Even though the percentages may seem minuscule on paper, a business owner may stand to lose thousands of dollars per year if a wrong credit card processing service provider is selected.
This is because, in today’s shopping environment, it is not unusual to find merchants relying exclusively on credit card sales because customers find that payment mode most convenient as they are spared of the hassle and risk of carrying cash.
Unfortunately, credit card processing terminology is not exactly comprehensible to the majority of merchants signing up for credit card acceptance services, and consequently, they run the risk of being ripped off by the acquiring banks.
Depending on the volume of sales, the charged fees can vary by hundreds or even thousands of dollars every month and the business can save valuable money if they make sensible choices while engaging a credit card processor.
Another thing to keep in mind is that prevention is a merchant’s first line of defense against chargebacks.
Typically, online merchants and businesses see higher rates of chargebacks than brick and mortar businesses and will have additional preventive steps. Getting the help of the best chargeback sites can also relieve the merchants from getting charged hefty.
Credit Card Fees Explained
Credit card service providers charge merchants an interchange fee on every transaction. The amount of the fee is decided by the card networks and the proceeds are shared between the networks and the banks that issue the credit cards.
The fee comprises a flat per-transaction component together with a percentage of the value of the sale transaction. The percentage varies according to a number of factors such as the type of the card being swiped, nature of the merchant, the card issuer, and other complex considerations. An additional fee is often charged by your credit card processor on similar lines.
There is a great deal of opacity regarding the interchange rates being charged to the merchant. Hardly ever does any credit card services provider disclose the components of the fee but prefers to present to the merchant a flat base rate, often referred to as the discount rate.
The discount rate is actually a sum of the interchange rate charged by the card network and the issuing bank. While the interchange fee by the network is fixed, it is the fee that is charged by the card issuer that accounts for the difference in transaction rates between merchants and needs to be lowered to the maximum by merchants.