Posted by Jeff Shavitz on Tue, Jan 12, 2010 @ 01:59 PM
Retail merchant accounts carry the least amount of risk to the credit card processor. Because retail merchant accounts are considered low-risk, they are given the lowest rates and fees.
In order to find the best merchant account you should first learn how the different qualification rates will affect your business.
Retail Merchants
In order to qualify for a retail merchant account a business must be able to transact the majority of their credit card sales by swiping a customer's card through a credit card machine. This act is referred to as electronic data capture. Most processors will require a merchant to transact at least 80% of their sales via electronic data capture to qualify as a retail merchant.
Retail Credit Card Processing Rates
Retail merchant accounts pose the least amount of risk to a processor and therefore carry the lowest qualified discount rates. The qualified discount rate will only apply to transactions that are run using electronic data capture (swiped transactions). Any transaction that must be keyed-in will run at a mid or non-qualified rate.
If you will not be swiping the majority of your transactions you should not apply for a retail merchant account due to the downgrading of transactions described above. Instead, you should apply for a mail order merchant account.
If you are a retail merchant you should also give some thought to purchasing a pin pad in order to run debit cards at a flat per transaction rate. Knowing when to use each card can save considerable money.
Retail Merchant Sub-Categories
Certain business types qualify as retail merchants because they swipe the majority of their credit card transactions, but are assigned separate merchant accounts due to an inherent high or low risk associated with the business type.
Lodging businesses such as hotels, motels, and bed-and-breakfast establishments must utilize a lodging merchant account for their processing needs.
Grocery stores are able to utilize a grocery merchant account which has the lowest rates and fees of almost any merchant account due to the inherent low chargeback rate in the grocery industry.
Article courtesy of: Merchant Council (www.merchantcouncil.org)
To learn more or to find out how much you can save on a retail merchant account, get a free rate analysis from CCS today.
Posted by Jeff Shavitz on Tue, Sep 01, 2009 @ 08:36 AM
When shopping for a merchant account, the most diligent business people will do their homework. They'll get multiple processing quotes from different providers and negotiate the lowest rates to get what seems to be the least expensive processing solution. Here's the kicker - merchant accounts with very low discount rates are not always less expensive than accounts with higher rates. In fact, more often than not, they're substantially more expensive. Here's why:
The merchant discount rate that businesses pay to process credit cards is based on VISA and MasterCard's interchange fees. Basically, interchange rates are the wholesale processing rates paid to the issuing bank of a customer's credit card. If your merchant account is set-up in a tiered rate structure (the most common type of set-up for a merchant account), your merchant account provider will take the hundreds of VISA and MasterCard interchange fees and group them into three categories. The first rate category is called the qualified rate, and the second and third categories (called the mid-qualified and non-qualified rates) represent surcharges that are applied to the qualified rate. For example, a typical three-tiered merchant account pricing schedule mak look like this:
Qualified rate: 1.79%
Mid-Qualified Surcharge: 0.25%
Non-Qualified Surcharge: 0.60%
Simply put, merchant account providers have the ability to control which fee category interchange rates will be charged to - meaning they can conceivably offer a merchant account quote with a qualified discount rate of 1.50% and still make a profit by routing the majority of the charges to the mid and non-qualified rate categories. Rates as low as this are very appealing at first, but once it becomes apparerent how interchange fees are being routed, they're essentially worthless because they are virtually unattainable. This practice allows shifty merchant account providers to win business over honest providers that are actually offering a better merchant account.
In order to find the best merchant account rate, ask your provider how they will be routing interchange fees, as this can be more important than the rates and fees that you're quoted - again, a low rate is worthless if very few of your transactions will every qualify for it.
If you're already processing credit cards, now is a good time to call your provider and ask them to explain how they are routing interchange fees on your account - you may be surprised by the answer.
If you're in the market for a new merchant account, make sure to ask each provider how they'll be qualifying the different interchange fees. Don't get caught up in selecting the quote with the lowest rate, make sure to pick the quote with the lowest rate that will apply to the majority of your transactions.
Courtesy of: MerchantCouncil.org
Posted by Jeff Shavitz on Wed, Aug 19, 2009 @ 08:42 AM
In order to figure out which type of merchant account is best for your business, and which rates and fees will matter the most you, you must create a quick profile for your business. Answering these 6 simple questions can point you in the right direction:
1. How will I be processing credit card transactions? Envision how you see a transaction taking place - will you be accepting credit cards via your website and/or in a retail store? Perhaps you will require some degree of portability in order to process credit card transactions - in which case you may need a wireless merchant account.
2. Does my business have seasonal swings? If your business is dormant for certain months, you should try to have monthly fees such as the merchant account statement fee and monthly minimum fee lowered. You may need to give a little in other areas (like discount rate and transaction fee) but it will save you money in the long run.
3. What is my average dollar volume (or ticket size) of each sale? If you have a high dollar volume per sale, you should try to find the lowest discount rate possible, even if you have a higher transaction fee. If you have a smaller average ticket size, then the opposite is true - you are better off with a lower transaction fee and higher discount rate. To get a better understanding of these terms, click here.
4. What will my processing volume be? How many Visa and MasterCard transactions do you expect to process in a monthly period? If the transaction volume is higher, then monthly fees are less important to your business and you should focus on trying to get lower transaction and discount fees.
5. Does my business require multiple merchant accounts? If your business will be processing credit card transactions in different ways (i.e., retail businesses that also have an online presence), you may be better off having separate merchant accounts - often times you can work with your provider to have monthly fees lowered or even waived on one of the accounts.
6. Will my business benefit from the ability to accept credit cards? This is probably the most important - and overlooked - business profile question. Make sure to compare the cost of credit card processing to the expected increase in sales it will generate, and also look what your competitors are doing. Retail stores and e-commerce websites may not have much of a choice, but smaller businesses and niche business types need to give this question some serious thought.