With major credit card companies planning to increase their interchange rates, it’s understandable that small business owners are looking for ways to save money. Finding the cheapest credit card processing option can help you reduce the fees associated with credit card transactions and increase your company’s profitability.
Let’s compare some of the payment processing services’ pricing models and see which one is the best for your business:
Tiered Pricing
Many businesses use tiered pricing, which organizes your credit card transaction into three different categories:
Qualified Transactions
Qualified transactions are also known as the “swipe rate.” This fee is charged when a credit card is physically present and swiped through a credit card terminal. This use model is something of the “ideal” scenario and poses the lowest risk for both the merchant and the Issuing bank.
Mid-Qualified Transactions
Mid-Qualified transactions are typically those in which the card is not physically present. The transaction must therefore be keyed in manually and rely on the Address Verification Service (AVS).
For the sale to proceed as a Mid-Qualified transaction, the following information must all match:
- The credit card number.
- The expiration date.
- The customer’s address and/or zip code.
Mid-qualified transactions cost a bit more than a qualified transaction and receive this label when one or more conditions for a qualified transaction are not met.
Non-Qualified Transactions
Non-Qualified transactions can occur typically under several scenarios:
- The card data was entered manually without using the AVS.
- The card used was a business or commercial card.
- The transaction is batch transmitted more than one day from the authorization date.
These transactions tend to be more costly for the merchant when compared to the other forms of qualified sales above.
Flat-Rate Pricing
Some credit card processing companies charge a simple, flat percentage for all credit, debit, or reward card transactions. The advantage is that this makes the process simple and predictable without having to do a lot of estimating how much each transaction will cost your business.
The downside is that you’ll likely have to pay this flat percentage in addition to a transaction fee for each sale. These additional fees can sometimes add up, cutting into your profits and adding overhead expenses most business owners would prefer to avoid.
Interchange-Plus Pricing
Business owners who use interchange-plus pricing will pay two different types of processing fees:
- The interchange fee for the category of card used.
- A mark-up percentage from the credit card processing service.
On the positive side, this makes the process transparent and easy to understand since there’s no question about which fees are going to each party.
The obvious flip side is that these fees can add up quickly, and a spike in the fees for each party can put a significant dent in your profits. Plus, the mark-up assigned by credit card processors can vary considerably, and business owners will have to compare these fees when evaluating their choice of credit card processor.
Membership-Based Pricing
Membership-based pricing involves a fixed fee, usually billed on a monthly or annual basis. Like interchange pricing, there will be a cost per transaction and a markup charge in the form of a fixed membership cost.
The advantage to business owners is that monthly or annual fees are relatively easy to incorporate into their operating budget. Plus, restaurants and other businesses that do frequent, smaller card swipes may be able to save money by paying membership fees rather than pay for each individual sale.
Similar to other models, the membership fees vary considerably between processing companies, and depending on the company, you may find yourself locked into a contract. This lock-in illustrates the need to compare companies carefully before making a commitment.
Zero Fee Credit Card Processing
Of course, the best way to save on credit card processing fees is to not pay them at all! How is this possible? A zero fee program offers customers a separate price for cash and credit purchases. The credit price is slightly higher, designed to cover processing expenses.
It’s actually not a new idea. Gas stations have done the same thing for years. Some customers may even appreciate the chance to save some money by paying cash for their purchases.
With customers relying on cash to make their purchases, you can expect to see more foot traffic in your brick-and-mortar store, giving you an opportunity to connect with shoppers and turn them into repeat guests.
Let Finical Take You to Zero Fee Processing Route
It’s easy to see that the zero-fee credit card processing model is the most affordable. When you rely on Finical, you’ll be able to take these fees down to zero, all without any setup costs or monthly payments. We offer free equipment with fast approval and no setup costs.
To learn more, contact us today, and we can start you on your journey toward zero fee processing.
