Reducing Fees Archives - Credit Card Processing and Merchant Account

The Most Expensive Credit Cards for Merchants?

Kalle Radage — Fri, 16 Jun 2023 17:51:38 +0000

Credit cards have revolutionized the way we transact, providing convenience and security for consumers worldwide. However, for merchants, accepting credit card payments comes with fees that range from 1.9% to sometimes well over 5%.

In this article, we cover some of the credit cards that are known to be more expensive for merchants. By understanding these high-fee options, businesses can make informed decisions when it comes to accepting certain credit cards.

Interchange fees are the largest portion of the payment processing fees that merchants pay. Each country has its own set of interchange rates so it might be good to familiarize yourself with it.

American Express (Amex) Cards

American Express is one of the largest credit card networks and is renowned for its premium credit cards, offering exclusive benefits and rewards to cardholders. AMEX has a 19% market share of the credit card market with 133 million cards globally and 56 million credit cards in the United States.

The AMEX exclusivity comes with higher merchant fees. AMEX operates on a closed-loop system, meaning they handle both issuing and acquiring services, allowing them to charge higher fees compared to other card networks. Due to factors such as higher perceived risk, unique features, and premium services, Amex cards typically carry higher interchange fees, impacting the merchant’s costs. Here is an explanation of interchange rates by the tier of credit card.

Premium Rewards Cards

Certain credit cards, often referred to as premium or high-end rewards cards, offer extensive benefits and perks to cardholders, such as travel rewards, airport lounge access, and cashback programs. These cards are aimed at affluent customers and tend to have higher interchange fees, resulting in higher costs for merchants.

Examples of premium rewards cards include the Chase Sapphire Reserve, Citi Prestige, or the RBC Avion Visa Infinite.

Business Credit Cards

Business credit cards, designed for business owners and corporate expenses, also have higher merchant fees compared to personal credit cards. These cards often come with features tailored to business needs, including higher credit limits and specialized expense tracking tools. The associated perks and increased risk of business spending contribute to the higher fees imposed on merchants. The extra fees for business credit cards can be 0.5% and more.

International Credit Cards

Accepting international credit cards lead to higher merchant fees. These fees are attributed to factors such as currency conversion, additional fraud protection measures, and potential higher interchange rates for cross-border transactions. Cross border fees can range from 0.05% to 1% in some cases.

Merchants that frequently process payments from international customers should consider the impact of these fees on their bottom line and work with processors that have low cross-border fees.

Things merchants should consider about fees

It’s important to note that while these credit cards are often associated with higher fees for merchants, the actual fees can vary based on factors such as the payment processor, the specific agreement with the acquiring bank, and the merchant’s industry. Additionally, the benefits of accepting these credit cards, such as attracting affluent customers or expanding international reach, should also be considered alongside the associated costs.

There are other things merchants can do to lower credit card processing fees. This includes tactics such as encouraging the use of debit cards, try to do as many in-person (card-present) transactions as possible, and going with a low-cost credit card processor like TRC-Parus.

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Cancel and Switch from Lightspeed to Reduce Fees

Kalle Radage — Wed, 24 May 2023 18:12:28 +0000

Payment processing and point-of-sale systems can be complex and frustrating at times. The Toronto Star article titled “All Stick, No Carrot: Store Owner Balks at Sales Terminal Company’s Fee for a Service He Doesn’t Need” discusses the frustration of a store owner who is being charged for a service he does not require.

The owner of the small business expresses dissatisfaction with Lightspeed Commerce, a point-of-sale payments company, that is imposing fees for a service that is irrelevant to his store’s operations. Despite the owner’s attempts to negotiate and find a resolution, the company refuses to accommodate his request, causing financial strain and dissatisfaction for the store owner.

What is Lightspeed doing wrong?

In the world of retail and e-commerce, a seamless payment processing system is crucial for business success. Lightspeed Commerce, a popular sales terminal company, has been receiving criticism from customers for its poor service and unnecessary fees.

Lightspeed Commerce has even received a “D” rating from the Better Business Bureau due to numerous complaints with a 1-star rating out of 5.

Below are some of the shortcomings of Lightspeed Commerce. Later in the article, we also explore a viable alternative, TRC-Parus, which offers a similar payment processing solution and point-of-sale for businesses with lower fees.

Excessive and Irrelevant Fees: Lightspeed Commerce has been frustrating customers with its imposition of fees for services they don’t need. This all-stick-no-carrot approach has left store owners feeling burdened and dissatisfied. TRC-Parus, on the other hand, prides itself on transparent pricing and customizable plans, ensuring that customers only pay for the services that are essential to their business operations.

Inflexible Customer Support: Lightspeed Commerce’s customer support has been a point of contention for many users. Frustrated customers often face long wait times, unhelpful responses, and a lack of willingness to accommodate their needs. TRC-Parus, in contrast, places a strong emphasis on exceptional customer service, offering dedicated support that is responsive, knowledgeable, and readily available to assist with any issues or inquiries.

Lack of Customization: One size does not fit all when it comes to payment processing. Lightspeed Commerce has been criticized for its lack of flexibility and customization options, forcing customers into packages and features that may not align with their specific needs. TRC-Parus understands the diverse requirements of businesses and offers customizable solutions that can be tailored to fit individual preferences, ensuring an optimized and personalized payment processing experience.

Switching to TRC-Parus

Making the switch from Lightspeed Commerce to TRC-Parus is a promising move for businesses seeking a better payment processing solution with world-class customer support.

A key difference of TRC-Parus is that its mission is to drive down the cost for merchants to accept payments. This is one reason so many merchants are moving to TRC-Parus. There are two primary point-of-sale solutions that TRC-Parus offers. The Clover and the Talech point-of-sale solutions which are discussed below.

Talech point-of-sale

The Talech point-of-sale (POS) along with payment processing is built for retail, restaurants, or services businesses. Easy to learn and mobile ready with a great consumer experience.

Clover point-of-sale

Clover is a complete point-of-sale system to take payments, track sales, manage employees, and run your business. Built for table and quick-serve restaurants, retail, or service businesses.

By transitioning to TRC-Parus, customers will benefit from transparent and affordable pricing plans, outstanding customer support with quick response times, extensive integration options for seamless business operations, and customizable solutions tailored to specific business requirements. TRC-Parus is happy to help you with the process to switch to make it seamless.

Seamless switch to TRC-Parus to get the best point-of-sale with world-class support

Lowest-cost processing in the industry
Fund transfers in less than one day
A full set of payment products to accept payment anytime, anywhere
World-class customer service

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Interchange Rates by Credit Card Tier

Kalle Radage — Mon, 20 Feb 2023 16:20:10 +0000

Interchange rates are fees that merchants pay to the banks that issue credit cards for processing payments. These rates vary depending on the type of credit card, the transaction amount, and the merchant’s industry. This article focuses on the credit card type from the basic starter credit card to the exclusive and fancy “black” credit cards.

It is important to note that interchange rates are different for each country. You can see the full list of interchange rates for Canada and the full list of interchange rates for USA or see how interchange rates change by country. Below are the current interchange rates for some common credit card types in the United States.

Tiers of credit cards

There are a lot of credit cards in the market. Something around 23% of adults in the world have a credit card. If you look at USA and Canada, around 80% of adults have a credit card. Depending on a person’s credit rating, an issuing bank will offer different credit cards to people. In general, there are 5 tiers of credit cards.

Starter cards: Starter cards are designed for people with little or no credit history. More exclusive credit cards generally require better credit. Starter credit cards are good for people to build up credit.
No annual fee cards: The second tier of credit cards have no annual fees and might have some rewards like cashback, air miles, or other points. These usually have a lower credit limit up to around $2000.
Mid tier cards: Mid tier credit cards focus on rewards and other perks. Sometimes these cards give perks like free checked baggage, priority boarding, and entertainment deals.
Premium credit cards: Premium cards are basically the highest tiered credit cards you can apply for. Rewards, perks, and status are the reason people get these. Credit limits can exceed $10,000 and even be over $100,000. Consumers who get these cards generally have high salaries and credit ratings.
Invitation only credit cards or “black credit card”: These exclusive credit cards aren’t advertised because you have to be invited. Strong connections or celebrity status will help you get one of these cards. These cards generally have no credit limit and will have the highest interchange rates.

These are the general tiers of credit cards. It’s not always easy to figure out which card you’re actually accepting by looking at the card. However, most cards from the large banks have clear branding.

Credit card types and interchange rates in USA

There are other types of credit cards from networks such as Discover, Diners, China Union Pay, and more. Each of them have different interchange rates per country. However, the all generally follow the credit card market leaders: Visa, MasterCard, and American Express.

Interchange rates are complex. There are hundreds of them. Therefore, the information in the post are simply guidelines. You can go directly to the card brands to get exact rates ,however the documentation is quite complex to navigate. Overall, rates for Visa are around 1.4% to 2.5%, Mastercard are 1.5% to 2.6%, Discover are 1.55% to 2.5%, and American Express are 2.3% to 3.5%.

Card Tier	Example Card Names	Visa	MasterCard	AMEX
Starter Card	Visa Traditional Mastercard Core Value AMEX Green	1.51% + $0.10	1.43% + $0.10	1.95% + $0.10
No Annual Fee	Visa Platnium Mastercard Enhanced Value AMEX Green	1.43% + $0.10	1.53% + $0.10	1.95% + $10.0
Mid Tier	Visa Signature MasterCard World AMEX Gold	1.65% + $0.10	1.66% + $0.10	2.40% + $0.10
Premium	Visa Infinite MasterCard World Elite AMEX Platinum	2.05% + $0.10	1.76% + $0.10	2.45% + $0.10
Black or Invitation Only	Visa Reserve MasterCard Gold AMEX Centurion	3.15% + $0.10	3.15% + $0.10	3.50% + $0.10

Reminder, these are just example fees that will give you a ballpark understanding of the rates from different tiers of credit cards. These rates also change based on the type of merchant (grocery, high value retail, etc) and how the card is accepted (online, credit card machine, etc).

Best way to lower your interchange rates

As a merchant, interchange rates are a cost of doing business. It’s painful to have that 2%+ of fees, but the service is needed for most merchants. There are a few things you can do to help minimize the credit card processing expense.

The first and easiest thing you can do is work with a reputable payment processor like TRC-Parus. You get fair pricing, transparent fees, and world-class service. They will also set up your merchant account with the right parameters to minimize your interchange fees.

Another thing you can do is optimize your transaction processing. This can be achieved by ensuring that transactions are properly authorized, verifying the identity of customers, and using fraud prevention tools. Interchange rates are lower with more secure transactions. When possible, do in-person transactions.

Lastly, you can also encourage the use of lower-cost payment methods. The lower-cost payment methods are debit cards, electronic checks, or etransfers. You can also offer discounts for customers who pay with cash or checks. This is called surcharging.

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Merchants That Pay the Highest Interchange Fees in Payments

Kalle Radage — Wed, 15 Feb 2023 15:41:50 +0000

Interchange rates are fees that merchants pay to credit card processors and issuing banks for accepting credit card payments. The fee is based on things such as the type of credit card being used (premium, rewards, basic, etc), the type of transaction (in-person, online, etc), and the type of business (high risk, low risk, etc).

In general, merchants who accept online payments or premium credit cards with high rewards programs can expect to pay higher interchange rates. However, there are several reasons that some businesses pay higher interchange fees than other businesses. This is a list of some of the main reasons some merchants have higher interchange rates.

We’ve written a lot on interchange fees, so you can also check out how interchange fees work in payments. After you learn about why some merchants have high interchange rates ,you can also read some tactics you can deploy to lower your credit card processing fees.

Merchants that have customers with premium credit cards pay higher fees

Premium credit cards have higher interchange fees. Premium credit cards are rewards cards and business credit cards. Therefore, if you are a business that has luxury goods and services, you likely have high-end customers. Many high end customers have premium credit cards being used. Premium credit cards can have at least double the interchange fees compared to basic credit cards.

Here is a list of the types of credit cards that have higher interchange fees:

Rewards Cards: Credit cards that offer rewards, such as cash back, points, or miles, tend to have higher interchange fees due to the additional benefits offered to cardholders.
Business Cards: Business credit cards typically have higher interchange fees compared to consumer credit cards. This is because business cards often have higher spending limits and offer additional features and benefits, such as expense management tools.
Premium Cards: Premium credit cards, such as black or platinum cards, typically have higher interchange fees compared to standard consumer cards. These cards often offer additional benefits and services, such as concierge services, travel insurance, and premium rewards programs.
Corporate Cards: Corporate credit cards, which are used by companies for business expenses, tend to have higher interchange fees compared to consumer or business cards. This is because these cards typically have higher spending limits and are used for larger transactions.

Businesses that are in a higher risk industries pay higher fees

The industry that a business is in has a large impact on the interchange fee they pay. Higher risk industries pay higher interchange fees. When they say “risk”, they are referring to the likelihood of a chargeback. A 1% chargeback rate is the industry-standard maximum, which equates to one chargeback for 100 successful orders. The average rate of chargebacks is around 0.47%.

Higher risk industries, therefore higher interchange fee industries, are those like travel, furniture, advertising, and money transfer services. Lower interchange rate industries are food and beverage, apparel, pets, entertainment, and grocery. Higher risk industries can easily pay 50% more than lower risk industries.

Merchants that accept credit cards remotely rather than in person pay more

The way credit cards are accepted changes the risk therefore changes the interchange fee. In general, in-person transactions are much lower risk than on the internet or over the phone.

Overall, online payments have the highest average interchange fees. Most fraud comes from online transactions. The average online credit card interchange fee in North America is around 2.30%, which is much higher than basic interchange fees.

Check out some of the best practices for remote, card-not-present, and online payments.

Smaller merchants pay higher interchange fees than large corporations

It’s unfortunate, but true that smaller businesses pay higher rates. The larger business you are, the more likely you have the ability to pay lower interchange fees. Small businesses have very little negotiating power in interchange fees, however large retailers like Walmart, can negotiate directly with Visa and MasterCard.

An example of a highest interchange rate business

If we put all this together, an example of the highest interchange rate business would be something like an online business accepting payments remotely, in a high risk industry like custom furniture, that caters to a high end customer using “black” credit cards.

A customer like that can expect to pay the highest fees in payments. We see businesses like that all the time and they sometimes pay their current processor 5% or even more. TRC-Parus works hard to by giving merchants strategies to keep payment processing rates low.

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The Average Interchange Fee

Kalle Radage — Tue, 07 Feb 2023 15:04:04 +0000

Interchange fees are the biggest part of the fees that merchants pay whenever a credit card is used for a transaction at their business. This fee is paid by the merchant to the issuing bank as a percentage of the transaction amount. There are also additional fees that merchants pay for processing the payment. This article covers the average amount merchants pay.

Interchange fees change frequently

It is important to note that Interchange fees are subject to change and can be adjusted by card networks such as Visa and Mastercard. The frequency of changes can vary, but typically, changes are announced a few months in advance and occur once or twice a year. Additionally, regulatory changes can also affect interchange fees. It’s best to check with the credit card network for the most up-to-date information on their fees. You can see the current USA interchange fees and the Canada interchange fees on our website.

The average interchange fee has been a subject of debate. In the European Union, interchange fees for debit cards were capped at 0.2% in 2015 and 0.3% for credit cards in 2016. In the United States, the Durbin Amendment and Consumer Protection Act limited interchange fees for debit cards issued by large banks. You can read more about the interchange rates by country. Many merchants and consumers still argue that interchange fees remain too high and result in higher prices for consumers.

The average interchange fee in North America

We wish it was a very straight answer to give, but unfortunately it is not because there are hundreds of interchange rates. That being said, we will give some concrete numbers to give you a good picture on what merchants pay.

There is an important thing to make clear about the question. Are we talking about what is the average interchange rate merchants pay? Or are we talking about what is the average fee that merchants pay for payment processing? Those are different questions. The interchange fee is just one part of the overall payment processing fee, although it is the largest part. You can read more about the breakup of payment processing fees in this article.

The Average Interchange Fee is About 1.81% in USA and Canada

The average interchange fee that merchants pay is 1.81% in North America. If you are a business doing physical payments where you accept the credit card in-person, the average interchange rate is around 1.71%. If you are an eCommerce merchant, your average interchange rate will be about 1.91%.

The reason for this is that online payments have higher interchange rates than physical payments. Businesses that are higher risk have higher interchange fees. Online payments are higher risk because there is more fraud. Therefore, as a higher percentage of purchasing is done online by consumers and businesses, the average interchange rate merchants pay will increase. As a point of reference, the lowest interchange fee in North America is about 1.25% and the highest is about 2.5% for Visa and MasterCard or 3.5% for AMEX.

The Average Payment Processing Fee is About 2.2% in USA and Canada

Interchange fees are not the total fees that merchants pay for payment processing. You can add another 0.40% for other fees, such as card brand fee, processing fees, etc in USA and Canada. Therefore, the average payment processing fees that merchants pay are roughly 2.2%. An physical retailer would pay around 2.1% and an online store will pay around 2.3%.

Keep in mind that these are average rates. The big box retailers tend to be able to get lower rates while other businesses and higher risk businesses pay above average. The overall fees vary depending on several things such as the type of card being used, the type of merchant (risk level), the type of transaction, and the location of the transaction. It also might be worthwhile to read about the tactics to lower your payment processing fees.

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The 8 Things you can do to Reduce Chargebacks

Kalle Radage — Sat, 04 Feb 2023 00:03:01 +0000

In credit card processing, a chargeback is a process by which a cardholder disputes a charge on their credit card statement with their issuing bank. The card issuer then investigates the dispute. If the issuer finds it was a false or incorrect charge, they will reverse the charge and refund the credit card holder’s money.

Chargebacks can occur for several different reasons, such as fraud, disputes over product quality or shipping issues, or simply because a cardholder does not recognize a charge.

Chargebacks can be costly for merchants, as they can result in the loss of both the sale and the merchandise, as well as additional fees charged by the payment processor. Additionally, merchants may also face penalties if they have a high chargeback rate and can also be put on a MATCH list (terminated from accepting card payments). Merchants with many chargebacks are also considered high risk so their rates tend to be higher than low risk merchants. It’s important for merchants to do what they can to reduce the risk of chargebacks.

There are several steps that merchants can take to prevent chargebacks in credit card processing:

Verify the customer’s identity: Use tools such as AVS (Address Verification Service) and CVV (Card Verification Value) to verify that the person making the purchase is the cardholder.
Clearly communicate your return policy: Make sure your return policy is clearly stated on your website and in any confirmations or receipts that you provide.
Send a receipt: Send a receipt for the transaction to the customer’s email address, and include a copy of the receipt in the package when shipping the product.
Monitor for fraud: Use fraud detection software to identify and prevent suspicious transactions.
Respond promptly to disputes: If a chargeback is filed, respond promptly with any relevant information or documentation. The faster you respond, the more likely it is that the chargeback will be resolved in your favour.
Keep detailed records: Maintain detailed records of all transactions, including any customer complaints or disputes, so that you can easily provide evidence in the event of a chargeback.
Use 3D secure: Implement 3D Secure such as “Verified by Visa” or “Mastercard SecureCode” to reduce the risk of fraud and increase the chances of successful dispute resolutions.
Provide excellent customer service: Make sure your customer service is top-notch. If a customer is happy, they are less likely to file a chargeback.

In general, it is well worth it to take these steps to reduce your chargebacks. Too many chargebacks will put your business in a high risk category which will impact your bottom line.

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How Interchange Rates Work in Payments

Kalle Radage — Mon, 30 Jan 2023 09:32:11 +0000

Interchange fees, also known as swipe fees, are charges that merchants pay when a customer uses a credit card to make a purchase. Sometime interchange rates also apply to debit cards, in particular Visa Debit Cards. Interchange fees are primarily a percentage of the total transaction amount and they are paid to the issuing bank of the credit card being used and to the payment processors.

The purpose of interchange fees is to cover the costs associated with processing and approving a card transaction, including costs related to fraud prevention and chargebacks. If you’re looking for a background on the payments industry, check out our Overview of the Credit Card Processing and Payments Industry.

History of interchange rates

The history of interchange fees in payments can be traced back to the 1950s when the first credit cards were introduced. At that time, banks and other financial institutions began charging merchants a fee for accepting credit card payments in order to cover the costs of processing and approving transactions.

In the beginning, the fees were relatively low and were not widely contested. However, as the use of credit and debit cards grew, so did the rates charged by the card networks and issuing banks. By the 1980s and 1990s, interchange fees had become a significant expense for merchants, particularly for those with high sales volumes or low profit margins.

In response, some merchants began to push back against the fees, arguing that they were too high and that they were being unfairly passed on to consumers. In the late 1990s and early 2000s, a number of lawsuits were filed against the card networks and issuing banks, alleging that they were engaging in anticompetitive practices and charging excessive fees.

In response to these legal challenges and growing public concern, some governments and regulatory bodies began to take action. For example, in the European Union, interchange fees for debit card transactions were capped at 0.2% in 2002 and credit card transactions were capped at 0.3% in 2015. In the USA, the Federal Reserve proposed capping the interchange fees on debit card transactions at 12 cents in 2011, but the rule was later struck down by the courts.

Who defines the rates of interchange fees

The fees are set by the card networks such as Visa, Mastercard, American Express and rates are typically higher for premium cards like rewards or corporate cards. For example, a merchant might pay a 1.5% interchange fee for a standard credit card transaction, but a 3% fee for a rewards credit card transaction.

In some countries, there have been efforts to regulate interchange fees and limit the amount that merchants must pay. For example, in the European Union, interchange fees for debit card transactions are capped at 0.2% and those for credit card transactions are capped at 0.3%.

Despite these regulatory efforts, interchange fees remain a contentious issue. Critics argue that they are still too high and that they are an unnecessary burden on merchants and consumers. Supporters, on the other hand, argue that they are necessary to cover the costs of processing and approving card transactions and to prevent fraud.

How much are interchange rates for merchants

Interchange fees can vary depending on the type of card being used, the type of merchant accepting the card, and the specific terms of the merchant’s merchant services agreement with their bank or payment processor. For example, the fees are generally higher for online payments than for in-person transactions, and they may be higher for small businesses than for large corporations. Interchange rates also vary significantly by country. You can view the interchange rates of Canada and USA below by clicking the below buttons.

The cost of interchange fees can add up quickly for merchants, especially for those with high sales volumes or low profit margins. Some merchants may pass on these costs to their customers in the form of surcharges or higher prices for goods and services. Others may choose to accept only certain types of payment cards or to limit the number of card transactions they accept in order to minimize their interchange fee expenses.

That being said there are some tactics that merchants can take to reduce their overall payment processing fees. It is very good to work with a payment processor that can help you get low rates, like TRC-Parus.

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Stop Funding Delays in Credit Card Processing

Kalle Radage — Sat, 26 Nov 2022 23:40:07 +0000

One of the great things about credit card processing is that funds are deposited into your bank account within one or two days without having to go to the bank. Everything is digital. However, not all payment processors are equal. Some do same day or next day funding, like TRC-Parus, and some payment processors take a week to put funds into your bank account.

On occasion, there are funding delays. This means funds are held by your payment processor for some time before they are deposited into your bank account. Funding delays are typically a couple days, but some cases can take weeks or months. As a business, there’s not much more frustrating in payment processing than funds not being deposited into your bank account. What’s worse is if you don’t even know why they are being held.

The reason funding delays happen

Funds to a merchant’s bank can be delayed for many different reasons. Overall, funds are delayed to prevent fraudulent transactions. It is to reduce risk of losing money. Even funds that are legitimate might be held because they appear fraudulent to the payment processor.

One of the most common funding delays occur when a particular transaction is higher than the average transaction of your business. For example, if you mostly have transactions that are $250 and you run a payment that is $7000, it is likely that the batch will be delayed until the $7000 payment is verified as legitimate. The payment processor will reach out to the merchant to verify the transaction. Sometimes the payment processor will even have the end customer verify the transaction.

If you have a merchant account with a payment processor with a high level of service, like TRC-Parus, they will verify the transaction quickly and release the funds. Many payment processors are slower and may take a week or two. If your payment processor is with an aggregator, like PayPal or Square, they may not reach out the merchant and just hold the funds to see if there is a chargeback. This could take weeks. You can do a simple search on Google for PayPal funding delays to read some of the stories of funds being held. This is one reason why larger businesses should go with a merchant account rather than an aggregator.

What to do if your funds are delayed

The most simple thing you can do if your funds are delayed is contact your payment processor and provide them with the information of your transactions in the delayed batch. Give them the details that ensure it is a legitimate transaction. Therefore, it is important that you keep good records of your transactions and customers. TRC-Parus tries to be proactive and will typically reach out to the merchant before they contact us if there is any significant delay in funding.

Reaching some payment processors can be very difficult if you don’t go with a payment processor with great customer service. If your payment processor is an aggregator like Square, it can be even harder. Aggregators are built to service millions of smaller businesses and use self-serve tools for merchants.

Ways to reduce funding delays in payments

Some funding delays are good, particularly in the case where it is truly a fraudulent transaction. However, most funding delays are not due to fraud. They are mostly due to one-off transactions that are not typical for your business. Here are a couple things you can do to prevent funding delays of legitimate transactions.

Ensure your payment processor has the correct limits of your business

When you get a new merchant account, you tell the payment processor about your average transaction size and the number of transactions per month. This gives them a baseline of what to expect. If there is any inaccurate data in this on-boarding, it can cause a delay. Ensure you supply accurate information. If your business changes, let your payment processor know. All businesses evolve.

Let your payment processor know before you run abnormal transactions

Payment processors look at your historical data and flag transactions that are inconsistent. When your business is about to run a transaction that is larger than normal or if you are about to have a large increase in sales, it is best to notify your credit card processor in advance. A merchant stands a much better chance of having no delays in batches if the payment processor is aware beforehand. For TRC-Parus, you can just send a quick email and we’ll file that to our risk department.

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How Much Does Credit Card Processing Cost?

Kalle Radage — Tue, 15 Nov 2022 00:06:28 +0000

Credit card processing is one of the “must-haves” for a lot of businesses. This is especially true because the world is moving to a cashless and internet-based economy. Payment processing is more similar to a utility, such as electricity or water. Unlike a traditional utility which has very few suppliers and frequently only one option, there is a lot of choice in payment providers. You can do a simple Google search on payment providers and you’ll see many options.

In credit card processing, there is a very wide range in what merchants pay due to the number of payment providers and the vast array of pricing tactics used. The many different pricing tactics make it quite difficult to compare and contrast payment providers. That’s why we recommend using your effective rate when comparing the costs.

In general, merchants will pay anywhere from 2% to 5% of their credit card processing amount in fees. This wide range is most impacted by three things: 1) whether you are accepting credit cards in person or not, 2) the markup that your credit card processor is charging you, and 3) the type of credit card your customer is using.

The amount merchants pay for payment processing

We stated that merchants typically pay an effective rate between 2% and 5% for payment processing. Let’s unpack this a little by categorizing merchants into three main types.

One main factor determining the rate a merchant pays is whether transactions are done in person or not. Credit card transactions that are done remotely (online or by phone) have more fraud, therefore it is riskier, which is why remote transactions cost more. A mid-level MasterCard for an in-person transaction will have an interchange rate of 1.22%. This same credit card used online will have an interchange rate of 2.3%. That’s a difference of 1.08%. Quite large.

In-person versus remote transactions make the first two buckets. Keep in mind, interchange is only part of the fees that merchants pay. You can learn more about interchange in the article what is interchange.

Type of Merchant	Estimated Average Cost
Merchants that accept payments in person	2% and $0.12 per transaction
Merchants that accept payments online or remotely	2.8% and $0.20 per transaction
Merchants with high-end or luxury customer base	3.2% and $0.15 per transaction

The third bucket is about how luxury the merchants’ customers are. Fancier credit cards are more expensive for merchants. More luxury people carry fancier credit cards. On average, you will see luxury stores have a much higher payment processing cost. To show this in an example, the interchange rate for a basic Visa credit card is 1.25%. The interchange rate for an AMEX Platinum is 2.40%. That’s 1.15% difference which is very significant.

If someone was going to ask us what the overall average effective rate a merchant pays for credit card processing, our answer would be 2.50% and $0.10 per transaction. This includes all businesses, physical and online. As online shopping continues to grow, that average will go up.

Ways to reduce your credit card processing fees

There are merchants we have talked to that have told us their credit card processing rates are zero. We wish that was true, because that is our mission. However, there is no possibility to accept credit cards for free without someone losing money. In the case of the merchants that thought their credit card processing was free, it was because they were told by a sale representative. This is something you have to watch out for. As the 3rd fundamental law of economics states, there is no such thing as a free lunch. Payment processing is not free. However, there are ways you can reduce your credit card processing fees.

Conduct transactions in-person when possible

More businesses are moving online, so in-person payment transactions are becoming more rare. However, online or remote payment transactions are more expensive than in-person transactions. One tactic some merchants are taking is to try to take payments physically in their store whenever possible. This could save you 1% on each transaction.

Use Square or Stripe if you process less than $100,000 per year

When you use a company like Square or Stripe, you are sharing a merchant account. They are called payment aggregators. Aggregators provide a lower fixed cost in monthly fees. When you are a smaller business, all fixed costs matter. You can read our in-depth article on the pricing of an aggregator vs a merchant account.

The $10 to $15 per month fixed fee that you generally need to pay with merchant account providers matters when you are processing less than $100,000 per year. Even though aggregators charge 2.9%, which is higher than a merchant account, the percentage difference is not a significant if you are processing a low amount. Use an aggregator if you process small amounts.

Get a merchant account if you process more than $100,000 per year

Once you reach the level of at least $100,000 per year in credit card processing, it’s time to think about moving off of PayPal, Stripe, or Square and move to your own dedicated merchant account. The higher the amount you process, the more it will reduce your payment processing cost to move to a dedicated merchant account. The below chart from our article comparing merchant account vs aggregators fees highlights the cost savings. If you are processing more than $100,000 per year, get a merchant account.

Where to get low cost credit card processing

The most effective way to get low cost credit card processing is to work with a transparent and reputable payment processor. When choosing a provider, ensure they offer payments in cost plus pricing, otherwise known as interchange plus.

TRC-Parus has a mission to lower the cost for merchants to accept credit cards. If you process more than $100,000 per year, reach out to Clearly payments to compare your pricing you would get.

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Early Termination Fees in Payment Processing

Kalle Radage — Mon, 19 Sep 2022 15:53:14 +0000

An early termination fee in credit card processing is an extra charge that a merchant gets for cancelling their merchant account prior to the termination date set in their contract.

The design of early termination fees is to discourage merchants from leaving. It is supposed to reduce churn. All payment processors want to make a profit and they think these fees may help retain customers. Unfortunately, many times the early termination fees come as a surprise to merchants once they try to switch payment processors. This is because some payment processors are not completely transparent with their fees and keep them in the fine print.

All in all, we think early termination fees have the reverse effect in retaining customers. This article is to give a little education on early termination fees and how to avoid them.

What is churn in payment processing?

Churn, also known as attrition, is the number of customers who leave a payment processor over a given time period. Churn can also be represented as a percentage which is the number of customers that left over a time period divided by the total number of customers at the beginning of that time period.

Customers leaving a business is expected, however when the churn rate becomes too high, it impacts the ability to grow or even sustain. To look at an example of churn rates, Netflix has some customer churn, but is quite low at 2.5% per year. It is thought in the tech industry that anything below 7% churn rate annually is very good.

In payment processing, the industry average for churn is over 20%. Some of these customers leave due to poor service, however it is also important to note that much of the churn comes from “new businesses” that signed up for a merchant account then went out of business.

The cost of early termination fees in payments

Not all payment processors have early termination fees. The good payment processors have no termination fee at all. However, when there is an early termination fee, it is generally a flat fee that ranges from $250 to $500.

There is also the possibility of a liquidated damages termination fee. This is a fee that is based on the estimated revenue that the payment processor would have received had the contract been completed. Sometimes these fees can be ridiculously high. For example, if you were expected to bring $5000 in fees to the payment processor per year and you have two years left, the fee could be $10,000. That’s insanity.

Your contract could have a $500 flat cancellation fee in addition to a liquidated damages fee. This is why it is so important to review your contract before you sign. Keep in mind, the best payment processors, like TRC-Parus, will have zero termination fees.

How to get out of early termination fees

The best way to get out of paying an early termination fee is to negotiate with your processor. This may not be easy, but it’s the best way. Prior to doing that, get to know your facts by reviewing your contract and key dates. TRC-Parus sometimes helps merchants with advice on how to get out of paying an early termination fee. Give us a call if you want to chat about it.

If you have been misled, you may also want to review Canada’s code of conduct. Canada implemented a Code of Conduct for payment processors that started in 2010. It is designed to get rid of poor or unfair industry practices. A good start is to review Canada’s Code of Conduct for the Credit and Debit Card Industry. It is possible to file a complaint to the code of conduct who may be able to help further.

Things to do before signing a payments contract

Here are a few key items you should do prior to signing a contract for your merchant account. It can be a pain to dig into these details, but it will pay off in the future.

Read the fine print in your contract
Review all essential dates
Get all promises on email (verbal is not enough)
Review your first statement to ensure all is expected
Read online reviews of the payment processor

After you you do these few steps, you are likely in great shape to sign you contract for a merchant account.

Final thoughts on termination fees

Payment processors come in all shapes and sizes. It is important to understand the bigger does not equal better in payments. Never feel pressure to sign a contract. Take your time and do online research. Even if you only check out the Google reviews of your potential payment processor, you’ll get a good sense on their customer service. Never settle for anything below a 4 out of 5 stars.

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