Things to know about credit card processing
For anyone who owns and uses a credit card, while the extension of credit is no doubt beneficial, a point of concern always is about the charges levied. When choosing a credit card processing agency to work with, try to sign up with processors who offer you the lowest possible markup rates for your specific usage requirements and the pricing model you opt for. Do not get mislead by offers of lower interchange and assessment fees as these are for the most part standardized among credit card processors and hence, non-negotiable.
While all credit card processors operate under strict norms about interchange and assessment fees, what varies is the pricing method they offer to their clients. There are two commonly used pricing methods – interchange plus, also known as pass through and bundled or tiered pricing.
The major advantage of the interchange plus pricing model is that regardless of the type of card or the process involved, the processor receives a standard fixed percentage. With interchange plus pricing, you receive interchange credits on refunded transactions. Also, interchange plus pricing gives you the advantage of benefitting from reductions in interchange rates whenever the legislature sanctions them.
Under bundled or tiered pricing, the credit card processing agency offers qualified, mid-qualified and non-qualified tiers for pricing. This may also vary based on the type of card used. The flip side of bundled credit card pricing models is lack of transparency among some card processors especially about giving you information about which tier a particular transaction is being processed through. Sometimes, you may end up being a considerable amount of the standard assessment and interchange fees. The reason for this is that there is no standardization of how each tier is classified and often the mid and non-qualified pricing tiers may receive a greater proportion of interchange fees, thus raising your costs.
Credit card processing fees are usually of three kinds – volume based, transaction fees or flat fees.