To process credit card payments, you must have a merchant processing account. When you shop around to get setup with a merchant processing account, it can be quite confusing to compare companies. There are many different pricing models and different companies present the pricing in different ways.
In today’s episode, Bernard Roesch will explain how the pricing models of merchant processing works so you can understand how to compare companies.
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How Merchant Processors Make Money
Merchant processors make money in a wide range of ways including marking up the processing fee, charging monthly service fees and charging fees for other situations. Most companies make the bulk of their money marking up the processing fee but the other fees that you will pay can add up quickly for your business.
For example some companies charge a fee if you have a chargeback, other companies charge equipment rental fees and there are a wide range of other fees that can come along with a merchant processing account. All of these fees enable the merchant processing company to make money but its often not clear upfront what the price will be for you to be a customer of a merchant processor.
Merchant Processor Pricing Models
Different merchant processors charge their customers in different ways. First, they might have a set mark up depending on the card that is being processed. They do this because different credit card companies charge the merchant processor a different price for processing their payments. The merchant processor then tries to have a set markup on top of that variable base cost. While this makes sense for the merchant processor’s business to keep their markup consistent, it is very confusing for you as the client because your rate is different depending on different cards being processed.
Some companies have a fixed rate regardless of the card being charged. While they are still charged a different price depending on the credit card they are processing, they make it simple for you as the end user by charging you a single standard processing fee regardless of the card being processed. While this is easier for you to understand, the downside is that the cost is usually a higher percent than competitors due to the merchant processor needing to have a cushion for the variable rate they are being charged.
Last, some companies have different processing fees based on whether you key in a credit card or whether you have a credit card that is swiped into a processing equipment. This adds another layer of processing fee differences to your pricing model.
How to Evaluate Merchant Processing Pricing
The best way for you to evaluate different merchant processing pricing models is to provide them with actual processing activity from your business. By having actual credit card processing activity that you can provide to them, they can run an actual quote that you can then compare between different companies.
If you are considering changing merchant processors or getting merchant processing setup for your business, contact Bernard today. It’s an incredibly confusing marketplace and Bernard has experience helping companies choose the best merchant processor for their needs.
You can also visit MissionBusinessPodcast.com for more insights that Bernard has been sharing with us in the previous episodes.