Whenever you are looking for a merchant account you need to always look for what pricing structure they offer or in simpler words how is the billing done.
Every business is unique thus you need to see what suits best for your business. You need to understand how it is going to affect your monthly statement. In this blog, let’s understand how the rates and fees are split up so you can learn how much your credit card processor is earning off each transaction. Take your own time to understand how your processor determines its rates. This will benefit you in evading any future stress when you receive your statement.
Interchange Plus Pricing
This is one of the most affordable and realistic pricing models available. It creates a genuine relationship with a merchant and their processor. Let us understand how this works? Here the payment processor margin will be a certain percentage for each transaction. However, the interchange fee varies based on the transaction type that will determine the final cost of the transaction. Compared to flat-rate pricing here you will save money whenever you process a transaction that is eligible for a lower interchange fee.
Flat Rate Pricing
Flat rate pricing the name itself suggests that it is a single rate or a flat rate pricing structure which will be calculated based on interchange fees, the card brand fee, and their margin fee. Since its a flat-rate pricing structure you get to pay a fixed percentage on your transactions. It doesn’t matter if the interchange rate varies between the different transactions. However, you might end up paying more depending on your business and the volume you are processing each month.
Many merchants easily get attracted to this pricing model. However, they will eventually understand the reality and might want to switch and want to save money. For a beginner, this model might look easier and better. It’s always good to do your homework and compare various pricing models before you choose it right away.
Tiered Pricing is most common pricing strategy. In tiered pricing, the price will be determined based on low qualified rates, mid and non-qualified rates. The disadvantage in tiered pricing is that the merchants are tempted with a low qualified rate, which regularly only applies to very select few types of cards. Most of the transactions fall under mid or non-qualified category. A quick tip here is in case if you are signing up with a merchant with tiered pricing make sure you cross-check about which cards fit for the lower rates and which cards your clients are currently using for purchases.
This is similar to tiered pricing however, qualified and non-qualified fees are charged, but merchants are also charged interchange differential fees for credit cards, which further blocks the processor’s margins. Merchants will literally get double billed by paying various fees.
If you understand each tier before you sign up you will be able to understand what your business actually requires and will be able to save money.
Questions call iPayTotal now.. Email us at [email protected] or call us at +44 800 5988. iPayTotal can assist you in creating your high-risk merchant account and provide you with customized credit card processing solutions. We can guide you through the banking underwriting process.