There's the quick and easy way to figure average credit card processing fees, and then there's the right way. If you're looking for quick figures; average processing fees for a retail business are about 1.90% - 2.25% of total volume, and typical fees for an Internet business are about 2.25% to 3.00%.
Calculating an accurate average means taking into account a number of different variables including how cards are accepted, the type of cards accepted, the equipment or software being used, and the type of pricing model that the processor uses.
Whether transactions are swiped, keyed-in or taken via the Internet will have a large impact on overall processing expense. Internet transactions are considered higher risk than retail transaction because of the increased risk of fraud and chargebacks. Interchange fees, which are essentially wholesale processing rates, average about 1.90% plus $0.10 for Internet transactions and 1.64% plus $0.10 for retail transactions.
If you haven't already, you should take a moment to familiarize yourself with the interchange fee schedules for credit card processing available at the Visa and MasterCard Web sites.
The equipment of software that your business uses also has a large impact on average cost. Retail businesses that use a counter top credit card machine will have lower fees than an Internet business that uses an online gateway. Machines do not have recurring fees like a gateway or POS system that has additional transaction and monthly fees. Any recurring costs associated with equipment or software will have to be considered when calculating average credit card processing fees.
Perhaps the largest impact on average credit card processing fees is the type of pricing model being used by the processor. Credit card processors can structure fees based on a tiered or pass through model. Tiered pricing has a low qualified rate and then higher mid and non-qualified surcharge rates.
In contrast, a processor charges just a single, low rate on an interchange pass through pricing model, and interchange fees (the wholesale processing rate) are passed directly to their merchants. Interchange pass through pricing is significantly less expensive than tiered pricing, and choosing a processor that offers interchange pass through over a processor that offers tiered pricing will produce a lower average cost.
A helpful tip to accurately compare average costs from one processor to the next is to calculate the average base expense of interchange and assessments, and then apply each processor's markup to this base average. By leveling the playing field with an average of base costs, you will be able to more accurately compare costs from individual processors.
Find the best credit card processing services by getting instant merchant account quotes at CardFellow.com. Our software calculates average credit card processing fees so you don't have to.
No comments:
Post a Comment