Are you paying too much for payment processing?

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4 things to watch for when considering switching your merchant account

It seems like everywhere you look lately, someone else is offering to save you money on your payment processing. Just do a search for "merchant accounts" on google and you will see lots of ads pop up for "free merchant accounts" or "rates as low as 0.39%". These all SOUND really good, but are they really? Here are a few things to watch out for.

1. Is free really free?

There is no such thing as a "free" merchant account. The card associations and processors charge fees to process payments, and nobody can escape that. They might be able to offer you "free" processing to get you in the door, but be careful to read the fine print. They are either going to hit you later with higher fees, or they are going to go out of business and leave you hanging. If someone is offering you payment processing for free, find out how they are going to make money on the deal.

2. Watch for "teaser rates" and hidden fees

This goes right along with #1, but whenever you're considering a new payment processing contract, make sure you read the fine print. Different card types and transactions typically will get charged at varying rates and what the salesperson is quoting you is the best possible scenario. Ask what the rate is when transactions downgrade and you might get a completely different response. An example of hidden fees to watch for are "over limit" charges: if you process over your monthly volume limit, you might get hit with an unexpected fee. Also consider what the startup charges are: do you have to buy new hardware to get started? Are there setup fees? Application fees? What does the service include? Make sure you get the facts.

When in doubt, remember the old adage: if it sounds too good to be true, it probably is.

3. One simple flat rate is not always better

A flat 2.75% rate on all your swiped card transactions might sound like a good deal, but is it really? An "interchange plus" rate might actually be better. Interchange fees are expressed as a percentage with a flat transaction fee, like this: 1.54% plus $0.10. A good interchange plus rate would be 16 basis points plus 10 cents per transaction, which means add 0.16 to the interchange rate or 1.70% plus $0.10/transaction. 

Consider your sales volume and transaction amounts and do a little math: is the flat rate or interchange plus deal better? 

For example: if you process 100 transactions of $100 each or $10,000: at a flat 2.75% it would be $275, but you would only pay $180 at 1.7% (if interchange was 1.54% + 16 basis points) + $0.10/transaction. The "interchange plus" rate here is clearly the better deal.

4. Money isn't everything

Let's face it, what drives the success and profitability of your business probably isn't what you pay for payment processing. What does it cost your business if your customer is ready to buy but your payment processor is down and you can't process the payment? Or when your employee can't figure out how to set up a scheduled payment or process a return because the software is too complicated? Also, consider what the costs are if you have a security leak of your customers' sensitive payment data and your company name ends up on all the news headlines. It actually might be worth it to pay a little more to make sure you have reliable, available payment processing, usable payment solutions, secure transactions and good customer service.

Here are a few VERY important things to look for:

• High reliability and availability. The number should be higher than 99% or you run the risk of your payment processing not being available when you need it.
• System redundancy and a failover backup data center. What happens if there is an earthquake, hurricane or tornado wherever their data center is located? You need to know your processor will still be able to process your transactions.
• Payment Card Industry Data Security Standard (PCI DSS) compliance. This is critical! One data breach can destroy a company. Make sure you're working with a reputable processor who meets or exceeds the standards.

Considering a switch?

We are offering wholesale interchange-plus merchant pricing that will save you money. Our gateway is reliable, available, redundant and PCI DSS compliant. 

Want to learn more?