How To Find The Effective Rate For Your Processor

Are you considered high risk?  High-risk merchants can be defined by industry, and if you are considered high risk, you should expect to pay higher rates to process their transactions, regardless of what the interchange rates are.

• Can you spot hidden or junk fees?  Remember, the effective rate takes into account total fees, not just interchange rates and rate markups. You could have hidden fees or incidental fees for that particular month. Check out our complete guide to rates and fees and our guide to analyzing your processing statement in full to learn more about all the potential fees involved in card processing.
• Is your average transaction size quite small? Businesses with very small average tickets are often hit hard by the flat, per-transaction piece of an interchange rate or processing rate. For instance, if you sell very small-ticket items, the effective rate on a flat-rate plan could be higher than it could be before any other fees are counted.
• Do you have international transactions? Card brands like Visa and Mastercard also charge some wholesale transaction fees, but these are typically much less than interchange. The exception is for international charges, particularly if currency conversion is involved. If your processor passes cross-border assessments through on the statement, this is added on top of all other normal fees and rates.
• Are your transactions being downgraded? Downgrading means that transactions are getting bumped into higher-rate tiers for any number of reasons (most of which are completely out of your control). If you’re on a tiered pricing plan, we’d check to see costs on qualified vs non-qualified credit card transactions. We generally recommend steering clear of tiered pricing plans because fees often get muddy and unpredictable.
• Are there other factors inching costs up? If you’re on a more transparent cost-plus model (like interchange-plus or subscription) you can also examine your statement in more detail to look at any specific fees like annual fees. You also want to identify if your team is manually keying in transactions, which almost always cost more to process and should be avoided if possible. Additionally, security fees could also contribute to your overall effective rate. And to add to all that, you may identify other rogue fees that may not have been clearly disclosed if you were lulled by a “teaser rate”.
• Is the processor’s markup too high? This one’s pretty self-explanatory, but it’s also worth pointing out that the only way you can accurately see the difference between standardized, wholesale costs (like interchange) vs. the processor’s variable markup is with a cost-plus/pass-through pricing plan like interchange-plus.