Why You Should Switch Your Merchant Account Today
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Business owners often overlook their merchant accounts because it only represents a small part of their overall financial picture. The reality is that merchants are overpaying and often don’t do anything about it because they believe it’s too much of a hassle to switch. Merchants that process transactions on a regular basis can save a significant amount of money by switching and it is significantly less work that most merchants might think.
When pricing accounts, both new accounts as well as pricing to switch over, most merchants look at nothing more than the qualified discount rate and base their decision on this number only. Instead of basing your decision to switch on just the qualified discount rate alone, you should instead base it on your effective rate which is the ratio of overall fees to the gross volume that you process. If you base it on the effective rate, you can usually always find a lower rate by modifying some components of pricing. If you’re overpaying by $100 per month on the non-qualified rate, you can keep all other rates the same and reduce just that fee alone to get an extra $1200 in your pocket every year.
Getting your per transaction low will affect merchants who process a lot of transactions more than those that process only a few transactions per month. In addition to the regular per transaction fee, there is usually an AVS fee which is also per transaction any time the address verification system is accessed which happens on internet or card-not-present transactions. This can add to the overall per transaction amount. If you process cards on a physical terminal where the transaction is swiped, you won’t have an AVS fee.
For merchants processing smaller ticket items, such as fast food restaurants or convenience stores, the per transaction fee usually represents a larger percentage of the overall transaction and can significantly increase the overall percentage you’re paying for accepting Credit Cards.
Business owners that have a higher ticket item should be more concerned with the discount rates they’re paying far more than the per transaction fees as that represents a larger percentage of the overall fees. If you divide the total amount of fees by the gross volume that you process each month, you’ll have your “effective” rate.
Switching your merchant to a new provider is easy. Generally it only takes a few minutes to complete an online application and a few minutes of verifying your prices and fees to know that you’re saving money. Although the time span for switching to a new account isn’t quick, the actual time you personally spend is typically less than 30 minutes.
Most merchant accounts have an early termination fee, so the process of switching accounts may have costs associated with terminating your existing agreement. There are a few options here, depending on how much your early termination fee is and the duration of your contract. Some merchants can save $100 or more per month and keeping the existing account open for $25 per month may make sense. You should check with the provider you’re considering to also see if they offer a reimbursement for switching by paying off your early termination fee for you. Some providers will do this, others will not, but it’s worth asking.
If your equipment is not PCI compliant, this may be a great time to switch to a new account. For most merchants, your equipment is most likely already Pci Compliant. Many merchant service providers now offer free equipment for new merchants including those switching over from another provider. Reprogramming your existing equipment is also an option and most merchant service providers will give you the reprogramming for free as well.
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