How To Negotiate Lower Pricing For Your Merchant Account

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by BrianArmstrong

Getting information on what you'll be charged to process credit cards will help you manage the expenses associated with this important part of your business. Most merchants don't give too much thought to this after they've setup their accounts. Business owners that are overpaying can very easily reduce their fees and those just getting setup for the first time can use the information in this article to make sure they're not overpaying.

The first part of pricing that everybody uses to compare one provider against another is the discount rate. Business owners always want to know the discount rate. This is the rate that typically results in the most fees paid by merchants so with good cause is the one that merchants should definitely try to keep low.

Your discount rate is determined by the risk your business may represent to the bank. The more risky your account, the higher the discount rate. The type of cards you process may also influence your discount rate, such as a business credit card vs. a check card, or rewards card for instance.

If you have a lower average ticket item or average transaction, the per transaction fee represents a higher percentage and can even represent a higher percentage of your overall fees than the actual discount rate or percentage. If you have an average ticket item of $10 and a per transaction of $.20, the effective rate on this transaction is 2%. If you add the discount rate of 1.8%, the effective rate on those $10 transactions is 3.8% which is higher than it could be.

If your per transaction fee is closer to $.18 per transaction, your effective rate is reduced by 1.7% which is significant. So, you should know what your average ticket item is going to be or at least a good estimate in order to most effectively determine whether your power of negotiation would best be used to get your discount rate as low as possible or your per transaction fee. Try to get your overall rate or "effective rate" as low as you possibly can.

There is a monthly fee for most merchant accounts. There is a cost associated with providing customer support, physical or even electronic statements, and account maintenance. This is usually a $10 monthly fee that is known as a customer service fee, account maintenance fee or a statement fee.

There is also a monthly minimum that is usually charged on merchant accounts as well. This is a $25 minimum fee based on the discount rate. Any given month, the $25 worth of discount fees is charged. So, if you process $1000 per month at 1.7%, you'll be assessed $17 worth of discount fees. If your minimum is $25, you'd pay the extra $8 worth of fees to equal the $25.

These fees represent the typical fees charged by merchant providers. There are usually other fees that will show up on your merchant account application, so be sure to ask your merchant account sales representative about any fees that you don't recognize or know. These fees must be disclosed, even if the sales rep doesn't tell you about them. When it comes to pricing, trust what's written on the application because this is what you'll be agreeing to when it comes to processing.

Find a good sales representative that you can trust. Your ability to establish a good working relationship with a reliable, trustworthy account manager will insure that you'll be able to keep your processing costs low for the duration of the account.

About the Author:

Brian is an expert at helping businesses just like yours reduce expenses on their credit card processing. If you're serious about reducing your expenses and doing so without a major hassle, contact Brian through his website dedicated to business merchant accounts.

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