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Finding Sensible Plans In Credit Card Processing

December 28, 2013

credit card processing continues to become harder with new fees, technology and regulations. We all know that perhaps you are overwhelmed with all the changes.

As a tiny company owner, you are inundated with offers from charge card processing firms that promise to seriously save money. Usually most offers start with a low rate. Each merchant services provider tries to trump another with this lower rate to win your business. If you have experienced business for some time and switched processors, it’s likely you have realized these low offers don’t at all times pan out.

Actually from 2000 to 2010, the normal charge card processing rates for retail have risen from about 2.00% to 2.66% excluding extra fees like statement fees, batch fees and PCI fees. This rise is despite a massive drop in bank card rates and upsurge in bank card usage. Why the increase? Rewards cards are among the main culprits. Banks are passing on the price of those fancy rewards, airline miles, etc, to the merchants.

The next main reason is deficiencies in merchant processing education. Merchants are trained by the banks to respond to low rates. The thing is there are 440 Visa/MasterCard/Discover rates and the banks are merely showing you the best transaction rates.

The appropriate question to ask isn’t “what is your rate?” but “what’s your effective rate?” The effective rate takes into consideration all of the possible Visa/MasterCard/Discover categories for which a transaction may qualify. Knowing your effective rate gives you a far more accurate estimate regarding the real cost of your respective processing. You have the ability to determine your effective rate using a simple formula.


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