Merchant Account Rates
Credit card processing “Rates” can be misleading since your total cost per transaction includes other less visible factors – Qualified Rate, Mid-Qualified, Non-Qualified, Rewards, Commercial Cards, Surcharges, Transactions Fees, Batch Fees, and Statement Fees.
When searching for credit card processing and merchant account services you’ll see all kinds of offers out there that may not show all your true costs. It can get quite confusing when looking around and comparing all the different rates and fees merchant account companies offer you. The merchant service 
industry has taken some notes from the cell phone and cable industries by offering teaser rates or “starter” fees that jump way up after you signed that 3-5 year agreement. They will also throw in expensive add-on services that you didn’t sign up for or tell you they are “optional” but required for your account type. There are also some associations offering “teaser rates” to get you in but your statement never actually reflects these rates. We’ve reviewed and set up thousands upon thousands of merchants over the years and we’ve found that the discount rate (%) can be a small part of the bigger picture and most banks and processors make their profit on the add on fees listed below.
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As you can see with all the fees above the list can be daunting. Have you ever wondered how some of these companies can advertise a rate of only .05%?
Here’s how they do it. They’ll set you up at a rate of XX% which looks like a really low rate on the surface. The problem is the rate they advertise or quote is way below the costs the credit card brands actually charge and they have to have some other way to get the money from you. Here’s some tricks to watch out for when shopping around:
- Over Limit Fee – They will set you up at .05% for the first $XX.XX amount you process then when you go over this they charge you the 5% over limit fee on the rest.
- Under Limit Fee – One of the largest Banks in the U.S. is famous for this. The sales rep will put $XXXXX.XX on your application and tell you you need room to grow. The problem is the Bank gives you 90 days to hit this monthly volume and when you don’t they start charging their “Under Limit” fee of 5%.
- Interchange Plus – Interchange Plus pricing can be good if it’s set up correctly but it’s usually padded with additional fees. Interchange Plus works like this: A processor offers you .50% over the interchange rates Visa, MasterCard and Discover charge them. This allows them to advertise a rate of only .50% but the true cost is really closer to 3%. For Example: There is a phone company advertising a $14.95 per month five year high speed internet access service on TV right now. The problem is the $14.95 is their cost and when you add in all the taxes and fees the true cost is close to $40 per month. It’s 100% legal but not the whole picture!
- Annual PCI Compliance Fee – PCI has garnered much attention the past few years and is required for all merchants. Here’s the problem though: For most merchants all that is required is a secure credit card terminal or payment gateway that is PCI compliant. What several banks and processors are doing is requiring a 20 page report to be done by you and if you don’t complete the report they surcharge you $20 – $40 per month and another $250 per year. The form is actually FREE to fill out and there is no need to pay surcharges unless your terminal or payment gateway is old and outdated and not secure.
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