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Get educated to understand the true cost of credit card payment transactions. Then you can prevent getting taken advantage of by slick talking salespeople and telemarketers with the so called “lowest” rate and beat them at their game.
Hi there! Today in this video I want to talk to you about what is a Fair Rate when you’re talking to a credit card processing salesperson about either getting set up for the first time or switching processors. Paypal and Square have a flat rate and a flat transaction fee and it’s rather high. It’s very high for most people and the reason it is high is because they have to cover their butt over the whole range of possible wholesale rates for the different types of cards.
I’m Gingergaye, President of Electronic Money Company,and I want to help educate you to understand this rating structure and how credit card processing salespeople come up with a quote in the first place. The banking associations get together and they are actually loaning money with the credit cards they issue and they need to receive compensation interest for that loan. Some cards have more risk and there’s more fraud and so there’s this whole range of about a thousand different categories of rates for different types of cards.
Three General Sort of Categories:
1. What industry are you in? Are you retail restaurant? Are you a contractor with big tickets or somebody with really small tickets?
2. Are you swiping the card? Is the card present, or are you taking their information over the phone? Are you taking the card over the internet? Those are all different risks.
3. What kind of card is being presented to you? Is it a debit card from your customer? Or a rewards card? Or some kind of corporate card? Let’s break it down a little more detail.
Debit cards: There’s two types of debit cards: 1. there’s regulated and 2. non-regulated. Regulated means you got the card from a very large bank like B of A or Well Fargo. The government has regulated how much discount or interest rate they’re allowed to charge for those transactions so those are the cheapest kinds of cards to accept for payments. Then there’s other debit cards from your small banks and credit unions that are a little bit higher rate because they don’t have to follow the regulation. Then there’s regular credit cards which have a higher rate. And then there’s rewards cards which are higher still because somebody has to buy an airline ticket to reimburse and reward that person with the airline rewards cards. You the merchant are paying that higher rate for that airlines reward card. And did they present it in person or did they present it over the internet? Then there’s the whole category of corporate cards, you have business cards, corporate cards, purchasing cards, and government cards. So when you put all these combinations together, the interchange wholesale rate for credit card processing is actually a thousand different categories.
When you’re negotiating with someone about your rates they really need to ask you questions in order to come up with a fair rate, and yes they do need to mark up the actual rate so that they can make money servicing the account for you.
When you’re talking to a credit card salesperson, are they asking you questions about your business, how you take credit cards, and what industry you’re in? And one more thing to be really be aware of is that a lot of times business owners tell me they’re telemarketed and somebody’s throwing out this low rate over the phone. You know they’re really slick on the phone and how they get you to give them all the information is quite an art in itself. But beware that they’re just telling you a rate because it sounds really low, but in the fine print on the application they’re actually adding on an extra rate; if it’s keyed in from a phone transaction or if it’s over the internet or if it’s a corporate card. A lot of processors actually have about six different rates but the slick guy on the phone might be just telling you the first rate without explaining the add on rates.
We at Electronic Money Company pride ourselves in being totally honest up front. We want to explain everything to you so you’re going in knowing exactly what’s going on. If you want, take a look at some of our other videos on how to read a merchant statement because that’ll really give you some detail and you’ll know everything on your merchant statement and understand all the so-called hidden fees. Thanks for watching and feel free to give us a call at 505-296-2847. We will you help you read your own merchant statement or answer your questions or compare to what somebody else has talked to you about.
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