I talk to business owners and operators every day about, you guessed, their credit card processing program.  During these conversations I’m asked a lot of questions, but none so often or with as much conviction as, "What is your rate?" For most people seeking out a credit card processor is all about shopping for the lowest associated cost, and it stands to reason that the cost of credit card processing is all about the rate, right? Well, not entirely.

Now, this is a subject that I could spend a great deal of time on, and despite the fact that credit card processing is every bit as exciting a topic as ultimate fighting, motocross or the latest episode of 24, I’ll limit myself to a brief explanation so that I can keep your attention. 

Your base rate is only a part of your overall cost

Try this simple math experiment: grab your last merchant statement and take a look at the total amount deducted, making sure to include anything that was deducted on a daily basis from your account. Divide that amount by your total Visa/MasterCard sales volume. Now, multiply that figure by 100 to get your effective rate. This is the rate that you are being charged to accept credit cards and it accounts for all of the transaction fees, monthly fees, rates and surcharges that apply to your account. 

Folks, I have seen some crazy fees. Strange, Dr. Seussian fees that I swear somebody came up with during a late night magnetic poetry session. Of course, despite their absurdity they seem official enough that most people don’t think to question them. Question them or not, they may be there and, if they are, they are inflating your effective rate. 

Focus on your bottom line

Yes, your base rate is important. Afterall, your rate is applied to every dollar that you run through on credit and debit card transactions.  I simply recommend focusing more on the total dollar amount that you are spending each month and on your effective rate. 

When we prepare a quote for credit card processing we take a bottom line approach.  As you are probably beginning to understand, every processing company uses different billing language and some companies out there structure their rates and fees in such a way that you can’t be sure exactly what you’re paying just by glancing at a statement.  It is for this reason that we take the time to analyze your merchant statement and prepare an ‘apples to apples’ analysis.  By taking this approach we can fish out any strange fees and present a savings estimate that is accurate, and one that we can guarantee. 

Let us help

If you are looking to reduce costs and feel that your credit card processing program is an area for improvement for your business, contact us today. We will take the time to explain what you are currently paying and we will prepare a savings quote that we can guarantee. We look forward to hearing from you. 

Whether tis nobler to suffer the slings and arrows of… oh, right. Let’s get on with it….

In order to process credit cards, most small to mid-size businesses utilize small credit card processing terminals that capture credit card data and transmit that data to a processing bank.  Given that the cost of a terminal can range from $400 to $1000 depending on functionality, the question often comes up, is it better to rent, lease or buy? As it turns out, each method has its strengths and weaknesses which I explain below, using a price point of $500 in each example.

Buying
If cash flow is adequate I highly recommend this method. If cash flow is tight and you’re more concerned about short term cash availability than a few extra dollars in long term profit, steer clear of buying.

Pros: Best overall value
Cons: Most cash flow intensive
Total cash out up front: $500
Total cost of ownership: $500 + maintenance

Renting
Renting is the least cash flow intensive option because not only do you have no upfront costs, but you can often times cancel any time given reasonable notice. For someone who just needs to accept credit cards on a temporary basis, renting is a great option. For someone who intends on taking credit cards indefinitely, renting will certainly cost you more in the long run.

Pros: Not cash flow intensive, flexible
Cons: Pay indefinitely without owning. Much more expensive than buying
Total cash up front: $0
Total cost of ownership: Unlimited

Leasing
Leasing has a bad reputation due to the unsavory methods many salespeople employ when selling a lease option. However, if you are dealing with a trusted source, are concerned with cash flow and would also like to eventually own your equipment, leasing might be a good option for you. For a $500 terminal on a typical lease is $20 per month for a term of 48 months. At the end of the lease agreement you may call your leasing company and request to buy it out. A standard buyout is around 1/10th the retail cost of the terminal.

Pros: Not cash flow intensive, option to buy
Cons: 48 month contract, more expensive than buying
Total upfront cost: $0 Total cost of ownership: Monthly $20 X 48 + buyout = approximately $1010

So you see, each method has its pros and cons. If you need new equipment contact us and we will work with you to find the most cost effective method for you.

I’d like to open this post up with a simple question: In your business, would you ever consider offering your products or services at or below your associated cost?

If you answered ‘Yes’, let me know what you do and where you work and I’ll be sure to stop by to pick up my free sample.  If you answered ‘No’ then you understand that businesses simply cannot operate by cutting out their margins.  Well, credit card processing companies are no different from any other business in that respect.

Unlike most other industries, however, credit card processing companies all have the same basic cost associated with the service that they provide.  That cost is known as interchange, dues and assessments (IDA), and no matter who you process with those basic costs will be a component of your overall pricing.  In fact, it will be the largest component of your pricing. IDA varies slightly by card type, method of transaction, industry, and the amount of the transaction, but generally speaking ranges from about 1.12% to 3.00%

Now, let’s put that into perspective.  Let’s say that a credit card processor comes knocking at your door and offers you a rate of 1.30%.  Hopefully you’ll remember reading this post and you’ll realize that there has to be more to the story.  There isn’t a processor out there that will charge 1.30% on a transaction that’s priced at a higher rate.  You’ll need to find out what you’ll be charged for the different card types that exist and also what other fees are associated with the account.

At Gravity Payments we make it a point to prepare a side-by-side cost comparison that allows prospective clients’ an opportunity to not only see all of our rates and fees, but also to see how our pricing structure will impact their bottom line. In other words, we prove our worth before we ever ask you to sign on, and we give you the whole story regarding your pricing.

If you would like an honest and transparent cost comparison, and an explanation of your current fees, contact us today. We would be pleased to help.