Personal finance

Why Pricing Structure Matters When Selecting a Merchant Account

save moneyAre your credit card processing fees mounting up? Choosing the wrong merchant account could end up costing you hundreds or perhaps thousands of dollars per year in credit card processing fees. These credit card processing fees are a business cost which most companies cannot completely avoid. Consumers, businesses, and even government agencies often prefer to make purchases by credit card, resulting in credit card purchases making up for around 65-100% of a company's total sales. Since credit card processing fees can vary depending on not only your sales value but also the merchant service provider that you choose, it's important to take pricing and fee structure into consideration.

How Credit Card Processing Works

The credit card processing industry is quite complex, with often a number of parties making money from each transaction processed by your business. Each transaction, you will be required to pay an interchange fee, which is set by the credit card networks and split between the networks and the issuing banks. The exact percentage of the transaction can vary according to a wide range of different criteria such as who issued the card, the type of purchase being made, and the type of credit card, amongst others. You will also be charged an additional fee by your merchant provider, which is also a percentage of the transaction. This fee could also include a per-transaction amount.

Finding Out the Interchange Rate

When searching for a credit card merchant provider such as UltimateMerchantProviders, it's essential to enquire about the interchange rate. Often, small- and mid-size retailers are not given much information about the interchange rate, with merchants instead presenting a single base rate known as the ‘discount rate', which includes both the interchange rate and any additional fees charged by the credit card merchant provider for each transaction. When the interchange rate is unknown, the retailer in question generally has no idea exactly how much of their fee is going to the merchant provider, a factor which accounts for the bulk of the differences when merchants charge different rates for otherwise identical credit card transactions.

Negotiating Fees and Choosing Pricing Structure

When choosing a credit card merchant provider, researching and finding out as much as possible regarding their fees can be hugely beneficial in saving costs as a business down the line. In general, smaller businesses or businesses which are new to credit card processing will have to settle for some type of three-tier pricing structure - usually qualified, mid-qualified and non-qualified rates - however, don't be fooled into believing that this means that you have to settle for discount rates which are sky high. Before making your final decision, it's a good idea to contact a range of merchant providers to work out the most cost effective option. It's also vital to avoid working with independent sales contractors who know little about the industry - instead, opt for larger organizations which understand both your industry and the credit card processing industry.

Choosing the right pricing structure for a merchant account is vital to your business' costs.

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