True Pricing - Flash Transcript

What is your rate is the most commonly asked question by businesses looking to accept credit cards or change providers. But what they should be asking is ‘how much will it cost me to process credit cards with you?’

Traditionally, a simple rate structure or true pricing was reserved for big businesses with high leverage. Element Payment Services has decided to level the playing field and make true pricing available to businesses of all sizes and in the process take the mystery out of the cost of credit card acceptance. Business owners are frequently puzzled by service rates and fees. They wonder why they are charged different amounts depending on the type of card used and who keeps the percentage of their sales that is siphoned away as surcharges and fees.

The answer to these questions revolves around interchange and dues and assessments. Interchange is a fee that Visa and MasterCard require merchants to pay card issuing banks for accepting their cards. It’s comprised of over a series of a hundred different rate categories each containing requirements that must be satisfied for a transaction to qualify for a specific rate. Dues and assessments are membership fees paid by financial institutions to Visa and MasterCard. These fees have no categories, rules or criteria. They are simply a set percentage of the amount of the sale and are the same for every transaction processed.

Merchant account providers traditionally charge for transactions using tiered pricing schemes, commonly referred to as bucket pricing, wherein the hundred-plus levels of interchange are separated into buckets commonly labeled qualified, mid-qualified and non-qualified. Under bucket pricing, each bucket is priced high enough to cover the cost of the transaction type with the highest interchange fee. Consequently, merchants pay higher fees for all other interchange types in the same bucket.

Additionally, Visa and MasterCard make adjustments to interchange categories once or twice a year. These increases usually effect only one or two interchange rate categories in a bucket but can negatively affect businesses by giving providers the opportunity to raise rates on entire buckets. Merchant account providers use their own discretion to determine what buckets the categories of interchange will be separated into and it is often not defined in a merchant’s agreement with the provider. Since the criteria for this decision are proprietary, inconsistencies are common between providers. This makes is nearly impossible to accurately compare pricing from one provider to the next. Transactions that would land in the mid-qualified bucket with provider A may land in the non-provider bucket with provider B.

There is an alternative to bucket pricing available through Element Payment Services. True pricing or pass through pricing is the answer to unveiling the mystery around card acceptance costs. With true pricing, actual card charges for processing are passed through to you. When Visa and MasterCard raise interchange rates, only the affected categories are increased—not an entire bucket. Rates and basedon your Visa and MasterCard average monthly dollar volume and sale amounts. Using these variables, the true pricing rate is determined up front at the time you sign a contract and remains effective throughout the term of the agreement.

With true pricing, each interchange category carries a consistent margin providing you with the most competitive pricing, the lowest processing costs, a set, disclosed and consistent profit margin and an understanding of the exact impact from interchange increases and decreases.

For more examples of how true pricing can result in savings for your business, contact our sales professionals today. Take advantage of true pricing and reduce your costs of card acceptance.