The discount rate is probably the one component of the merchant account pricing that represents the largest percentage of the fees you`ll pay as a merchant. A competitive discount rate for qualified retail transactions is about 1.29% for check or debit cards and about 1.69% for regular credit cards. Internet discount rates are typically considered competitive at 2.15% to 2.25%.
Your discount rate is determined by the risk your business may represent to the bank. The more risky your account, the higher the discount rate. The type of cards you process may also influence your discount rate, such as a business credit card vs. a check card, or rewards card for instance.
If you have a lower average ticket item or average transaction, the per transaction fee represents a higher percentage and can even represent a higher percentage of your overall fees than the actual discount rate or percentage. If you have an average ticket item of $10 and a per transaction of $.20, the effective rate on this transaction is 2%. If you add the discount rate of 1.8%, the effective rate on those $10 transactions is 3.8% which is higher than it could be.
If you take the same $10 transaction and could lower that per transaction fee to $.17, even with a higher discount rate, say around 1.8%, your effective rate would be 3.5% which would lower your overall effective rate on the transactions.
There is a monthly fee for most merchant accounts. There is a cost associated with providing customer support, physical or even electronic statements, and account maintenance. This is usually a $10 monthly fee that is known as a customer service fee, account maintenance fee or a statement fee.
If you have a merchant account, you most likely have a monthly minimum which is what a flat fee charged every month based on the discount fees. If the discount fees exceed $25, the monthly minimum is met. If the discount fees are based on a slower month or lower volume month, the minimum is charged still at $25. If your volume is only $500 that month, the $25 represents a 5% effective rate, no matter what the discount rate is. Many providers now will waive this fee, so if you anticipate at all that fee being an issue, work with your provider to make sure that fee is either reduced or waived.
These are the primary fees that accompany each merchant account. There are several other fees that may apply depending on whether your are processing through a wireless terminal, an internet-based account, or mail order / telephone order.
Finding a sales rep that you can trust and work with on your account will save you significant hassles later on and will be a relationship you can leverage to make this important part of your business hassle free.
You can contact Brian through his website dedicated to providing information on business merchant accounts. He has been setting up merchant accounts for all types of businesses now since 2001. You can find more information on his website at MerchantHotline.com.
Published By: Indocquent.com- An online resource where you can promote your business, products and services around the world.
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