How Low Can You Go? The Credit Card Processing Match Game

You come across a credit card processing offer that’s significantly lower than what you’re currently paying. Rather than go through the trouble of opening a new account, you can ask your current credit card processor to match the lower fee. Simple, right?

Not so fast. The best you can hope for is a slight reduction in cost over a short period of time. Credit card processing fees are complex, and asking one processor to match the best rate offered by another processor is just one piece of the puzzle. You’ll need to consider several variables.

The total cost of your merchant account is a combination of rates you pay your processor for each transaction, plus monthly or annual fees. You’re likely to come across a variety of pricing models, including interchange-plus pricing, tiered pricing, flat rate, and subscription pricing.

Ask yourself, how long will the match last?

Look at it this way: When you receive a credit card offer in the mail with an introductory interest rate, the rate will eventually go up. Maybe it’s a six-month, zero percent rate that will jump to 18 percent. No matter what, it’s guaranteed that the rate will always increase. The same goes for credit card processing. Even if your current processor is willing to match a more competitive offer, how long will the new pricing last? In most cases, it won’t be long before you’re right back to paying the same rate.

Investigate the terms of the agreement

A competitive credit card processing solution isn’t just about cost. The terms of a merchant processing agreement are important to investigate as well. How long is the contract term? Is there a cancellation fee? Is a daily or monthly discount method being used? What’s the pricing model used?

Pricing Models to Consider

Pricing models determine how processing fees are charged and passed on to you. This can result in either competitive or expensive pricing.

Interchange-plus pricing is used by credit card processors to determine the per-transaction cost paid by merchants. The pricing model includes two components—the interchange fee established by the credit card company and a markup set by the credit card processor. Interchange pricing is highly transparent in that all of the charges are disclosed on your statement, making it harder for processors to slip in hidden extra fees.

Tiered pricing generalizes a large number of processing rates into three basic tiers: qualified, mid-qualified, and non-qualified. Which tier a particular transaction will fall into depends on several criteria, which are set by the credit card processor. Those requirements can include card-present or card-not-present transactions, whether a transaction was processed on the same day it occurred, and the category of a purchased item.

Flat rate credit card pricing is a set rate that business owners pay each month, no matter what type of card or transaction method is used. With flat fee pricing, every transaction has the same processing cost. However, your provider must cover both high-cost (corporate cards) and low-cost (debit card) transaction types, which means they will ultimately charge more for transactions that would cost less on a different plan.

Subscription/Membership pricing replaces the processor’s percentage markup with a monthly subscription fee and a flat per-transaction charge (for example, $50/month + interchange + $0.8 per transaction). Similar to interchange-plus pricing, it’s transparent and will generally lead to lower fees than tiered pricing. However, this model generally favors high-volume businesses because the monthly fee can be higher than what you encounter with traditional interchange-plus plans.

We’re here to help.

At Sekure, we offer merchants options that are aligned with their business needs and goals. Whether you’re looking for lower rates, next day funding, free contactless equipment, or ecommerce integration, our team of payment professionals can help.

Sekure negotiates for more than 2,000 businesses per month, with over $20 million in combined processing volume. Clients are offered the lowest rates available, with a Rate Guarantee and free equipment upgrades. Sekure also handles the cancellation with your current processor and pays your standard termination fees.

Contact Sekure today.