If you’re looking for the ideal payment processor for your business needs, don’t be fooled by the first quote that you receive. Often, the quotes supplied by salespeople are based on qualified rates alone. This rate is often termed the “loss leader,” because it is just that, the leader rate for your fees. If you read the fine print, however, you may discover a few surprises.
Understanding payment processor rates
When you’re given a quote for a payment processor’s rates, be sure to get the whole picture. Qualified rates should never be confused with the total cost of the services. While a few processors offer single-rate processing, many distinguish between three wide-ranging rate tiers that can drastically change the amount you pay for services.
Qualified rates
Qualified rates are the rates that you’ll most often see advertised because they look the best on paper. The low rate quoted by your sales contact is probably the qualified rate. However, the qualified rate only applies to purchases that qualify, hence the name. In general, the qualified rate is limited to purchases made by particular credit cards swiped through the terminal in your shop. Traditionally, very few cards will fall into this pricing. In general, this tier catches secured credit cards and those with no cash back or rewards attached.
Mid-qualified rates
As the name suggests, mid-qualified rates are higher than qualified rates, but still lower than non-qualified rates. Usually, mid-qualified rates include most rewards cards and a few business card transactions. They may also include payments entered via keyboard rather than swiped.
Non-qualified rates
The highest tier of rates. These can include e-commerce, some credit cards and corporate cards that earn big rewards like airline miles and cash back. Additionally, if your business is classified as a majority face-to-face business and you have to key in a card, it automatically falls into this rate category. Businesses are classified as face-to-face, non face-to-face, or eCommerce depending upon how they process transactions 70% or more of the time.
Understanding common fees applied to payment processing
In addition to varying rate tiers, you should also consider the miscellaneous fees charged by payment processors. A few to look out for include:
Cancellation fees
Some payment processors will offer a rate that looks great on the outset, encouraging merchants to sign long-term contracts. The standard contract length for the industry is 3 years, and sometimes there is an auto-renewal clause that locks you in again. If you decide later that the service isn’t working for you, you could be hit with a mind-boggling cancellation fee for terminating the contract.
Batch-processing fees
Each time you process a transaction, you’re charged a fee, which makes batch-processing a more cost-effective way to process your daily payments. However, some payment processors charge a separate, daily fee for batch-processing. This often mirrors a transaction fee.
PCI compliance fees
PCI compliance fees are usually annual or monthly fees, but what they cover can vary from processor to processor. In the best case scenario, a compliance fee covers support that ensures your business is in compliance with U.S. payment card industry security and fraud requirements. As long as you’re actually receiving the support you’re paying for, this is a perfectly legitimate cost.
You can also incur PCI non-compliance fees for not abiding by these regulations. Just as processors are held to a compliance standard, so are its merchants. This fee is a monthly reminder that you are not in compliance, and you’ll need to take necessary action. Once that is complete, the non-compliance fee drops off.
Does it all seem like a little much to figure out alone?
One way to avoid being mired down in figuring out the actual cost of your payment processor is to gain insight from a broker like Precision Payment Systems. Through our strategic industry partnerships, flexible contracts, buyouts and vast knowledge of product offerings, we simplify the process of finding the right processor for your unique business needs.
We offer all new clients a complimentary, personalized fact-finding interview to uncover inefficiencies in your existing payment process and explore new opportunities to improve your processes. Call today to schedule your interview.
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