Paying to much for Credit Card Processing - Fraud Library

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Don't be fooled by a really low rates, there is more to your "total cost" for credit card processing than just the rate. Dig under the covers, and negotiate on all the fees.

Credit Card Processing is a very competitive market, don't be afraid to ask for lower fees and rates.

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Negotiate, negotiate, negotiate....

The Discount Rate: The discount, or lead, rate is a percentage of the sale that the processing company subtracts from the total sale. It typically ranges from 1.5 percent to 4 percent. If you sell an item for $100 and your discount rate is 2 percent, the company subtracts $2 from the price, leaving you $98.

The per-transaction fee: This is an additional set fee applied to each transaction. Almost all processing companies charge this fee, which can be as high as 50 cents.

The Batching fee: At the end of each day, you total your transactions and send them through the processor's network. many services charge to process this "batch." The fee is typically 25 cents to 30 cents per batch. That's not a lot per day, but it adds up over the course of a month.

Monthly Maintenance fee: On top of these three fees, most companies impose a fixed monthly maintenance fee (also called a statement or account fee).

The Monthly Minimum: Often, companies require you to pay a certain minimal amount as a result of transactions each month or you will be charged an additional fee. They set this requirement to make sure the costs of servicing your account are covered. For example, based on a monthly minimum of $25.00. If you had $500 in credit-card transaction sales in a month and your discount rate is 2 percent, you paid $10 in discount rates. You also paid $3 in transaction fees, for a total of #13 in fees. That leaves your $12 short of the $25 minimum, so you'd be charged that amount at the month's end. 

Additional charges for some cards: Most processing companies tack on additional charges for cards other than Visa and MasterCard. These are bank-based programs, while other cards operate independently. This extra charge ranges from 10 cents to 25 cents.

Debit Card Fees: Likewise, processing companies typically charge a fee to process debit-card transaction. This ranges from 25 cents to $1.50.

Reprogramming Fees: Even if you already have credit-card processing equipment, some services may charge a "reprogramming fee" to start up new service.

Charge-back fees: f a customer disputes a transaction, the credit-card processing company levies a charge-back fee to the merchant, which is essentially an administrative charge. This fee can range from $10 to $25.

Calculate your true costs:

1. Monthly Visa/MasterCard Sales in dollars =$_________
2. Discount rate =____%
3. Total Cost for Rate = $_________
4. Number of monthly Transactions = _______
5. Cost per Transaction Charged=$______
6. Total Cost for Transaction=$____________
7. Additional Fees Monthly=$___________
8. Total Monthly Costs(3+6+7):=$__________
9. Actual Rate =8/1 = _____%

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