Welcome to part 1 of our 12 part series – “Tell Me the Best Merchant Solution for My Business.” In this this chapter we are going to discuss the question of “How much am I paying now and how much less can I be paying if I switch providers?”
Let’s cover the 1st part of the question first – “How much am I paying now”?
You may be surprise by the level of difficulty there is in answering this question. Merchant service providers purposely make it difficult for you to know what your merchant services rates are so you can not compare them against a competitor. To find this answer, the first thing you want to get a look at is your current merchant services statement. Take a look at your total processing volume and see how many dollars you processed through your merchant account in that amount of time. Then find the total fees paid to your merchant account provider. After you have found both numbers divide the total fees by the total processing volume and you have found your effective merchant services rate. The next thing to find out is if you are on interchange plus pricing or if you are on 3-tier pricing. If you see a total markup of interchange pricing plus a clear mark of fee of X number of basis points you are on interchange plus pricing. If you see words such as “qualified,” “mid-qualified”, and “non-qualified,” you are on 3-tier pricing. For 3-tier pricing in order to figure out what your rates are take your total fees at each level and divide it by your total processing volume. Similarly, you will notice per-transaction fees on your statement. Divide the total cost of transaction fees by the total number of transactions and you will know your per transaction fees. Then enter all of these fees and your average monthly fees into free 3rd party-tools such as the Merchant Services Rates Calculator.
The next question is “How much less can I be paying if I switch providers”?
The best way to compare this is to analyze your current merchant statements. Then, request quotes from 2-3 different merchant services providers and ask what they would charge for the same fees. Then simply compare the the new vendors against your current merchant provider by looking at your expected processing volume. Again free 3rd party-tools such as the Merchant Services Rates Calculator, can help you to know the exact savings when comparing the merchant account providers.
Typically by switching merchant providers you can save approximately 30%. This is because most merchant accounts are sold at a mark-up and over-time a merchant provider will gradually raise your rates without notification just like your bank usually drops your interest rates on your checking accounts without telling you. This is why it is important to find a merchant provider that will offer you a low rate and a promise of locking that rate in for you. In addition, some merchant account providers will offer you free merchant equipment which is another way to save money in payment processing.
Keep reading our blog for the next chapter of our 12 part series. Our next topic is “What is the best merchant software and merchant equipment for my needs?”
