Why You Should Switch Your Merchant Account To Save Money
What most merchants don't realize is that they are significantly overpaying for their existing account. Some merchants may even have a good idea that they are overpaying, but don't realize how easy it is to switch their account. The more volume you are processing as a merchant, the more you'll save by switching to a less expensive merchant account.
When pricing accounts, both new accounts as well as pricing to switch over, most merchants look at nothing more than the qualified discount rate and base their decision on this number only. Instead of basing your decision to switch on just the qualified discount rate alone, you should instead base it on your effective rate which is the ratio of overall fees to the gross volume that you process. If you base it on the effective rate, you can usually always find a lower rate by modifying some components of pricing. If you're overpaying by $100 per month on the non-qualified rate, you can keep all other rates the same and reduce just that fee alone to get an extra $1200 in your pocket every year.
Getting your per transaction low will affect merchants who process a lot of transactions more than those that process only a few transactions per month. In addition to the regular per transaction fee, there is usually an AVS fee which is also per transaction any time the address verification system is accessed which happens on internet or card-not-present transactions. This can add to the overall per transaction amount. If you process cards on a physical terminal where the transaction is swiped, you won't have an AVS fee.
For merchants processing smaller ticket items, such as fast food restaurants or convenience stores, the per transaction fee usually represents a larger percentage of the overall transaction and can significantly increase the overall percentage you're paying for accepting credit cards.
Merchants processing high tickets, the discount rate will usually always overshadow the per transaction fee simply because a $.25 per transaction fee for a $5,000 product is extremely small where a higher discount rate of say.5% higher on that $5,000 transaction represents an increase of $25. So if you process the higher ticket items, you need to negotiate as low as you can the discount rate even if you pay a higher per transaction fee.
If you are ready to switch merchant accounts, you should start by looking at one of your statements and calculating your effective rate. If you'd rather not have to learn anything about rates and fees and simply want to get someone else to do this for you, find a competent merchant services professional who will evaluate your current rates and provide you some data on what it would cost to switch and estimate your savings. Finding someone you trust is critical as merchant services professionals don't always have the best reputation for integrity thanks to some in our industry that use deceptive practices and are dishonest.
One of the reasons many merchants won't switch their merchant accounts is because they have an existing contract for which they have an early termination fee. The irony here is that for most accounts, the savings on switching to a lower priced account far exceed the early termination fee. Some merchant account providers even offer a waiver or reimbursement to provide incentive for merchants to switch so if you find the right merchant account provider to go through, you'll have that early termination fee with your existing processor covered.
Getting new equipment during a switchover often makes good sense because you will literally have no down time. If you choose to keep your same equipment, you will have to reprogram your existing equipment to point to the new merchant account which typically takes about 30 minutes to 1 hour depending on the connection speeds. The terminal will download the new program over the internet if you have a terminal with internet capabilities or it will download the new programming over the phone line.
When pricing accounts, both new accounts as well as pricing to switch over, most merchants look at nothing more than the qualified discount rate and base their decision on this number only. Instead of basing your decision to switch on just the qualified discount rate alone, you should instead base it on your effective rate which is the ratio of overall fees to the gross volume that you process. If you base it on the effective rate, you can usually always find a lower rate by modifying some components of pricing. If you're overpaying by $100 per month on the non-qualified rate, you can keep all other rates the same and reduce just that fee alone to get an extra $1200 in your pocket every year.
Getting your per transaction low will affect merchants who process a lot of transactions more than those that process only a few transactions per month. In addition to the regular per transaction fee, there is usually an AVS fee which is also per transaction any time the address verification system is accessed which happens on internet or card-not-present transactions. This can add to the overall per transaction amount. If you process cards on a physical terminal where the transaction is swiped, you won't have an AVS fee.
For merchants processing smaller ticket items, such as fast food restaurants or convenience stores, the per transaction fee usually represents a larger percentage of the overall transaction and can significantly increase the overall percentage you're paying for accepting credit cards.
Merchants processing high tickets, the discount rate will usually always overshadow the per transaction fee simply because a $.25 per transaction fee for a $5,000 product is extremely small where a higher discount rate of say.5% higher on that $5,000 transaction represents an increase of $25. So if you process the higher ticket items, you need to negotiate as low as you can the discount rate even if you pay a higher per transaction fee.
If you are ready to switch merchant accounts, you should start by looking at one of your statements and calculating your effective rate. If you'd rather not have to learn anything about rates and fees and simply want to get someone else to do this for you, find a competent merchant services professional who will evaluate your current rates and provide you some data on what it would cost to switch and estimate your savings. Finding someone you trust is critical as merchant services professionals don't always have the best reputation for integrity thanks to some in our industry that use deceptive practices and are dishonest.
One of the reasons many merchants won't switch their merchant accounts is because they have an existing contract for which they have an early termination fee. The irony here is that for most accounts, the savings on switching to a lower priced account far exceed the early termination fee. Some merchant account providers even offer a waiver or reimbursement to provide incentive for merchants to switch so if you find the right merchant account provider to go through, you'll have that early termination fee with your existing processor covered.
Getting new equipment during a switchover often makes good sense because you will literally have no down time. If you choose to keep your same equipment, you will have to reprogram your existing equipment to point to the new merchant account which typically takes about 30 minutes to 1 hour depending on the connection speeds. The terminal will download the new program over the internet if you have a terminal with internet capabilities or it will download the new programming over the phone line.