Switch Your Merchant Account To Save Thousands
If you own a business and accept credit cards you are probably paying a lot more than you should for your merchant account. You’re probably overpaying without knowing that you are or really even caring that much. But when you find out by how much you’re overpaying, you’ll be much more likely to switch to a new merchant account.
The discount rate is the rate that banks charge each other to process transactions and is used to manage the risk associated with transactions as well. There are three different discount rates, there’s the qualified discount rate, the mid-qualified discount rate and the non-qualified rates. These rates vary depending on the type of credit card and some other components of the transaction.
Getting your per transaction low will affect merchants who process a lot of transactions more than those that process only a few transactions per month. In addition to the regular per transaction fee, there is usually an AVS fee which is also per transaction any time the address verification system is accessed which happens on internet or card-not-present transactions. This can add to the overall per transaction amount. If you process cards on a physical terminal where the transaction is swiped, you won’t have an AVS fee.
For merchants processing smaller ticket items, such as fast food restaurants or convenience stores, the per transaction fee usually represents a larger percentage of the overall transaction and can significantly increase the overall percentage you’re paying for accepting credit cards.
Merchants processing high tickets, the discount rate will usually always overshadow the per transaction fee simply because a $.25 per transaction fee for a $5,000 product is extremely small where a higher discount rate of say .5% higher on that $5,000 transaction represents an increase of $25. So if you process the higher ticket items, you need to negotiate as low as you can the discount rate even if you pay a higher per transaction fee.
Switching your merchant to a new provider is easy. Generally it only takes a few minutes to complete an online application and a few minutes of verifying your prices and fees to know that you’re saving money. Although the time span for switching to a new account isn’t quick, the actual time you personally spend is typically less than 30 minutes.
One of the reasons many merchants won’t switch their merchant accounts is because they have an existing contract for which they have an early termination fee. The irony here is that for most accounts, the savings on switching to a lower priced account far exceed the early termination fee. Some merchant account providers even offer a waiver or reimbursement to provide incentive for merchants to switch so if you find the right merchant account provider to go through, you’ll have that early termination fee with your existing processor covered.
Getting new equipment during a switchover often makes good sense because you will literally have no down time. If you choose to keep your same equipment, you will have to reprogram your existing equipment to point to the new merchant account which typically takes about 30 minutes to 1 hour depending on the connection speeds. The terminal will download the new program over the internet if you have a terminal with internet capabilities or it will download the new programming over the phone line.
Filed under: Small Business