculators ask merchants probing questions about processing volume, average ticket size, the type of credit cards being accepted and various other questions in the hopes of creating a general processing profile. Of course, the accuracy of these numbers is based on the assumption that the merchant understand what they're being asked and that they have accurate figures to provide if they do.
Assuming we get this far while still maintaining some degree of accuracy, the issue of peripheral account details still needs to be addressed. Most calculators avoid this gray area completely because the subjective nature of these features won't fit into a web site form field. A calculator relies on one-dimensional variables to try and guess a merchant's processing costs. It can't examine a merchant's needs and make money-saving recommendations, or read a merchant service agreement and inform the merchant that they're about to sign a 3-year contract that auto-renews itself unless it's cancelled in a thirty-day window.
Another important point along these lines is that calculators guess at processing costs on an objective black and white level without regard for the aspect of a merchant account that can greatly affect the interpreted cost such as customer service or getting a merchant set up with the best solution.
Merchant accounts are far too important not be considered and compared in aggregate, and credit card processing calculators fail miserably when it comes to looking at the big picture.
New calculators are bound to hit the market periodically, as they have been for so many years, and we'll be sure to update this article as new and potentially promising calculators come to our attention.
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