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The economy is on everyone’s mind these days, and we’re all searching for ways to save money wherever we can. Fees for card-not-present transactions are among the highest in merchant account processing. Keeping costs low is possible, however, by following three simple steps:
- Identify and Reduce Risks.
- Learn the Basics of Credit Card Payment Processing.
- Uncover the Truth Behind Your Fees.
There are some risk factors behind online merchant account processing which you may not be aware of. They may be responsible for higher fees imposed by your merchant services provider (MSP). Product type and description can have a direct impact on whether or not consumers are satisfied with what they receive. Be as clear and concise as possible regarding product details, to avoid surprising your customers.
Claims you make regarding your product can have an equally important negative response from your customers. Avoid complaints and chargebacks by being as accurate and truthful in your claims. Shipping times and methods should be clearly identified as to give your customers an expectation of when they will receive their product. Send shipments insured with tracking information and proof of delivery.
Learn the Basics of Payment Processing
Avoid unnecessary fees by staying on top of changes in the merchant account processing industry. Working with a knowledgeable and proactive merchant services provider helps you stay up-to-date with industry changes. The Processor is divided between front-end and back-end. The front-end authorizes data, while the back-end receives the authorization, processes it and passes it on to the acquiring bank for settlement to be paid out.
The Acquirer is the financial institution that accepts payments for the products or services on behalf of a merchant. The acquirer bills the merchant and can terminate the relationship if it is deemed too risky. Most acquirers don’t do business directly with merchants. They work with
merchant services providers, who generally offer lower rates and take on riskier clients.
The Issuer is the financial institution that lends money to the cardholder. The rate for each transaction, known as interchange, is determined by the issuer of the card (Visa, MasterCard) and depends on the card code. The Merchant Services Provider (MSP) is an organization that offers merchant account processing services. An MSP can be a merchant bank or an independent sales organization (ISO) sponsored by the member acquiring bank.
Interchange Rate is a fee that the acquiring bank pays to the issuing bank during a transaction. Your MSP pays for this fee charged by credit card companies. Small to medium sized businesses may not always be told about the Interchange rate, having it instead combined into a single discount rate. Dues & Assessments are uniform fees merchants pay on all merchant account processing transactions, collected by the acquiring bank on behalf of Visa and MasterCard in order to finance their operations and payment network upgrades.
A Payment Gateway is an e-commerce interface which allows you to connect your online store to your internet merchant account, so you can accept credit cards. Visa and MasterCard are associations offering memberships to qualified banks as an issuer and/or acquirer. They set interchange rules and provide the infrastructure for the exchange of funds and data.
Interchange is a fixed fee that is set solely by Visa and MasterCard. While it accounts for the bulk of your rates, there are multiple processor and gateway fees, plus downgrade costs that ultimately affect your bottom line.
Banks partner with merchant service providers who are willing to take on part or all of the risk involved in merchant account processing. Speak with your provider and find out what factors in your business affect your risk, and consequently your rates. Understanding fees, reducing risks and having the right merchant services provider can help lower your rates. When in doubt, get a free rate analysis from a provider familiar with your industry.
