The total amount of money paid in card processing is always colossal and could add up to hundreds of dollars per month. That is why when choosing merchant card processing services, most business owners could want a provider that charges the least. Therefore, selecting payment solutions with the least cost can help reduce the expense considerably.
However, determining the cheapest provider could be a big challenge because payment processing is complex. Besides, every player would want you to think that they are giving the best rates. When you call them to enquire about the rates, they will convince you that they are the cheapest in the market even when it is not the case. Read on to see how you can get the best rates from the merchant card processing providers.
1. Discuss the rates with your provider
Unfortunately, the term ‘’rates’’ has many meanings. We have the markup rates, effective rates, qualified transaction rates as well as non-qualified transaction rates. So, you must know what the provider is referring to when discussing the rates.
But interchange rates may be the largest component of the processing cost. So, the provider will want to avoid discussing these rates since they do not have control over them. therefore, they will avoid discussing or helping you understand the rates altogether. Since they may not influence the rate, ensure you discuss other rates under their control. The ones they can influence include the markup rates, flat rates, and effective rates.
2. Understand your business metrics
Being aware of your business metrics is important since the processing rates vary and depend on the number of transactions you process every month. So, your average basket size, credit card volume, and risk profile, are likely to affect your rates.
The credit card volume- It refers to the transactions and the amount of money to be processed.
Average transaction size – refers to the basket size of your transactions.
Types of payment cards- the rates may vary depending on the method of payment and the card used. So, knowing the cards that your customers use can give you an idea on how high your rate may be.
3. Check the markups
Choosing the lowest markup is the only way to ensure that you will pay the least fees. Of course, the fee you pay consists of interchange and assessment fees that are non-negotiable but which are paid to the bank, so the provider may not have control over them. However, the processors have control over the markup fees, which refers to the amount you pay on top of the bank charges. Therefore, shopping on markups can help lower the charges considerably.
4. The pricing structures
Payment processing structure is important because it determines the amount you pay in terms of fees. But there are a variety of pricing models that depend on the type of business you run. We have the interchange plus, tiered pricing, flat-rate pricing, and the membership model.
The interchange plus model- here, the credit card providers add markup on the interchange processing rates. This model allows you to know how much you are paying as interchange fees and the amount going directly to the processor.
Tiered pricing – here, the interchange, the assessment, and the markup are bundled together, so they are less transparent.
Flat rate pricing- the providers charge a single rate on all transactions without separating them into tiers.
Membership- the model charges an annual membership fee. So, there are no assessment and markup interchange fees.
Therefore, understanding how each pricing structure works can help you choose the best fit for your business.
5. Reduce the fraud risk
When you reduce the risk for fraud, you lower the processing fee. Card processing providers charge the least fee for swiping credit cards and a higher fee for cards that require you to key in manually. Also, you will need to verify the cardholder’s billing zip code and address.
6. Check if your business qualifies for level 3 or level 2
If your business is a B2G or B2B, you may save up to 1% of interchange fees through either level 3 or level 2 data processing. All you need to do is to provide certain information to credit card networks. Also, you will be required to conduct self-assessment and comply with your provider’s requirements. Doing all this may sound tedious, but if your business processes large volumes of B2G and B2B transactions, check your level.
Of course, you can use many other approaches to get the best rates for merchant processing cards. But the rates the provider charges, the pricing structure, and your business metrics are the most critical.