What most merchants don't realize is that they are significantly overpaying for their existing account. Some merchants may even have a good idea that they are overpaying, but don't realize how easy it is to switch their account. The more volume you are processing as a merchant, the more you'll save by switching to a less expensive merchant account.
The discount rate is the rate that banks charge each other to process transactions and is used to manage the risk associated with transactions as well. There are three different discount rates, there's the qualified discount rate, the mid-qualified discount rate and the non-qualified rates. These rates vary depending on the type of credit card and some other components of the transaction.
There are per transaction fees for every merchant account. Sometimes this fee is not charged if the merchant has history and does a flat rate on just the discount rate. But even if the fee doesn't show up on the statement, the merchant account provider and the bank still have this fee. They simply make it up in the discount rates. Flat rate pricing has one advantage and that is simply for accounting. It may be easier to know that every transaction is subject to a flat rate, either a flat per transaction or a flat percentage or discount rate.
For merchants processing smaller ticket items, such as fast food restaurants or convenience stores, the per transaction fee usually represents a larger percentage of the overall transaction and can significantly increase the overall percentage you're paying for accepting credit cards.
Merchants processing high tickets, the discount rate will usually always overshadow the per transaction fee simply because a $.25 per transaction fee for a $5,000 product is extremely small where a higher discount rate of say .5% higher on that $5,000 transaction represents an increase of $25. So if you process the higher ticket items, you need to negotiate as low as you can the discount rate even if you pay a higher per transaction fee.
If you are ready to switch merchant accounts, you should start by looking at one of your statements and calculating your effective rate. If you'd rather not have to learn anything about rates and fees and simply want to get someone else to do this for you, find a competent merchant services professional who will evaluate your current rates and provide you some data on what it would cost to switch and estimate your savings. Finding someone you trust is critical as merchant services professionals don't always have the best reputation for integrity thanks to some in our industry that use deceptive practices and are dishonest.
Most merchant accounts have an early termination fee, so the process of switching accounts may have costs associated with terminating your existing agreement. There are a few options here, depending on how much your early termination fee is and the duration of your contract. Some merchants can save $100 or more per month and keeping the existing account open for $25 per month may make sense. You should check with the provider you're considering to also see if they offer a reimbursement for switching by paying off your early termination fee for you. Some providers will do this, others will not, but it's worth asking.
Getting new equipment during a switchover often makes good sense because you will literally have no down time. If you choose to keep your same equipment, you will have to reprogram your existing equipment to point to the new merchant account which typically takes about 30 minutes to 1 hour depending on the connection speeds. The terminal will download the new program over the internet if you have a terminal with internet capabilities or it will download the new programming over the phone line.
The discount rate is the rate that banks charge each other to process transactions and is used to manage the risk associated with transactions as well. There are three different discount rates, there's the qualified discount rate, the mid-qualified discount rate and the non-qualified rates. These rates vary depending on the type of credit card and some other components of the transaction.
There are per transaction fees for every merchant account. Sometimes this fee is not charged if the merchant has history and does a flat rate on just the discount rate. But even if the fee doesn't show up on the statement, the merchant account provider and the bank still have this fee. They simply make it up in the discount rates. Flat rate pricing has one advantage and that is simply for accounting. It may be easier to know that every transaction is subject to a flat rate, either a flat per transaction or a flat percentage or discount rate.
For merchants processing smaller ticket items, such as fast food restaurants or convenience stores, the per transaction fee usually represents a larger percentage of the overall transaction and can significantly increase the overall percentage you're paying for accepting credit cards.
Merchants processing high tickets, the discount rate will usually always overshadow the per transaction fee simply because a $.25 per transaction fee for a $5,000 product is extremely small where a higher discount rate of say .5% higher on that $5,000 transaction represents an increase of $25. So if you process the higher ticket items, you need to negotiate as low as you can the discount rate even if you pay a higher per transaction fee.
If you are ready to switch merchant accounts, you should start by looking at one of your statements and calculating your effective rate. If you'd rather not have to learn anything about rates and fees and simply want to get someone else to do this for you, find a competent merchant services professional who will evaluate your current rates and provide you some data on what it would cost to switch and estimate your savings. Finding someone you trust is critical as merchant services professionals don't always have the best reputation for integrity thanks to some in our industry that use deceptive practices and are dishonest.
Most merchant accounts have an early termination fee, so the process of switching accounts may have costs associated with terminating your existing agreement. There are a few options here, depending on how much your early termination fee is and the duration of your contract. Some merchants can save $100 or more per month and keeping the existing account open for $25 per month may make sense. You should check with the provider you're considering to also see if they offer a reimbursement for switching by paying off your early termination fee for you. Some providers will do this, others will not, but it's worth asking.
Getting new equipment during a switchover often makes good sense because you will literally have no down time. If you choose to keep your same equipment, you will have to reprogram your existing equipment to point to the new merchant account which typically takes about 30 minutes to 1 hour depending on the connection speeds. The terminal will download the new program over the internet if you have a terminal with internet capabilities or it will download the new programming over the phone line.
About the Author:
Before you get a merchant account, be sure to check out Brian's website about credit card merchant accounts. He has been setting up online merchant accounts since 2001 and is an expert in providing excellent service for business owners.
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