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    7 Replies Latest reply on Jan 25, 2013 11:35 AM by amspcs

    Expected merchant processing fees for start up.

    prestonbusiness Wayfarer

      What would be the expected merchant processing fees be on an account for a new eCommerce site?  I've seen 2.19% up to 3.45% per transaction, plus $0.25.  I feel this is a bit high for the volume that I expect.  Any tips on how to get a better rate?

        • Re: Expected merchant processing fees for start up.
          amspcs Ranger

          Well, the first thing  you need to learn is to stop tunnel-visioning on the percentage rate.  You are interested in COST, not rate. Low rate means your cost will be higher, not lower.  Strictly a marketing tool. IF you have good credit and IF your specific product or service falls within specific risk tolerances, we've set up merchants in these ballparks (note the many aspects are are as important, if not more so, than just the 'rate'): 1.95-2.10% Qual 2.50-2.54% Non qual $.23 per $6.95 month No annual fees No contracts or early termination fees Gateway: $15/mo Again, these are approximations. The exact program YOU qualify for will depend on YOUR specific circumstances.

            • Re: Expected merchant processing fees for start up.
              prestonbusiness Wayfarer

              Thanks for the feedback.  I have been analyzing the monthly fee as well as the per transaction fees.  My price points are going to be between $5 and $30, so the per transaction fee does come into play along with the percentage rates.  I have been plugging in both of the fees into my financial analysis to find the overall effective rate per sale.

               

              When you mention "COST not rate", are you just referring to the per transaction fee being included in with the percentage points?  The monthly fees are irrelevant for my quantities of transactions.  It just seemed high to be charged $3.45 + .32 for rewards and corporate cards.

               

              In the end, I'm going to go with Bank Of America.  The full integration with my existing BofA business account will make a world of difference and will certainly reduce management costs.

                • Re: Expected merchant processing fees for start up.
                  amspcs Ranger

                  By 'cost' I mean the total bottom line cost of driving transactions.  That means absolutely everything:  percentage, per item, add-ons, d&e's, annual fees, headers, bill backs, the entire schedule.  In other thing, judge the cost effective by the only number that counts which is the bottom line, not the individual sum of the parts which is the mistake many merchants made.  The final result will differ greatly based on the individual circumstances of each unique merchant, that's what I mean by "no such thing as one-size-fits-all".  Any specific fee schedule will be great for one merchant, but the identical schedule will be terrible for another. Bank of America is an excellent and dependable processing solution to those merchants to whom cost is not the primary concern.  Not sure what  you're referring to by 'integration', would appreciate  your  updating me on this. One final suggestion:  You'll need a secure gateway to go along with your BOA merchant account if you're processing over the web.  They have (or used to have) a proprietary gateway partner.  Do yourself a big favor and say 'no thank you'. Insist on Authorize.net as your gateway. Long story, suffice to say that anything proprietary is almost always a mistake.

              • Re: Expected merchant processing fees for start up.
                nomoreodor Wayfarer

                i'm just doing a start up small business and researched the same issue. Groupon just started processing cards, that may be a solution; also you do not need to be a groupon merchant to process cards through them.

                • Re: Expected merchant processing fees for start up.
                  satsuki Adventurer

                  I too am just a start up small business and I use PayPal. They charge .029% plus $.30 per transaction. If something goes wrong with your sale, you have recourse  through them.

                    • Re: Expected merchant processing fees for start up.
                      amspcs Ranger

                      No no.  They charge 2.90%, a far cry from the 0.29% you stated, plus $.30.  And I think you are seriously misunderstanding the issue of recourse you mention. Don't get me wrong, if you are a VERY small merchant (say less than $500 total volume per month), then you have made a very wise choice in selecting Paypal.  Otherwise, your choice is probably not so wise.

                        • Re: Expected merchant processing fees for start up.
                          thedavid Adventurer

                          How easy it is to play with numbers I am an accountant and a merchant services company owner, even I have trouble sometimes understanding merchant statements. The credit card processing industry is not very strictly mandated I should say. It is easy for them to tell you that your rate is 0.29 instead of ALMOST 3 %  I am glad the merchants are better informed today than they were when I first started in the business. If I may add something, the most popular rate structures are what we call TIERED, which was discussed earlier , where you have a lower qualified rate (swiped) , then maybe higher rewards and then mid qual, then non qual ... i feel bad for the business owners that have to figure out this complex maze of pricing structure which was invented for the purpose of them not figuring it out Dear business owner, your credit card processing fee is comprised of Interchange (which is regulated by Visa and no one has control over it) and processing fees . When sales persons combine them together and pitch you a combined fee, you get confused... I suggest you pick whats called a PASS THRU rate, meaning whatever the interchange is ( you don't control it anyways) PLUS their fees, which is what you have control over and is easy to understand.

                          Dave G

                          Tax Services Las Vegas

                      • Re: Expected merchant processing fees for start up.
                        jojoes Adventurer

                        If you don't mind emailing me about your business type and expected volumn, I may be able to get you a way better rate. My email: ziahoo@yahoo.com.

                          • Re: Expected merchant processing fees for start up.
                            amspcs Ranger

                            Sorry guys, I tried, but I just couldn't resist the urge to comment on the previous post "...I may be able to get you a way better rate." This statement epitomizes why our processing industry has a bad reputation, and why merchants continually allow themselves to be shortchanged.  I'm not blaming the agents so much as I am blaming the merchants.  All the merchants understand is 'rate' and that's they respond to.  Rate.  Rate.  Rate.  He who has the lowest 'rate' wins.  So the rep is put in the position of knowing if HE doesn't tell the merchant what he/she wants to hear ("low rate"), somebody else will  and snatch the deal from him.  Merchants:  PLEASE make the effort to educate yourselves.  Here's what merchants refuse to understand: They confuse the concepts of "lower rate" and "lower overall cost of processing" with one-another.  They are not only decidedly NOT the same, they are in fact 99% of the time the exact opposites.  That's right:  Lower rates usually always equate to HIGHER, not lower, cost of processing.  It's all about marketing, 'packaging' if you will. It's called the "Rate Game", and merchants ALWAYS lose it. OK, got that out of my system.

                              • Re: Expected merchant processing fees for start up.
                                pabriss Newbie

                                Everything I've read about in amspcs' posts so far, make a lot of sense to me.

                                I'm certainly a novice at merchant credit card processing. Our small, employee owned company has been using merchant card services for a couple of years. Having just been thrown into the financial and overall management for the company, I have been appalled at what we have been paying. Therefore, I am trying to get my arms around what to expect as reasonable service versus "bottom line, all inclusive" cost. We have very low  card based volume so far (less than $25,000 per year) and all of it is done via phone in to the office. We are using a dial up terminal with an intigrated thermal receipt printer and no card swipe capability. All data is input manually. I believe, given the information I've expressed above, that we should be using an internet gateway, (if that's the correct terminology?), with online merchant processing/bank integration. We have no need or desire to do web site payment processing at this point, but we do want to continue to offer the convenience of credit/debit card payments.

                                Can anyone lead me to my best solution?

                                  • Re: Expected merchant processing fees for start up.
                                    amspcs Ranger

                                    Hello Paul, thanks for the compliment.  The fact is:  Going on a forum and asking "what is the best processing solution?" is a little like going on a medical forum and posting "I'm sick, can somebody tell me what the best medicine is".  Not nearly enough information, way too generic. The only way for someone to be able to assist you in any meaningful manner is to conduct an audit of YOUR unique processing circumstances, no two of which are exactly alike.  In other words, there is no such thing as one-size fits-all processing. First, your credit rating, processing history, time in business etc. will determine which of the many processors out there are the better fit for you, since they all have different 'niches'.  Much like shoes, being in the wrong 'fit' can be uncomfortable.  Secondly, an audit of your processing history will reap tons of useful information as to which of the hundreds of different Interchange categories most of your transactional activity falls into (the idea is to get the lowest rates in the Interchange category(s) you use most, NOT in the teaser rate categories you never qualify for.)  Maybe you would benefit from Interchange Plus pricing instead of Tiered pricing (most but not all merchants do).  Maybe you would benefit from gross processing instead of net.  Monthly instead of daily discounting.  Maybe you would benefit from a more appropriate hardware configuration , as you discuss in  your post and soundsd like might be a real possibility. Somewhere out there is the solution that is ideally configured to your most cost effective needs.  You just need help finding it, and you won't find it with any one-size-fits-all package.  A quick word of caution:  When I say "audit" I do NOT mean what we call in the industry the classic T-sale side-by-side rate comparison scam in which your present processing cost is compared with a competitive 'proposed' cost side-by-side to illustrate how many thousands of dollars you will save by switching today.  This is sarcastically known as the "Disney tool" because it only works in Fantasyland---way too many assumptions involved that can be easily manipulated to show whatever results the presenter wants to show.  (We published an article on this very subject some years ago--would be happy to share upon request). In your case, I have a pretty clear hunch how you should proceed, which would be to disregard entirely the 'rate' scenario and instead concentrate on dealing with some of the more fixed costs of processing, which I'm guessing most of your damage is coming from.  If you'd like to pursue in more detail, feel free to peek at my profile and reach out. Good luck.