The Profitability and Pitfalls of Credit Card Processing
How many times have you looked at your company's credit card processing statement only to wonder "What are my fees", or "I thought I was paying a lower rate."
There are many variables when developing a credit card merchant account for your business. What is your rate is the most common question asked by businesses already accepting credit cards. Yet the "base rate" is only part of the equation. The cred card industry has numerous "hidden costs" which can, and will, inflate credit card fees. Unfortunately, most businesses are unaware of the potential pitfalls and how the additional fees are adversely affecting the bottom line.
Visa and MasterCard maintain different rate structures for different types of cards and based upon how a transaction is processed. Did you know that there is a higher fee structure for manually entered transactions, or higher rates for different card types?
To give you a sense of the difference in pricing, a business that is set up to mainly swipe cards may be charged 1.79% - but in reality, many of its fees may equate to 3.5% or higher depending on card types and whether the processes were done properly according to the laws of Visa/MasterCard.
In addition to discount rates there are transaction fees. Not having a transaction fee does not necessarily ensure the best rate structure nor does a low introductory rate. Companies will "bundle" their rate, combining the discount rate and the transaction fee to give businesses the appearance of a better rate structure.
Two issues that are rarely raised are funding and collection of fees. Do you know how long it takes from the time you settle your batch until your money is deposited into your bank account - is it 24, 48, or 72 hours? Gauranteed 24-hour funding is available.
As stated at the beginning, accepting credit cards is a winning proposition for your business. Hopefully now you have the information necessary to ask the right questions the next time someone wants to speak with you about your credit card processing. or you decide it is time to check up on your current processor to ensure they are taking care of you. After all, it is your business and your bottom line.