So, any given processor will charge some businesses using bundled pricing and others using pass-through pricing. As we will outline below, pass-through pricing is the model you want, and bundled pricing is not. With pass-through pricing a processor bills interchange fees charged by banks and assessment fees charged by card brands directly to a business at cost with no markup.
The processor makes money by charging its markup as a single flat rate and a single transaction fee. For example, 0. The image below illustrates the flow of fees on a pass-through pricing model. Notice how the business essentially pays fees to the issuing bank, the card brands and the processor directly. The table below provides a few examples of how the components of cost are reported and charged on pass-through pricing. The qualified rate of a bundled pricing model is the lowest followed by the mid-qualified rate and finally the non-qualified rate.
For example, rates of 1. To make matters worse, the processor gets to choose which transactions are considered qualified, mid-qualified, or non-qualified. The final nail in the bundled pricing coffin is that it makes it impossible to accurately compare rates among processors.
Even if several processors quote the same exact rates, one processor may route certain transactions to its lowest qualified rate that another will route to its highest non-qualified rate. The image below illustrates the flow of credit card processing fees on a bundled pricing model. Notice how the business pays the processor and the processor pays interchange fees to the bank and assessment fees to the card brand. The table below is in the same format as the one used to illustrate pass-through pricing in the previous section.
This table provides a few examples of how the components of processing cost are reported and charged on bundled pricing. Seems like this could be simplified to maybe more just make a recommendation about asking for interchange plus pricing and minimizing ancillary fees:. The charge from the card brands stays the same but your markup to your payment processor is fixed. With Interchange Plus, you can get charged one of over rates, and your bill can vary based on customer base that month. Tiered statements means you have a max of rates, which makes for a simpler statement.
Plus again, bashing tiered may limit who wants to partner with you. Find a great online business to acquire. View the listings we have available for sale today. Tune into the Digital Exits Podcast for all the latest tips and tactics from expert special guests! Find out more.
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Such integration means sales data can flow directly into ledgers and invoices can be automatically generated, all of which reduces the workload involved in managing a growing e-commerce business. Stripe also offers a POS system — a recent addition to its offerings — making it useful for businesses that sell online but also like to sell at trade shows and market venues.
It offers a flat payment plan where all card transactions are processed at a 2. Alongside the processing service, Square has a range of capture hardware that includes a countertop register, contactless chip-and-pin, standard chip and magstripe readers. The only recurring complaint that Square customers have is that the customer service lines are only open 6 a. Pacific time, Monday through Friday. Not having a person to contact in the evening or on the weekend could be a deal breaker for some small businesses.
PayPal has one of the most flexible mechanisms for dealing with online transactions, making it great if you only have take cards online once in a while. In-person sales are charged at 2. PayPal does more than online transactions, though. For example, PayPal Here is a mobile card reader solution that uses a reader connected to a mobile phone. Plus PayPal has a selection of different EVM-compliant readers that cover chip-and-swipe, chip-and-tap and keyed scenarios. Payment Depot can be used with a payment gateway, virtual terminals, POS systems, credit card terminals and through mobile payment.
Flagship Merchant Services is designed to take card payments through all the standard mechanisms and scenarios, including include telesales, POS systems, table service, wireless capture and e-commerce platforms. The allure, along with the numerous access points, is the low cost of each transaction and that the company now processes American Express at the same fee rate as Visa, Mastercard and Discovery.
Flagship is also at the sharp end of the PCI compliance being pushed hard by credit card companies to protect against fraud.
As a vendor, you have a grace period to gain compliance, after which time you incur a monthly cost penalty until you are certified. However, there are a couple of aspects to this business that should be mentioned. Instead, you are encouraged to ask for a quote so that a salesperson can contact you. There is also a transaction fee, although this appears to vary between customers. Flagship has been particularly successful with corporate vendors and has a large number of customers that include Subway, Mag Tools, Verizon and Avon.
Choosing a credit card processor is a big decision for your business. You need to be able to accept credit and debit cards, but navigating the landscape of processors can be confusing since there are many pricing models and complex contracts. The first step is to take stock of your business and what you need. Figure out how many card sales you make and decide if you need mobile processing. Next, call several processing companies to get quotes. Some, but not all, processing companies list their prices online.
And even then, most companies base pricing on your sales volume and average ticket size. Cost is one of the biggest influencers as you choose a credit card processor. The costs are broken into two categories: processing rate and fees.
The processing rate is usually a percentage of each sale along with a small transaction fee. There are multiple pricing options, including tiered, interchange plus and flat rate.
5 days ago Here are the best credit card processing solutions for small Flagship Merchant Services is our pick for the best flexible terms because it offers with FIS and will be known by that name when the deal closes later in Finding the right credit card processing service is crucial to any e-commerce operation. But with a myriad of payment options hitting the market.
Tiered pricing is the most common structure, though experts criticize it for its lack of transparency. In this structure, transactions are divided into several tiers based on the type of card used and whether the card is present or keyed in.
Our two favorites for subscription pricing are Payment Depot and Fattmerchant. Go ahead and read it, then follow the advice given. Orbital Virtual Terminal : Get specialized pricing plans to adapt to the growth of your business across multiple selling platforms. Poor online reputation. I presently pay around 2. A powerful, customizable point of sale system with various credit card processing capabilities.
When you call for quotes, processors tend to disclose the rate for qualified debit transactions, which are the lowest. Be sure to get information about all the tiers and find out which transactions qualify for those tiers. If you have a lot of debit card transactions, this pricing model may good for you. Most experts prefer the interchange-plus pricing model, which adds a markup to the interchange rates charged by the credit card companies.
This makes it more transparent and simpler than a tiered pricing model. You may need to prod the processor to give you a quote for this model, and some require you to process through them for a while before you can use interchange-plus rates. Flat-rate pricing is the simplest — you just pay a fixed percentage of each transaction or a percentage of each transaction plus a small transaction fee.
This is the pricing structure often offered by mobile processors like Square, and it's quicker to set up and tends to not have as many fees as others.