Which processor has the best rate?
People always ask me, “What is my rate?” It is such a silly question. The wholesale, interchange rates vary greatly from the low end of a regulated debit card to the high end of a corporate card. The processor has to analyze what percentage of what kinds of cards the merchant is likely to receive for payment in order to come up with “A Rate”. And then it will vary for each merchant. Fast food restaurants take a lot more debit cards than most other merchants. High end restaurants receive a lot of rewards cards and corporate cards. Retail shops with low tickets receive a lot more debit cards than retail shops with high end tickets. E-commerce websites generally have to pay higher transaction fees because those payments are higher risk and carry a higher rate. B2B merchants have to pay higher transaction fees because they receive a lot of corporate cards, which again are a higher rate because of a higher risk.[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner][vc_column_inner][vc_column_text]
But here is a general overview of the wholesale cost of rates:
[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner][vc_column_inner width=”1/2″][vc_column_text]Regulated Debit Cards (The big banks)Unregulated Debit Cards (Credit Unions)
Regular Credit Cards
Airline Rewards Cards
Corporate Cards[/vc_column_text][/vc_column_inner][vc_column_inner width=”1/2″][vc_column_text].05% and $.22 per transaction
.80% and $.10 per transaction
1.54% and $.10 per transaction
1.65% to 1.95% plus $.10 per transaction
2.95% and $.10 per transaction[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner][vc_column_inner][vc_column_text]On top of the wholesale interchange rates is added approximately .15% for Visa, MasterCard, American Express or Discover. On top of that the processor has to charge something to make money servicing the account. This markup in general ranges from .20% to 1% or higher. The processor can charge the merchant cost plus a % or come up with a flat rate which will cover all the costs and give him some profit. A fast food restaurant might have an overall effective rate of 1.85% giving the processor a big markup and an e-commerce website selling industrial supplies to corporations might have a lower markup with an overall effective rate of 3.25%.
So don’t ask anyone what their rate is as your first question analyzing the cost of switching processors. Ask yourself what kinds of cards do your customers usually pay you with. Then you can figure out if the rate your processor is proposing is making him a bundle or giving you a good deal.
P.S. How does the transaction fee figure in? If you have a small ticket, the transaction fee is the biggest factor. And if you have a large ticket, the rate is the biggest factor. $.15 on a $10 ticket is 1.5%. $.15 on a $1000 ticket is a hundredth of a percent.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row]