Do you know what your realcost for credit card processing is? Sorting it all out, especially in comparingcompeting processors, isn’t easy. But the "best deal" may be a betterdeal for the processor and not your business.
Keep in mind that salesvolume and unique attributes of your business will dictate the best paymentservices provider, transaction equipment deal, and service fees.
For example, a bundleddiscount rate may be a better deal for you than a smaller rate with an addedtransaction fee, depending on the dollar volume you process each month and theaverage transaction size. The smaller the average transaction size, the greaterthe percentage of the sale a transaction fee eats up.
One key factor you canexamine yourself is what you’re really paying for processing services –including the discount rate and all added fees or charges. This is called the"effective rate," and is found by dividing the total processing chargesfor a month by the total credit card sales volume for that same month. Thiswill tell you the cost of the processing program as a percent of sales.
You can use this calculationto make a true apple-to-apples comparison between competing processing offers,and the best option for your bottom line.
Using simple numbers, let’scompare two sample plans. Plan A has a discount rate of 1.75% on a monthlycredit card volume of $10,000, that’s a fee of $175. But add to that atransaction fee of $100 ($.20/transaction), a $5 ACH fee, a monthly service feeof $10, and a $30 equipment lease fee, and you’ve spent $320 for $10,000 insales, an effective rate of 3.2%.
Plan B calls for a discountrate of 2.05%. With a $10,000 monthly volume, that’s $205 in discount fees.ACH, service and equipment lease fees are the same as Plan A, but Plan B has notransaction fee. The result is a monthly expense of $250 on $10,000 in sales,or an effective rate of 2.5%.
Certainly there are otherfactors to consider, such as service levels, other processing or financialproducts, current business relationships, etc. Combine those with an accurategauge of real costs for a better look at your options.
– Source: Tire ReviewBusiness Toolbox
