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Choosing a Payment Processor

Why “What’s Your Rate?” is the Wrong Question                                                                 


When shopping for a payment processor, the first question most merchants ask is “What’s your rate?” When they find the processor with the lowest discount rate, merchants think they have found the least expensive payment processing solution. Unfortunately, that isn’t always the case. Credit card processors often advertise only their “qualified” (ie., lowest) discount rate. Then they add pricey surcharges on to their mid-qualified and non-qualified discount rates... This means that merchants may pay hundreds or even thousands more in processing fees than they were led to expect.  


How is this possible? With the common three-tier pricing model, merchant account providers determine whether they will place a transaction into a qualified, mid-qualified or non-qualified rate "bucket." Unscrupulous payment processors promise merchants incredibly low qualified discount rates, then charge much higher mid-qualified and non-qualified rates – the ones they don’t advertise – on the majority of transactions. This practice is known as inconsistent bucketing.


This goes to show that how the fees are applied is more important than the rate quotes you receive over the phone. After all, it doesn’t matter how low a processor’s qualified rate is if they place a mid-qualified or non-qualified surcharge on most of your transactions.


Merchant account providers who offer interchange-plus or enhanced billback pricing offer a more transparent fee structure, because they charge merchants the actual interchange rate plus a set mark-up.


Understanding the Big Picture
Even when comparing processors’ mid-qualified and non-qualified rates, or looking at interchange-plus pricing, focusing on rates alone doesn’t give merchants a complete picture of the total costs involved with payment processing. It’s important to consider additional fees and charges to get a better picture of the total cost of processing.


Charging statement fees, monthly minimums and batch fees are all standard industry practices, but the fees can vary widely from processor to processor. Be sure to ask merchant account providers for a Schedule A form, which is a full disclosure of their rates and fees, so that you can get a clear sense of unreasonable fees or special savings. (For example, A-AAccess Merchant Services never charges a batch fee.)


Software and Support 
Some processors require merchants to use external software to process payments. These external software systems may require annual licenses or technical support contract, as well as frequent updates performed on your own time and at your own expense. Factor in the cost of any necessary software and support, or look for an all-in-one payment processing solution that eliminates the need for additional software.


The Value of Your Time
Another hidden payment processing cost is the cost of your time. Choose a merchant account provider with a commitment to customer service so that you don’t waste time on hold or being bounced back and forth between customer service and technical support.


Next time you shop for a merchant account services provider, don’t just ask, “What’s your rate?” Find out the non-qualified rates and the true costs of processing with that provider. A reputable payment processor will be happy to walk you through their rates and fees to help you understand the total cost of processing payments.


Ready to find out what A-AAccess Merchant Services can do for you? Call 800.317.1819 to speak to one of our dedicated account managers today!


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