How much should I expect to pay for merchant services?
I am curious who people recommend for merchant services and how much they charge. Bank of America charges 1.99% and 20 cents per transaction, $16 monthly fee (which includes payment gateway), $94 for PCI and a $99 set up fee. I used to use them and these fees are less than they were a year ago, but I still wonder if they are reasonable. Also, does anyone have any recommendation for recurring subscription services. I have used Pin Payments, which was previously Spreedly, but it's been over a year. Thanks.
Fees depend on a number of variables including size of average transactions, number of transactions, and annual/monthly volume. The industry is highly competitive. I am a member of Costco they offer On Site and In Store
1.38%¹ Plus 19¢ per transaction, Online 1.99%¹ Plus 25¢ per transaction and
On-the-Go 2.49%¹ $0 per transaction. Service is sponsored through Elavon.
A lot of misinformation is floating around out there, made more confusing by different pricing styles and overall lack of merchant understanding. The BofA plan isn't all that bad, but it isn't that great, either. You have lots of elements to consider with regard to overall costs, and this includes the impact of your monthly and annual fees on your REAL overall percentage cost. Merchant services should not end up with an effective cost over 4% of total card volume. If you are doing under $5000 in card sales monthly, a higher percentage plan that covers most transaction fees and comes with no additional fees is likely to save you money, and definitely if you are doing less than $2000 monthly this is something you should consider. If you are doing more than $5000, chances are you will be better served by an Interchange Plus account, but you would have no problem beating the BofA rates.
Transaction fees are often split so as to give the illusion of being less. A processor may charge $0.03 to cover THEIR costs, but they will still "pass through" the additional expenses charged by the card brands, ranging from $0.10 for most credit cards to $0.22 for check/debit cards. I am not sure whether the BofA pricing is meant to be inclusive, but I think it is, which means they might eat a few cents processing check/debit cards (which cost about $0.25 total, or $0.22+$0.03) but then rake in a nice profit on credit cards (which cost about $0.13 total).
I consult on these solutions often, so feel free to ask more specifics if you would like.
Hi Mary-Alice! As mentioned here the 1.99% is on the higher end for credit card processing even in a card-not-present situation. I would generally set up an account at a 1.65% to handle this type of transaction. As far as PCI fees our company only charges $4.95 a month and it is waived for the first 12 months. We have no set-up fee.
I would recommend Authorize.net for you gateway as well as for recurring payments. They are very flexible on how you can set-up the payments with an easy to use interface.
I offer a comprehensive side-by-side analysis based on your current processing situation. Feel free to contact me if you would like more information on having one prepared for your company. I can be found via searching for Total Merchant Services.
Have a stellar day!
Total Merchant Services
I do not have a recommendation for recurring subscription services, but I can comment on the merchant services side of your question.
I can tell you that 1.99% is a little high when compared to the market rate. I ran credit cards for a restaurant and other businesses and our typical rate was 1.3-1.5%. it was a little higher for American Express, but we used so little of that, it didn't make a difference. You should definitely shop around. I know a lot of the companies will wave all set up fees and PCI and will have no monthly fee. They will most certainly not charge .20 cents a transaction. I think we were charged .03 cents per transaction.
These aren't the worst rates out there, but I would suggest looking into companies that focus all of their energy specifically into merchant services. They are typically cheaper with rates, can work with you on setup fees and customer service is generally great.
If you supply your merchant statement to any merchant company, they will work to save you a lot of money and you can work your way down to where you are actually saving a lot more money than at your current rates.
I use Intuit Payment Network (https://ipn.intuit.com) There is no monthly fee. They charge 50 cents for a bank payment, or 3.25% to receive a credit card payment. Since I use QuickBooks, I just send my clients a PDF invoice which has a link for payment. I can also set up recurring requests online, which automatically sends out an e-mail to my regular clients.
Negotiable: Set Up fee, when it gets down to it tell them u will sign with if they completely waive the set up fee.
What payment gateway are u using, $16.00 sounds fair?
Ask what is the mid-qualified and the non-qualified rates are....
and then Ask them for "Cost-Plus" pricing, way more advantageous than tiered pricing.
$94.00 sounds correct for PCI Compliance however, make sure it's a one time fee.
What is ur average ticket, small tickets stay away from pin, large ticket take pin number every chance you can get...
1.99% + $.20 is just the base rate, not the total cost of all the rates. There are hundreds of different rate surcharges both in your favor and not. Debit Cards, Rewards Cards, Corporate Cards, and the new High-Net worth Cards influence the different rates. Additionally your industry determines much of these different fees. There are different programs for Retail, ecommerce, Restaurant, B2B, Non-Profit, Fuel, Insurance, Real Estate, etc. There are also network fees as well.
Most software solutions offer reoccurring services; some charge more for the feature. The more important is the total gateway cost with the gateway authorization & settlement fees.
Average Ticket & Average Volume help determine how a processor prices all of these. There is no specific formula for “one-size-fits-all” to know how much you should expect to pay for merchant fees. The average ticket size really influences the total cost or “effective rate” you should expect to pay. For example the above rate is 3.99% on a $10 transaction and 2.19% on a $100 transaction less the different card types and other network fees.
It typically depends on your specific needs, average sales volume, and risk pool that your business is in. Also the rates are generally specific to the type of card that is used IE, its a higher rate for a Visa Rewards card than it is for a standard Visa or debit card. If anyone says they have the same rate across the board, they are either making a lot of money off of you or they don't want to take the time to actually consult on what will work best for you bottom line and business.
From my experience as a wholesale merchant service provider, bank rates are usually inflated compared to what you can actually obtain. The fact of the matter is that people don't know what they don't know and just assume they are getting a "reasonable" rate.
With regard to recurring subscription services are concerned, are you looking to handle this remotely IE through some type of phone app, or are you wanting to implement and online payment acceptance method? Reason being is that again with a good company behind you, there should only be one single provider so you don't have to shuffle through multiple accounts and receive multiple bills or rates.
On another note, be picky if you are looking to use a mobile solution. There are mobile point of sale systems out there that work real well but if you are looking for something less sophisticated, you've got a ton of choices. Popular products include those from Intuit, Square, and even many banks. But then again there are hidden fees they don't point out for example, a non swiped transaction fee versus a swiped transaction fee. In my opinion, there's one mobile solution out there that beats everyone else hands down and only charges 1 fee no matter if the card is present or not. Reach out directly; I'd love the opportunity to discuss this further and walk you through the process
Interchange-plus is a way to correct the issues with tiered pricing models. High-volume businesses have long been able to use this pricing model, but it’s only recently been expanded to merchants of all sizes.
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