Take a look at your company’s operating expenses! One place where you can easily find savings is in your merchant account fees.
UK Chip & PIN let you in on top tips to help you save an average of 40 percent in 30 minutes or less!
- Make sure your Merchant Representative is reputable.
I do not wish to start casting aspersion but most people have heard of some ones else’s bad experience with representatives from all sectors – Merchant services should not be treated differently. Conduct your own due diligence. Be sure to find someone to represent you in this arena that you can trust, who has experience and can explain the industry jargon in layman’s terms.
- Understand Common & New pricing models.
There are three standard pricing models in credit card processing: flat rate, tiered pricing and interchange plus (also known as cost-plus pricing).
Processors such as PayPal and Square made flat-rate pricing famous. I tend to find that flat-rate pricing is best for merchants who are processing small monthly volumes. You end up paying more per transaction, but it’s easy to understand, and in many cases, you don’t pay any ancillary fees.
Tiered pricing generally feature three levels (sometimes more) called qualified, mid-qualified, and non-qualified tiers. Processors essentially bundle the rates it costs them to process transactions and offer you these tiers. As with flat-rate pricing, it’s simple to understand, but in many cases, costs you more.
Impact of revised Visa UK debit interchange (March 2015)
UK debit card interchange is currently based on a fixed rate per transaction, 8p for chip and pin transactions. Acquirers add a mark-up then typically charge MSC of 12p – 14p per transactions to SME merchants. Debit card costs (unlike credit card costs) are unchanged irrespective of the value of the transaction – merchants pay the same cost for both a £5 debit transaction and a £200 debit transaction.
Clearly when interchange costs change from a fixed rate per transaction to a percentage of transaction value (ad-valorem) then higher Average Transaction Values (ATV) will incur higher interchange costs (and vice versa) and, in isolation, you would expect merchant acquirers to pass on these costs/savings to merchants through higher or lower Monthly Service Charge (MSC).
As you can see, at an ATV of £35, interchange costs are unchanged at 8p per transaction. Below £35, interchange costs are marginally cheaper but above £35 interchange costs become significantly higher. Transactions above £245 will incur interchange costs of 50p, over 6 times the current interchange cost of 8p.
Does your rep know the differences among these pricing structures and have a good explanation as to why they’re choosing one for you? If not, they’re not the rep for you.
- Ask the right questions.
There can be so many ancillary fees associated with a merchant account, so be sure to ask the right questions up front or when negotiating with a new provider. Here are some of the most frequent fees to consider:
- Are you being charged an annual fee? (This should be waived.)
- Are you paying a monthly minimum penalty? (This may be waived.)
- Are you signing a contract term and what is the early termination fee? (This should be month to month with no early termination fee unless you’re getting free software or equipment in exchange, or the processor is paying you out of a contract.)
- What is the monthly service fee? (It shouldn’t exceed £25 per month.)
- What is the statement fee? (This should be waived.)
- What is the batch fee? (This shouldn’t exceed 10 pence.)
- Is there a setup fee? (This should be waived unless you’re purchasing equipment or software.)
- Is there an application fee? (This should be waived or negotiated.)
- What is the PCI compliance fee? (This should not exceed £60 per year.)
- What are my funding times? (These should be 24 to 36 hours depending on how you transact your payments.)
- Will my fees be debited monthly or daily? (This should be up to you to choose.)
- What type of online reporting will be made available to me? (This should be free and a demo should be offered if requested.)
- Are there fees to reprogram my existing equipment or payment gateway? (There shouldn’t be any fees from the credit-card processor, but be sure to check with your service provider if you have a point-of-sale system as they often will charge a new integration fee.)
About Cornel Sampson
Helping UK Businesses MAKE MONEY and SAVE MONEY on rates they pay to the bank for taking payments by Debit/Credit Cards
Helping Retailers and service providers to take payments by debit/credit cards face to face or online – Saving up-to 40% in Fees & Charges
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