FAQs
1. What are the Credit Card Discount Rates?
Every Credit Card Processor will have a fee. Discount rates can vary on from 1.59% up to 5.0%. The discount rate is not an actual discount.
The term “discount rate” refers to the percentage of your sales that the Payment Processing Service Company charges to offer the ability to accept credit cards.
For example: If you sold $5,000 in Visa sales in Whole month and your discount rate was 2.5% then you would pay $125 in fees to your Credit Card Processor.
Merchant Account Rates vary and are dependent on your
- Business model
- Annual sales
- Average sale per customer
- Type of product
- Service your business offers
- How you perform your transactions: swiping a card or hand keying
- How soon your customer receives a product/service after payment is taken
- Business & personal credit
All these factors above will have an effect on what Discount Rates your business will qualify for.
Usually, high-risk business will have higher discount rates (2.5%-5%). A high risk business is one that has:
- Higher ticket prices ($1500 plus per ticket)
- Businesses that process 45% or more of their sales through Internet/E-commerce or MOTO transactions
- Businesses that take payment before delivering the product or providing the service
2. Are keyed-in Credit Card Discount Rates at a different rate than swiped Credit Card Discount Rates?
Two questions you should ask:
- What will the “Qualified Rate” be? (for swiped transactions)
- What will the “Non- Qualified Rate” be? (for hand-keyed transactions)
In addition, many business owners are not aware that Corporate Cards also are usually charge a higher rate than the “Qualified Rate”, usually 0.15% higher, but can be as high as a full 1%. Fortunately, most businesses get less than 6% of their credit card sales made with Corporate Credit Cards.
3. What are Transaction Fees?
Transactions fees are sometimes called IDP transactions. Every payment processing company has at least a transaction fee for debit and usually also for credit card transactions too.
It is becoming more common that any transaction that is made on your point-of-sale terminal will be considered a transaction and a fee will apply, whether it’s a debit, credit card, refund, batch close, etc.
Transaction fees can range from 0.05 cents up to 0.50 cents and can be different for each type of transaction, although typical Point-of-Sale Terminal transactions fees are between 0.05 cents to 0.18 cents.
Although, some Payment Processing Companies charge as high as 0.20 cents to 0.35 cents, in which case, you may want to ask for a rate review or search for a new Payment Processing Provider.
Non Point-of-Sale card processing services like IVR, PC, & E-commerce processing transaction fees are usually much higher ranging from 0.35 cents to 0.50 cents.
4. What is the monthly cost for the Point-of-Sale Terminal?
Point-of-Sale Terminals are known as: Interact Terminals or Debit Card Machines or Credit Card Machines, but in the industry they are known as Point-of-Sale systems and will be referred to from this point forward as “POS Terminals”.
Traditional Retail POS systems can hook up via a regular phone line (Dial-up POS systems) or a DSL High-speed Internet connection (IP POS systems) , and more recently to the Wireless Data Network making some POS system’s are wireless and mobile (Cellular POS Terminal).
Most Traditional Retail type business’s only need regular Dial-up terminal Dial-up terminals will work for the Merchant who does under 300 transactions a day. A Merchant who does a high volume of transactions and needs to move customers through a check-out line quickly should consider using an IP POS Terminal.
Most Bank related card processing companies offer a ‘rental ONLY program’ for POS Terminals. Rental costs can range from $20 right up to as high as $90 a month depending on the type of Point-of-Sale Terminal your business requires.
Private label card processing companies usually only offer a ‘Lease-to-own or Buy option’ program on their POS Terminals. Lease-to-own usually run on 48 month leases with a 10% buy-out option at the end. Lease-to-own POS Terminal prices range from $30 – $80 dependent on type of POS terminal. Buy-out POS Terminal prices, typically run from $999 – $1800 (without taxes) dependent on type of POS Terminals.
Two very important questions to ask before buying a POS Terminal:
- What are the warranty conditions?
- Is the POS Terminal smart-card ready?
When renting a POS Terminal if you require a new POS Terminal is usually will be fixed or replaced at no cost to you. However, you pay rent forever. If you have been renting a POS Terminal for $35 a month for 5 years, then you just paid $2100. If you have been renting a POS Terminal for 10 years at $35/month then you just spent $4200 & no asset in your business. You can own a basic POS terminal for as little as $1100 and now have another asset in your business.
In terms of warranties, most private label companies will offer some type of warranty on the POS Terminal, sometimes at no extra cost, sometimes for an additional fee. There are even a few payment processing companies that offer a life-time warranty all inclusive in the original retail purchase price. Sometimes it is better to pay more for an all inclusive warranty on hardware with free software upgrades then to pay less with a limited warranty.
5. What are the Set-up Costs?
Some debit and credit card processing company will have set-up fees. Set-up fees can range from $10 – $300. Usually the set-up fees are one-time only set-up fees for Visa, MasterCard, Amex, & Interact cards usually around $25 per card. Some companies also charge an initial set-up fee for programming the POS Terminal or a fee for initial training. Set-up fees greatly vary from company to company.
6. Are there any Application fees?
Some companies payment processing companies have an application fee, but not all. This is usually a non-refundable fee, whether your business is approved or not. Applications fees can vary from non-existent to $400.
7. Is there a Statement Fee?
Again, some payment processing providers have a statement fee, but not all. The average statement fee is usually around $10 or free if you are willing to receive your statement coming to you via e-mail.
8. Is there a Settlement Fee?
Most merchant account providers have a settlement fee. Settlement fees can range from 0.05 cents 5 dollars. The settlement is what sends your funds to your bank account when the batch is complete.
9. Is there any Minimum Processing Fees?
Most payment processing providers have minimum processing fees, usually from $5 – $25. Often there are minimum processing fees for each type of card you intend to have processed. What this means is if you do not do enough business sales to have high enough fees you will still pay a minimum every month.
For example: Say your discount rate is 1.85% on Visa and your business does $1000 worth of sales on Visa that month and your minimum processing fee is $10.
1.75% X 1000 = $17.50 in fees that month on Visa. Therefore, you have cleared your minimum of $10 and you have nothing to worry about.
Now if you take the same rate and minimum, but only made sales of $250 that month on Visa, 1.85% X 250 = $4.62 in fees that month on Visa. Therefore, you did not make you minimum and would be required to make the difference up of $5.38.
10. Is there a Gateway Fee?
Most card processing providers usually have a gateway fee, but usually only for IP POS terminals, PC and E-commerce payment solutions. Gateway fees can range from $5 to $75 a month.
11. Is there a Monthly Maintenance Fee?
Some card processing service providers have a monthly maintenance fee others do not. If they have it, it is usually a fee that is associated with IVR, PC, & E-commerce payment processing solutions. Some companies have it on POS Terminal solutions too.
12. Is there an Added Value Fee?
Some payment processing service providers have a monthly added value fee and some do not. This fee usually ranges from $5 – $10 a month.
13. Is there a Chargeback Fee?
Most payment processing providers have a chargeback fee. Chargeback fees can range from $10 – $50. A chargeback is when a card holder holds a dispute on a Visa, MasterCard or Amex transaction that came from your business. If the card holder wins the dispute, they will be refunded their money and you will be charged a chargeback fee, a similar fee to bouncing a check.
It is always the merchant burden of proof to prove that the card holder had used or bought the product or services from your business. This is why is so important to check that on credit card purchases that the signature matches the back of the card holders credit card and if it does not to ask for photo ID.
14. What are the Technical Support Service Hours?
Most card processing companies have a help desk/technical support. However, not all are 24/7 and some are better than others. The best thing to do is to get the help desk number and give it a call a few times throughout a day to see what kind of service you would get.
15. How soon can you have a new POS Terminal to my business if my POS Terminal is not working & cannot be fixed via the phone?
Payment processing providers can vary on this from company to company. Some can have one to you within 24 hours others can take 2-4 weeks before they have a new POS terminal to you. The question you have to ask yourself is how long can your business run without one in your business? Sometimes it is better to pay more for better services.
16. How long does it take to initially get set-up with full services?
Most card processing companies usually take at least 2 weeks (sometimes as long as 4-6 weeks) to have your application processed, merchant accounts set-up, point-of-sale terminal programmed and shipped to your business ready to use. However, there are a few payment processing companies that can have one ready in your business in as little as five business days. These are usually private label payment processing companies.