Save Money on E-Commerce Card Processing

Processing card payments online is necessary to conduct business. When choosing a payment processing company, the fees, charges, and rates should be discussed and negotiated. Knowing about ways to save money with card processing will help a merchant to be able to negotiate the best contract with the best prices.

FIXED PERCENTAGES

A “low” fixed percentage rate may or may not be a good deal. Knowing the average price of the products you are selling will help you to be able to negotiate a better fee. When being presented a percentage rate, do the math. You will need to determine what you will be paying per transaction. A merchant that mostly has high-ticket items will need to scrutinize fixed percentage rates to be certain it is in their best interest. A merchant that sells lower priced items will benefit from a different fixed percentage rate.

PER ITEM TRANSACTION FEES

For a merchant that has a lot of low-ticket item sales, will need a lower per item fee than a merchant who has less sales due to selling mostly high-ticket items. When going over fees, the more you know about your sales, the better contract you can negotiate and avoid your profits being eaten up in per item transaction fees.

UNDERSTAND AND MONITOR PAYMENT PROCESSING DOWNGRADES

The discounts that a payment processing company quotes are usually based on tiers. These tiers will have different discounts. There are usually three tiers; they are a qualified transaction, a mid-qualified transaction, and an unqualified transaction. The downgrades are the mid-qualified and the unqualified transactions, which will have higher fee. Reward cards and some international transactions are considered downgrades. Qualified transactions are transactions that the data is of high quality and passed onto the card association in a timely manner. The payment process should be set up in a way so that as many transactions as possible are qualified to receive the discount.

KNOW THE DIFFERENC BETWEEN BUNDLED AND PASS-THROUGH PRICING

There are a number of fees involved for a merchant to be able to accept credit card payment. The card associations charge an assessment fee, the card issuing banks charge an interchange fee, and payment processors charge a processing fee. When the fees are bundled there is no way to determine exactly what the merchant is paying and to who. The following are often bundled together:

  • Assessment fees
  • Interchange fees
  • Processing fees
  • Percentage of sale fees
  • Fixed per-item fees

With the pass-through method, the payment processors report the fees in a separate section of the report and it lists the fees individually. This method is easier to reconcile and it is easier to manage downgrades to save money.

PRICING

The pricing of all fees should be understood and it should be the best pricing for the type of sales that the merchant does. Doing some basic math and understanding pricing will help assure the merchant’s financial health. It is important to know exactly what you are paying. To calculate the “all-in” processing fees is simple to calculate.

Total aggregate merchant fees divided by gross sales = all-in processing fees

The aggregate merchant fees will include the following fees:

  • Discounts
  • Interchange
  • Downgrades
  • Authorization
  • Chargebacks
  • Reporting
  • Transmission

There may be additional fees to add to the aggregate merchant fee total to accurately calculate the all-in processing fee. Decide if the result is a fair number, if it is greater that 2.4 percent you may need to review your payment process.

Contact Merchant Data Systems today to find out more about saving money on e-commerce payment processing and find out more about the services that Merchant Data Services offers on all types of payment processing.

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