Knowing their Differences Could Save You Thousands
Did you know that here are basically 3 totally different pricing models by which you can accept credit cards?
These are Fixed Rate, Tiered (also known as Bucketed) and Interchange Pass Through Plus. Knowing the difference between these models could put thousands of dollars to your bottom line… and keep it there.
1. Fixed Rate
This pricing model has a fixed fee rate for every credit card transaction your business has… If you’re store is retail store and the vast majority of your transactions are swiped consumer cards, you might be okay on this pricing model.
However, every card (and there are over 400 types now) processes at a different and potentially higher rate. On top of that, you will typically be charged additional fees (called billbacks) as a penalty of which you are unaware.
It is not unusual for us to see merchants set up on this model having an effective rate* of over 4%. Usually, this is the most expensive model and we almost never recommend it to our clients.
2. Tiered or Bucket Model
Here, all of your processing fees fall into 3 tiers or buckets with 3 set prices, regardless of what their real Interchange cost might be:
• Qualified
• Mid-Qualified
• Non-Qualified
For the small merchant, this might be efficient but, again, we usually do not recommend this model. This is because many cards might fall or downgrade all the way to non-qualified, while the cards priced between mid-qualified and qualified might clear at a better rate.
3. Interchange Pass Through Plus
Interchange is the association that sets the rates processors pay… and is the part virtually all merchants have trouble understanding.
In this model, no matter what card you accept, you are charged the cost of that card. Of course, you will pay the dues, assessments, bank fees and processor fees—in addition to Interchange—but that’s why it’s called “Plus”. In 23 years working with clients of every size, type and in virtually every industry, this is by far the best model for our clients. It’s only downside is that it does require a little more knowledge on the part of the merchant (or whoever looks over your merchant accounts) to insure there is no “fee creep”.
We provide free and regular auditing for our clients as part of services to ensure they always pay what we promised. Since we work for the merchant and NOT the processor, these regular audits ensure happy clients.
If we can be of assistance, please don’t hesitate to contact us at britt@merconserv.com or call us at 321-800-6533. We look forward to serving you.
*Total Credit Card Fees divided by total Credit Card revenue = Effective Rate.