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Not Just Rates But The Overall Cost

Not Just Rates But The Overall Cost

How to Compare Credit Card Processing Rates and Fees?

Due to the complexity and confusion created by different credit card processing companies and independent sales organizations, finding the right credit card processing company for your business can be challenging.

The challenge starts when processing companies chose to omit and even hide, from merchants, how much they are charging to process credit and debit card payments for their clients.
It gets worse when a merchant unknowingly signs a binding merchant agreement for several years with hefty cancellations fees. In this article, our main focus is on processing rates and fees. Please search our resource center for an article entitled “What to look for on a Merchant Agreement?”

As previously mentioned in our article “Credit Card Processing Rates” there are three main pricing models customers should be aware of when looking to accept credit and debit card payments. The two most popular ones are called: “Tiered Pricing” and “Interchange Plus Pricing.” Typically the first question asked by a merchant interested in opening a merchant account is related to the processing rates and fees. Processing companies tend to offer tiered pricing because it is a much more profitable option for them and simple to explain. On the other hand however, even merchants who have interchange plus pricing can be paying more than what they should simply because they were sold on the markup being the only fee they would pay to accept credit card payments. Interchange fees charged by the issuing banks, card brand fees and monthly costs are usually omitted. There are also those who thought they were getting a good deal when a processing company or independent agent offers a so-called “good rate” but without any disclosures, omits adding monthly fees to make up for the “go rate” he is apparently offering. Monthly fees such as minimum processing fee, annual fee, programming fee and statement fees are some of the examples of how processing companies can recover some of their money by giving you a “low good rate.”

We at TekkPay, educate existing and future merchants on how to not only look for the “good rates” they will be getting but also the overall cost. It is the same as when a consumer leases a car. If he is simply sold on the monthly payment and forgets to research how much money is due at signing and how much it costs to return the vehicle at the end of the lease, this consumer can be in for a good surprise. The same happens with business owners wanting to start accepting credit and debit card payments from their customers. It is important to understand everything that is being offered to you in writing before signing anything. It is also important to be educated by the person talking to you on the phone about your day to day processing fees and other monthly costs.

Let’s look at a merchant who processed a credit card payment of $45.00 for products his customer just purchased from him. Pay close attention to what processor has the best deal on the per transaction basis and overall cost.

Partial Overall Cost – Per Transaction Cost Only
Based on $45.00 transaction TekkPay’sOverall Cost Processor AOverall Cost Processor BOverall Cost
Interchange Fee -Bank 1.65% + $0.10= $0.84 cents 1.65% + $0.10 = $0.84 cents 1.65% + $0.10 = $0.84 cents
Visa Dues and Assessments 0.11% + $0.0195=$0.05 cents 0.11% + $0.0195 = $0.05 cents 0.11% + $0.0195 = $0.05 cents
Interchange Plus Rate – Processor 0.20% + $0.15=$0.24 cents 0.35% + $0.15=$0.30 cents 0.50% + $0.15=$0.37 cents
Total costofa single transaction of $45.00 $0.84 + $0.05 + $ 0.24 cents =$1.13 per transaction $0.84 + $0.05 + $ 0.30 cents =$1.19 per transaction $0.84 + $0.05 + $ 0.37 cents =$1.26 per transaction
100 of these transaction alone in one month would cost your business $113.00 $119.00 126.00
Percentage Increase 5.3%increase 11.5% increase

 

On the example above TekkPay had the lowest “per transaction cost” among both processors A and B. Notice that the Interchange Fee and Card Brand in this case called VISA dues and assessments will always be the same no matter what processor you go to. The main difference on the per transaction rate. TekkPay’s rate of 0.20% + $0.15 cents is the lowest among its competitors.

On the chart below we will add few components in order to find out if TekkPay will have the lowest overall cost in this particular comparison. Keep in mind that this comparison is only fair based on the dollar amounts here displayed. In order to accurately compare other scenarios, we encourage our readers to contact TekkPay directly. Rates vary and a closer look at your particular situation might be necessary for us to provide you with accurate information.

Total Overall Cost – All Processing and Monthly Fees
Based on $45.00 transaction TekkPay's Overall Cost Heartland's Overall Cost Global's Overall Cost
Interchange Fee -Bank 1.65% + $0.10 = $0.84 cents 1.65% + $0.10 = $0.84 cents 1.65% + $0.10 = $0.84 cents
Visa Dues and Assessments 0.11% + $0.0195 = $0.05 cents 0.11% + $0.0195 = $0.05 cents 0.11% + $0.0195 = $0.05 cents
Interchange Plus Rate – Processor 0.20% + $0.15 = $0.24 cents 0.35% + $0.15 = $0.30 cents 0.50% + $0.15 = $0.37 cents
Total cost of a single transaction of $45.00 $0.84 + $0.05 + $ 0.24 cents = $1.13 per transaction $0.84 + $0.05 + $ 0.30 cents = $1.19 per transaction $0.84 + $0.05 + $ 0.37 cents = $1.26 per transaction
100 of these transaction alone in one month would cost your business $113.00 $119.00 126.00
Percentage Increase** 5.3% increase 11.5% increase
MonthlyStatementFee $0 $5 $20
Customer Service and Technical Support Fee $0 $10.00 $5.00
Annual Fee $0 $95.00* $50.00*
PCI Compliance Fee $9.95 $10.00 $15.00
Monthly Terminal Lease No Lease – Free Terminal $25.00 $49.99
Total Monthly Cost $9.95 $57.91 $94.15
Percentage Increase** 482% increase 846%

* Amount was divided by 12 (twelve) months.
** Based on the lowest offer

Monthly costs can easily add up. In terms of small businesses, monthly fixed costs can represent 15% to 38% of a merchant’s total processing cost. With that in mind, it is never enough to take a close look at much your business is paying on a monthly basis, especially if you are starting out and working with a small budget. Most businesses cannot afford the monthly cost charged by some processing companies. In the example above TekkPay had the lowest interchange plus rate and lowest overall monthly cost. It is always important to compare markup and monthly costs together to check which processor has the lowest cost available to your business. It is solely the business’ owner responsibility to do the due diligent work to compare every little detail to avoid any costly surprises.

*Tip:  Always read your processing statements to ensure the processor’s interchange plus rates do not increase, that interchange fees are itemized and fully disclosed. Contact TekkPay @ 888-502-2322 for a FREE statement analysis today and see how much we can save. Our merchants save on average 30% or more on their overall processing costs.