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Payment Processing Pricing: Several Ways To Figure Business Costs

Payment Processing Pricing: Several Ways To Figure Business Costs



Some pricing models are easy to understand but cost more to the business!

 

Payment processing is an essential service for your businesses. It enables you to accept payments from customers, whether in-person, online, or over the phone.

 

However, understanding the different pricing models available can be confusing.

In this article, we'll explore the four most common methods:

 

  • traditional 4-tier interchange,

  • cost plus/interchange plus small markup,

  • flat rate on all sales, and

  • cash discounts or dual pricing.

     

Traditional 3 or 4-Tier

 

This is the most complex pricing model. It involves three - four different interchange rates based on factors like transaction type, card type, and transaction amount. These rates are set by the card networks (Visa, Mastercard, etc.) and can change frequently.

 

  • Pros: Can be cost-effective for high-volume merchants with a diverse transaction mix.

  • Cons: Difficult to understand and predict costs, making it challenging to budget.

 

Cost Plus / Interchange Plus Small Markup

 

This model is simpler to understand. Processors charge a small markup on top of the interchange fees. This markup is typically a percentage of the transaction amount, plus a fixed fee per transaction.

 

  • Pros: Transparent pricing, making it easier to estimate costs.

  • Cons: Paying fees to Visa Mastercard

 

Flat Rate on All Sales

 

Here, processors charge a flat percentage of all sales, regardless of transaction type or card type. This model is popular for its simplicity and predictability.

 

  • Pros: Easy to understand and budget for.

  • Cons: Can be costly for merchants who accept card present and check cards.

 

Cash Discounts or Dual Pricing

 

This model involves offering customers a discount for paying with cash. This can incentivize customers to pay with cash/checks and reduce processing fees to almost zero.

 

  • Pros: Reduces processing costs and potentially increase sales.

  • Cons: Merchant may have more cash/checks to work with/secure/deposit.

 

Choosing the Right Pricing Model

 

The best pricing model for your business depends on several factors, including:

 

  • Transaction volume: High-volume merchants may benefit from the traditional 4-tier interchange model, while low-volume merchants may prefer a flat rate. All merchants will benefit from the Cash Discount Dual pricing program because it eliminates fees and customers don't balk or have issues because they can always pay with cash or check. 

  • Transaction mix: The types of transactions you process will also impact your costs.

  • Risk level: High-risk merchants may face higher processing fees.

  • Budget: Consider your budget and how much you can afford to spend on payment processing. Consider passing on all or part of the fee to your client.

 

Additional Cost and Technical Considerations

 

When evaluating payment processing pricing models, also consider the following:

 

  • Fees: In addition to the base pricing model, processors may charge additional fees for services like chargebacks, statement fees, and PCI compliance.  Look for a company to be fully transparent. 

  • Customer service: Look for a processor with excellent customer service and support.  Ask for a dedicated rep or local contact to assist you when needed.

  • Technology: Ensure the processor's technology meets your needs, whether you need in-person, online, or mobile payment processing.

 

By carefully considering these factors, you can choose the payment processing pricing model that best suits your business and helps you maximize your profits.

 

Let us help you understand the different payment processing pricing models and their associated costs and benefits.  Decisions your business can make when informed and choose the option that best meets your needs.

 

Set Up A Free Consultation by phone or webinar:  https://calendly.com/usmerchantpaymentsolutions/15min

 

Call Ken Givens direct, 512-848-1069 or 888-995-3995

 

Ask about Referral Affiliate program!

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Processing services provided by North American Bancard, LLC. All rights reserved. North American Bancard, LLC is a registered ISO of Wells Fargo Bank, N.A., Concord, CA., The Bancorp Bank, Philadelphia, PA, and BMO Harris N.A., Chicago, IL. and Paysafe Payment Processing Solutions, LLC is a registered Independent Sales Organization/MSP of Deutsche Bank AG, New York, NY; Citizens Bank, N.A., Providence, RI; PNC Bank, N.A., Pittsburgh, PA; Wells Fargo Bank, N.A., Concord, CA; Woodforest National Bank, Houston, TX; BMO Harris Bank, N.A, Chicago, IL

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