Believe it or not, most merchants I ask do not know! The answer is actually a bit tricky, because there are various rates for different card types! So let's break down the mystery for you here:
Your basic rate is called your Qualified rate and it applies to cards you accept, be they credit or debit, in person, and swipe through your terminal in your store. This is the safest transaction for the credit card companies. This rate may vary from less than 1% to 2% or more of each sale made. In addition to that percentage, there is usually also a per-transaction fee of anywhere from 5¢ up to 50¢ or more. Qualified rate is usually also required to be a card issued by a domestic bank, i.e., a bank located in the United States.
Your next tier of rate is called Mid-Qualified and this rate applies to cards accepted in person as well, however, the cards are not domestically issued, perhaps from a Canadian tourist, etc. This rate also applies to business/corporate credit cards and is a rate you want to pay more attention to if you have a lot of business-to-business sales or host a lot of businessmen in your establishment, such as a restaurant or hotel. These rates run higher than Qualified, anywhere from 2 to 3%, usually, plus the per-transaction fee. Mid-Qualified rate also usually is applied to any card, business or personal, domestic or not, that carries back to the cardholder any sort of rewards such as cash back or airline miles. You, the merchant, pay for those freebies earned by cardholders! These days more and more cards do have some sort of rewards program attached to them, so you will often be charged the Mid rate even if the card appears to be a person's personal credit card, domestically issued.
Your highest tier rate is Non-Qualified and usually applies to card-not-present transactions such as internet, mail and telephone orders. These transactions carry a much higher fraud risk for the credit card companies and this risk is passed on to merchants. Rates run from 3 to 5%, plus per-transaction fees. Some card processing companies are also now charging this rate to non-domestic business/corporate cards as well.
We also want to address monthly fees you are charged. Many processors assess a statement fee of $5 or $10. If you want to view transactions and your statement online, there is an additional fee. You may be charged 25¢ or so every night when you batch out your terminal and send the days transactions on to the bank to be deposited into your account.
Speaking of bank deposits, you should not have to wait more than 24 hours from batch-out time for your funds to be credited to your business checking account. Most processors promise 24-48 hours. Some processors, however, will only guarantee quick availability if you are banking with their bank.
That is the short story. If you are dissatisfied with your current processor, shop around! rates and fees vary widely. Because of the trickiness of determining what rates you are actually paying, ask a new processor if they will conduct an analysis of your most recent merchant account statement for you. They should do this for free, and present you with a proposal that shows you, in black and white, exactly how much dollars in sales you processed last month at each rate tier, and also break down for you the monthly fees, and then, across the page, set out for you their own new rate structure they are proposing and be able to show you your bottom-line savings. This is really the only way to know if you are truly going to get a better deal by switching to a new processor.
Remember, too, that your old processor may have a contract cancellation fee, and you will have to figure that cost into your switch as well. Your new processor often will help you eliminate that fee, however, and/or offer to pay a portion of it for you to acquire your account. Negotiate!
In my next article I will discuss equipment, terminals and software to help you process your transactions.
James Hussher is a national Account Executive for Card Payment Solutions, a registered merchant services provider (MSP) for Wells Fargo and JPMorgan Chase banks. Contact James at http://creditcardmerchantnews.com, a site James maintains to inform his credit card merchant clients. Wherever you are in the USA, I offer a free analysis of your current merchant account statement. I will provide a report showing you exactly how much you are paying to accept cards in each tier, plus monthly fees; I will also propose the rates we can give you, for a clear side-by-side comparison.
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