Credit Card Processing

An Interchange Plus Pricing Structure Can Greatly Reduce Your
Credit Card Processing And Merchant Account Fees.
By Gerald Kadish

Traditionally small to mid sized businesses have been set up
with what is called multi-tier pricing for their credit card
processing. This system is usually set up with three tiers
(qualified, mid-qualified, and non-qualifed.) Occassionally, if
the business owner has negotiated well, there will be a fourth
tier for qualified offline debit cards. While this system has
worked well for many years, the increasing number of rewards and
corporate cards being issued has made this type of pricing
obsolete.

Visa and Mastercard have many different interchange categories
for the multiple card types that are issued. Tier pricing takes
a large number of these categories and lumps them into one of
the three tier buckets available to the merchant. If the
merchant only ever takes standard credit cards then this system
will work well for them. Once they start to see more debit,
rewards, and corporate cards being used in their place of
business they will notice that their merchant services bill has
increased dramatically. This is because many of these
transactions are falling in to the mid or non qualified
transaction categories.

Some of these cards are actually not that much more to process
than a standard credit card, but the underwriting company for
the merchant account needs to make sure that they are profiting
on every transaction. They can ensure profit if they charge a
large mark up for any transactions that are not qualified. So
you may pay 2.9% for a mid qualified transaction and 3.5% for a
non qualified transaction (These numbers can range much higher
and lower.)

The fact is that some of the cards that fall into these
categories may only cost an additional quarter of a percent to
process. So the merchant may over pay by 1-2% to run certain
card types. The business owner can avoid this if they are set
up on interchange plus pricing.

What interchange plus pricing does is pass the true cost of
running the card right through to the merchant. So the fees
associated with that individual transaction will be put through
at the lowest possible cost. The business owner pays a mark up
at the end of the month based solely on their number of
transactions and the sales dollar volume. (typically .25-.50%
plus $.10-$.15 per trnasaction.)

This system will almost always prove to be a better deal than a
three tier structure. Make sure to check your latest credit
card processing statement to look for a high number of mid or
non qualified transactions. If you see them, then setting up an
interchange pluse pricing system may be the way to start saving
your business money.

About the Author: Jerry Kadish and Capital Bankcard specialize
in setting up gift and loyalty card programs and merchant
services. We provide fully customized programs for all of our
clients and help them use our products to promote their
business. To find out more check us out at:
http://www.capital-bankcard.com

Source: http://www.isnare.com