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5 Common Merchant Services Cost Cutting Mistakes

When looking for a new merchant services provider, these are the 5 most common mistakes of cutting costs.

1. Not understanding what you currently are paying in merchant processing fees. 
Sit down and look at your most recent statement.  Sadly, most merchant services companies make it difficult to understand what they are charging you.  They do this because usually they raise your rates from what they originally quoted you after you have been processing with them for some time.  It is important to sit down and calculate this.  First, add up all of the flat fees (statement fee, monthly fee, gateway fee, customer services fee, monthly minimum fees) and see what they total up to.  Second, look on the statements for words like qualified processing fees, mid qualified, non qualified or bundled.  Then calculate how much processing volume went through each credit card processing rate.  Then add up your processing fees, also called a discount rate, for each level.  Once you have done that divide your discount rate processing fee for each level by the amount of money ran through each level.  You now have your discount rate (or your processing fees.  Third, you should be able to see the total number of transactions you ran and the total amount debited from your account.  Divide the total amount of per transaction charges by the number of transactions and you then have you per transaction flat fee.  Still confused?  Request a merchant services processing quote, then either fax in or email a scanned copy of your most recent statement to company you are getting a merchant services processing quote from and they will analyze your statement and tell you what your fees are. 

2.Worrying about fees that won’t affect you.  
If you have a monthly minimum fee and are processing in excess of 10K per month in processing volume, don’t worry about it.  Also, if you never have charge backs, don’t worry about a charge back fee.  If you are not accepting checks, don’t worry about check processing fees either.  Instead just focus on your monthly fees and your qualified, mid-qualified, a non-qualified rates.

3. Not paying attention to mid-qualified and non-qualified merchant fees. 
Most merchant service providers charge close to industry rates on the qualified rate.  Yet, on the non-qualified rates that make up about 40% of processing volume for most merchants, they put in a big mark up.  Make sure your mid-qualified rates are never above 2.25% and your non-qualified rates are never above 3.75%

4. Using merchant equipment that drives up your merchant processing costs. 
Swipe credit card transactions are the cheapest for you to run.  They almost always fall into the qualified type of transactions.  You want to do as many of these as possible.  Oftentimes, companies do keyed transactions instead of swipe. Yet, this is a costly mistake.  Instead merchant services transactions that are typically keyed can be swiped done wirelessly through technology like the Verifone VX670, or the Way 5000.

5. Paying for merchant services equipment.
You should be partnering with a merchant services company that gives you free merchant services equipment.  You should never pay for it – ever.

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