Credit Card Processing Options
Industry competition has produced more credit card processing options for businesses than ever before. In terms of both the number of different providers from which they can choose and the type of pricing structures available, merchants have never had more choices than they do in today's marketplace. This article will cover the different options available and will analyze the pros and cons that each has to offer.
If you're a business owner or manager that finds the topic of card processing confusing enough without having to content with even more choices – this article will get you started on the path to savings.
When it comes to finding a cheap merchant account, what's best for your business may not work for another and vice-versa. Merchant service providers are offering competitive pricing in a couple of different formats, and the provider that can save you the most on processing fees may not be a providers at all. Don't worry if this all sounds confusing right now, I'll cover each option in detail in the text that follows.
Tiered Merchant Accounts
First on the list of merchant account pricing options is the traditional tiered merchant account. As the name implies, a tiered merchant account can have as many as 6 different pricing categories into which Visa and MasterCard's interchange fees are generalized. Tiered merchant accounts typically have three discount rate categories called qualified, mid-qualified and non-qualified with the qualified tier being the least expensive.
Tiered merchant accounts are the most difficult type of accounts to track and more often than not they're the most expensive option. Because tiered accounts pack a couple hundred interchange categories into just three or so tiers, it's very easy for providers that use these accounts to conceal their true cost.
Being the most expensive processing option tiered merchant accounts are also the most profitable for providers. The benefit to tiered accounts is that they're easier to get. New or high-risk businesses may have a problem getting an interchange plus or flat rate account that I'll talk about later.
Interchange Plus Merchant Accounts
Remember the interchange rates that I mentioned earlier? You know - those hundred or so rates that tiered merchant accounts generalize into just a few categories. An account that has what is referred to as an interchange plus pricing structure does not generalize rates. Instead, accounts of this type apply a standard mark-up to the actual processing fee as determined by Visa and MasterCard.
Interchange plus is the least expensive and most transparent way to process credit cards. Until pretty recently this pricing option was only available to businesses with a large monthly volume of credit card sales. Thanks to industry competition, it's finally making its way to the masses.
As I mentioned earlier, interchange pricing is the least expensive option for processing credit cards. The downside is that it's the toughest type of account to get. Interchange pricing leaves providers to operate on a tighter profit margin and therefore requires them to be more careful about the businesses that they offer this pricing to.
Just because it's tougher to get, doesn't mean that you shouldn't try. Use a comparison service like CardFellow to get merchant account quotes from different providers. You may be pleasantly surprised with the results.
Flat rate merchant accounts
The name flat rate credit card processing is a little misleading because the final product isn't quite what the name implies. Any business that processes credit cards will have to pay interchange fees, and the fee resulting from interchange qualification will always vary depending on the details of an individual transaction.
In this respect all merchant accounts will have varied pricing. A flat rate merchant pricing structure refers to the provider's fee, not to the actual processing fees. Providers that offer flat rate merchant accounts pass the exact interchange fee to the merchant without applying a mark-up. In order to make money on the account, they charge the merchant a flat monthly service fee.
The amount of the monthly service fee will vary depending on a merchant's monthly credit card sales volume. The verdict is still out on this new pricing scheme. Whether it's less expensive than the more conventional interchange plus pricing option depends on the flat monthly service charge.
Merchant account consulting
The last option available to merchants for lowering their processing fees is a new type of service that has been coined as "consulting" by the companies that offer it. Merchant account consultants will work with a merchant's existing credit card processor to lower rates, fees and overall processing expenses. Consulting services of this nature are a fairly new development in the processing industry, but they're a great resource to consider for merchants that already have a merchant account.
There are many benefits to utilizing a consulting service. First of all, you can cut credit card processing costs substantially without having to go through the time consuming ordeal of switching providers. There is usually no up-front fee to utilize a consulting service either. Instead, companies charge a percentage of the savings that they're able to negotiate for a merchant as their service fee. The more a merchant saves, the more the consultant makes. This creates a win-win relationship and also acts as a great motivator.
The obvious drawback to utilizing a merchant account consulting company is that your business must already be accepting credit cards.
We have partnered with a company that offers merchant account consulting services. If you would like a free merchant account consultation for your business, please click the previous link and complete the form on the resulting page. A representative will contact you promptly.
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