If you enable credit card processing through merchant services, you're helping to reach the increasing number of people who are shunning cash. A 2018 survey of 2,000 American adults found 25 percent of people rarely carry cash, and millennials are the generation most likely to only use credit cards. Some businesses in 2018 are forgoing cash acceptance altogether, USA Today reports.
You likely know the value of credit card acceptance, but enabling card swipes and dips costs money. Payment processing rates can quickly get out of hand with some merchant services providers. Exorbitant rates not only negatively affect the bottom line of your business, but they could also hurt your customers when you have to raise prices to make up for those costs.
Use this guide to learn how to identify processing rates, how to determine if they're fair and what you can do to ensure the lowest rates for your business.
What Kinds of Credit Card Processing Rates Are There?
Take a look at your payment processing statement, and there are generally three different types of fees that your merchant services provider may charge you. These include:
- Flat fees: Flat fees are anything that the credit card processor might charge you on a regular basis, for a fixed amount. These might be on a monthly statement and include fees like maintenance, support or account fees. These will vary depending on the merchant, so be sure to carefully learn what each flat fee means.
- Transaction fees: These are charged for every transaction. For example, at North American Bancard (NAB), merchants are charged starting at just 0.29 percent per transaction, which is one of the lowest processing rates in the industry.
- Incidental fees: Incidental fees are charged per incident. These may include fees for chargebacks, batch fees, equipment or retrieval request fees.
Fees like these may factor into several different types of processing models. Some pricing models, like an interchange plus pricing model, lists all fees on a monthly statement, including wholesale fees determined by banks and credit cards, as well as markup fees determined by a credit card processor. A tiered model will categorize credit card transactions based on qualifications and determine rates from there. Subscription models and blended models may charge businesses based on transactions.
The model that works best for you is determined by factors such as the amount of credit card transactions you process, how often you need to use address verification service (AVS) and other details that affect fees with the providers you're considering.
What Merchant Services Rates Are Fair?
To get the best payment processing rates for your business, you should choose a merchant services provider whose overall services offer you the lowest rates when accounting for flat, transaction and incidental fees. While incidental fees are more difficult to predict, your average sales volume gives you a good idea about whether paying flat fees is worth it because of lower transaction rates, or whether you might want to pay a higher transaction rate because your sales volume is lower, allowing you to avoid flat fees.
While incidental fees are more difficult to predict, your average sales volume gives you a good idea about whether paying flat fees is worth it because of lower transaction rates, or whether you might want to pay a higher transaction rate because your sales volume is lower, allowing you to avoid flat fees.
Whether you accept more payments in-person versus online or over the phone may also affect your ideal rate structure.
As you're comparing plans, try to identify and avoid these types of hidden fees:
- Setup fees: From paying to apply, to paying to create an agreement with a merchant services provider, startup costs could affect your business, whether you agree to a partnership with a certain provider or not.
- Cancellation fees: A fair credit card processor will allow for easy cancellation if you aren't completely satisfied with service. Beware of high cancellation fees that attempt to lock businesses like yours in to a plan.
- EMV acceptance fees: EMV chip card acceptance is mandatory in many countries around the world, and United States' credit card companies are following suit, issuing only cards with EMV chips in them. EMV chip acceptance makes in-person transactions more secure. If the merchant you're considering tacks on an EMV acceptance fee to credit card processing rates now, beware. Fraudulent transactions that occur on payment processors that don't accept EMV chip cards mean the business is held liable. Your business is at risk if you don't accept EMV cards, and expensive fees shouldn't be required to do so.
When you're considering merchant services providers to work with, the provider should explain all fees clearly. Hidden fees that pop up on credit card processing statements later are a red flag that the provider you're working with may be using unfair practices.
How Can You Get the Lowest Payment Processing Rates for Your Business?
Comparison shopping for payment processing can help your business secure the lowest rates. It's best to work with a merchant services provider that doesn't lock you into a lengthy contract and require expensive fees to cancel. A provider like NAB offers risk-free, month-to-month service agreements. That way, businesses can truly determine whether or not the credit card processing rates work best for their business model.
Some other factors to consider when evaluating rates include:
- How much does equipment cost? If you're in need of payment processing terminals throughout a location, free equipment and updates can make a difference.
- What kind of customer support can I get? Low rates from a provider that lacks in customer support can cause more headaches and trouble to your business than you need. Slightly higher rates but more reliable support is more beneficial.
- How secure are transactions? PCI-compliant payment processing is a must to protect your business finances and the finances of your customers. Merchant services providers that charge expensive extra rates for this necessary security should be reevaluated.
Above all, a merchant services provider you're considering should be willing to answer every single question you have. They shouldn't be simply selling you services — they should be a partner that helps you grow your business. A provider interested in your long-term growth will offer fair rates.
Want to learn about the low payment processing rates offered by NAB? Contact us online or at (877) 840-1952.
