Article by Total Merchants.
As you’re reviewing your company’s operational expenses, one area you will find can use some improvement is how you accept payments. Cutting merchant credit card processing fees, or associated fees, is an excellent way to pocket more of the money your business makes without cutting employees or resources. If you understand the basic pricing principles behind these accounts, it should be easier to see whether an account is truly a good deal for you or not.
Every merchant account uses one of three standard pricing tiers to rate your service: flat rate, tiered pricing, and interchange plus. Flat rate, which is championed by companies like Square, is a pretty good option for companies that don’t process a lot of transactions. The flat rate will, more often than not, save these freelancers and very small businesses a lot of money during the first years of their operation. They don’t need to pay for ancillary things, like payment gateway services, either.
Simplicity is key for flat rate models. Businesses will usually pay more for these systems, but the trade off is they don’t pay other fees to use them.
Tiered pricing is the next model, and you can break tiered pricing down into qualified, mid-qualified and non-qualified tiers. These packages are designed for businesses to have more options, and they are also simplified. A decent choice for businesses that are small to mid-sized, and need a simple solution to accept payments online.
The final model is interchange plus, which usually saves money for businesses processing more than $2,000 each month. The interchange is basically the wholesale rate a card brand would charge to process a transaction. You’ll pay that rate, plus a pre-negotiated markup. If you hunt around, you’ll find a low markup rate too. It’s a lot to take in, but knowing the differences in these accounts will help save you money throughout your business’ lifespan.