If your business operates online, the ability to process credit cards is a necessity. Consumers want the additional convenience of being able to make a payment for services or products online. They also prefer to use a credit card because of the extra security it provides for each transaction. Adding this payment method is a great way to match the competition, increase profits, and grow as a business. However, it can also be very costly if you do not compare fees appropriately. Stepping into this new business realm blindly is never recommended. There are numerous fees that card associations and banks charge merchants. It can be difficult to determine the exact amount you will be paying per transaction and for the service as a whole. Many factors assist in deciding the rates associated with merchant services. The transaction classification as well as average sales are the most significant factors. You will obtain better rates if you compare merchant services fees with these aspects in mind.
Merchant Services Fees: Significance of Card Classifications and Average Sales
A transaction may be classified under one of three categories. These categories include: qualified, non-qualified, or mid-qualified. Each classification is derived from MasterCard and Visa regulations. Any payment which does not exactly meet the regulations cannot be classified as qualified. High risk cards like those used by corporations will have higher charges because they are classified as a non-qualified transaction. Lower risk cards are not as risky and are more likely to be a qualified payment. A list of criteria can be obtained from a provider to gain a better understanding of what criteria are used for classifying credit cards. You can use this list to determine what types of payments your business handles regularly. This will supply more knowledge of what merchant services fees are possible for your business.
Some providers will advertise special qualifying or introductory rates. These rates are typically more beneficial to businesses which have a high daily sales average. The number is determined by getting an average from the total transaction amount divided by the total sales each day. If daily sales have a lower average, these rates could end up costing your business more money. Keep this in mind when reviewing merchant services fees. Both a discount rate and per transaction rate are charged for each sale. Do not let the word discount fool you, there is no discount involved. Instead this amount is simply a percentage the provider applies to each payment dollar. Individual charge fees are a flat rate added to every sale. If the card is not classified as qualified, additional surcharges will exist.
These two factors should be in the forefront of your mind when you compare merchant services fees for online or in store processing. Start by becoming aware of the criteria to meet for qualified cards. Handling higher volumes of qualified transactions can lower overall merchant fees. It will help you avoid the additional charges associated with other types of transactions. Match the service rate to average business sales to avoid additional expenses. This will prevent you from paying more than is necessary to offer customers this convenience.
