How can you save money when processing credit cards?
By: POSGuys - 10/12/2015

<h2>How do you save money when processing credit cards?</h2>

When signing up for [credit card processing][1] and trying to get the best rate possible one of the main things to look into is if they are quoting you out traditional tiered pricing or if they are doing cost+ pricing.  In both cases the rate that you get charged can vary depending on what kind of card you are using, however in almost every case going with cost+ pricing saves you money.

**Tiered Pricing:**
With this style of rates, cards are grouped into three categories.  Qualified cards, mid-qual cards, and non-qual cards.  The rates that you are charged are based on what kind of card you are processing.  In general debit cards are qual, rewards cards are mid-qual, and business cards are non-qual.  The qualified rate is going to be your best rate and be something around 1.3% + a per transaction fee (PTF).  The mid-qual and non qual will either be a bigger number OR be a subsidized rate.  So they will be something around 2.5% + a PTF or a subsidized 1.5% + a PTF.  For subsidized rates it is the non-qual rate plus the subsidized rate or in the example 2.8% + a PTF.

Many card processing companies do not fully disclose what cards are in what tier, to one service provider a card will be a mid-qual and to another provider it will be a non-qual.

**Cost Plus Pricing**
With cost+ pricing, instead of putting cards into tiers they take the universally applied [publicized Interchange rates][2] add in the [publicized assessment and access fees][3] aka Card Brand Fees, then do a flat percentage mark-up + PTF.  Typically a Cost+ rate would be around .20%.

Example if the interchange + card brand fees = 1.8% add in .20% for your markup and you'll get a true cost of 2.0% for running that card.  If it's a card with a lower interchange fee of .9% then the cost for running that card is 1.1%.  The lower the fees the lower your costs.

While at times the rate may look similar to tiered and does vary based on the types of cards you take, the rates are not marked up or have hidden margin "padded" into the tier to ensure profitability for the merchant service provider.

**Flat Rate Pricing**
One additional rate plan that is now going around is a flat rate plan.  For all cards no matter the interchange fees or what kind of card it is you get charged the same percentage markup and possibly a PTF.  This rate is designed to win some and lose some for the merchant services provider.  While they may break even on expensive rewards cards they take an extra high percentage on debit or standard visa/mc.  It is very simple but won't necessarily save you money.  This pricing scheme generally is not recommended as your average cost ends up being higher then cost+ pricing.

**Who offers cost+ pricing?**

Most merchant service providers including World Pay, Mercury, and Open Edge will all offer cost+ pricing and recommend cost+ pricing when asked to offer a competitive rate against an existing merchant services account that used tiered pricing.

While the lowest of the tiers will appear to be less than a cost+ pricing model's average rate you have to remember that it only applies to very specific cards that also have the lowest interchange rates in a cost+ pricing model, so comparing average cost+ pricing against the lowest tier is not a fair comparison, and in most cases if you don't have a statement you would want to compare it against the non-qual and mid-qual rates as that rate will apply to the large majority of cards.

[1]: https://posguys.com/creditinformation.asp
  [2]: https://usa.visa.com/dam/VCOM/download/merchants/Visa-USA-Interchange-Reimbursement-Fees-2015-April-18.pdf
  [3]: https://www.mastercard.us/content/dam/mccom/en-us/documents/MasterCard_Interchange_Rates_and_Criteria%202015-16.pdf

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How can you save money when processing credit cards? By: POSGuys - 10/12/2015

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How can you save money when processing credit cards?
By: POSGuys - 10/12/2015