How to Save Money on Credit Card Processing With Interchange Plus Zero Pricing
Many small business owners who are looking for the lowest cost credit card processing costs quickly find out that it’s pretty hard to understand where to even begin. What exactly is being offered by all the different merchant service providers anyway? The card processing industry has always been a confusing one with hidden fees and assessments, strange terms, with huge profits going to the big banks as a result.
Even for the most savvy business owner, it’s been difficult to know who was offering the best deal, but these days, it’s simple.
What is interchange?
Interchange is sometimes considered the wholesale “cost” of processing credit cards, because it is the exact the same cost for every company. In short, Visa and Mastercard interchange rates can’t be negotiated by anyone, and no matter what company you use to process credit cards, you’re paying the interchange rate. There is no use trying to figure out what interchange rate you’ll be getting, because there are over 440 different Visa, MasterCard, and/Discover rate categories.
The actual interchange rate on a given transaction can vary by card type and transaction type. These rates vary from 0.05% + $0.10 for debit cards, all the way up to to 3.25% + $0.11 for certain corporate rewards cards that are transacted over the phone. Yes, you pay more for a charge over the phone and over the internet. You pay the least for debit cards that are taken in person. For a listing of the exact rates from Visa and Mastercard, see the FAQ page on our site.
The bottom line is that there is nothing you can do to pay less than for interchange. So what can you do to make sure you get the best merchant processing rate?
Interchange Plus Pricing
Essentially, is it wholesale pricing plus a flat percentage, usually. Since you pay the exact interchange rate for the card category being charged by Visa, MasterCard or Discover, you just have to find the lowest fixed processor fee.
This type of pricing used to be reserved for big box stores like Costco and Walmart, but not any more. In the past, big banks never gave small businesses the opportunity to get interchange plus pricing because there wasn’t enough profit, instead offering tiered pricing that charges different percentages depending on about a dozen factors. What kind of credit card is it? What kind of business is it? What’s being sold and how? Online? In person? Over the phone? All these factors would allow the big banks to overcharge business owners.
Interchange-plus pricing works by adding a flat margin on top of interchange. Merchant accounts priced this way are fair and straight forward, since you know exactly how much is going to the bank and how much is going to your credit card processing company. But in the end, you’re still paying a percentage to the card processor.
What About Tiered Pricing?
Two words: Rip Off. This is the most common pricing method, (Three) Tiered pricing, which makes sure that you pay way too much money to your merchant card processor. This model puts most transactions in either a Mid qualified, or Non Qualified tier, as opposed to the Qualified tier, so that you pay a much higher percentage than you expect to pay.
If you process credit cards with a typical tiered processor like Merchant Warehouse, they might offer 1.48% rate for qualified transactions, but a whopping 2.91% and 3.75% for mid and non qualified transactions. The bad news is that mid qualified and non qualified transactions make up more than 3/4 of the merchants sales. Anything other than the normal credit card with no rewards, no miles, no business affiliations, that are not present are mid or non qualified, so you almost never get that great 1.48% rate they quote you.
Tiered pricing gives huge profits to the processor, while Interchange Plus pricing is very simple.
An even better option than Interchange Plus – Interchange plus Zero %
Payment Depot offers something that nobody else does: Interchange plus Zero %. While it may sound great to pay a flat percentage over interchange, what if you didn’t have to pay a percentage at all? What if you could pay just 25 cents per transaction?
We don’t just sell interchange plus pricing to small businesses, we sell interchange plus zero %, just 25 cents per transaction, and we’re leveling the paying field in the process. Anybody that has an average transaction size of over $50 shouldn’t be paying a percentage to their processor. You can save hundreds of dollars a month, thousands a year but not paying the added percentage!
All the merchants who have signed up with Payment Depot are saving thousands of dollars a year by not paying the added percentage their credit card processor, and you can save money too! Let us compare your statement and show you exactly how much you could be saving! Contact us today for a quick, no commitment comparison!