Flat Rate Credit Card Processing – Not Necessarily A Money Saver

Posted on: April 13, 2012 | Author: Patrick Hare

Flat Rate Credit Card ProcessingLots of merchants would like to see a flat rate for credit card processing, and there are a few services out there that are happy to accommodate. Unfortunately, flat rate merchant account providers probably aren’t going to get you the best deal on credit card processing. Like any business, fixed rate servicers need to make a profit. They will either make their money off of the margin between your quoted rate and the actual processing cost, or they will have hidden fees in addition to the processing charges. Whenever you compare merchant account providers, it pays to weigh all of the costs in order to make sure you aren’t paying too much to your credit card processing company. Over the lifetime of your account, you could be leaving thousands of dollars on the table.

A fixed credit card processing rate may be a workable solution for micro-businesses and low-volume merchants. For example, people who make money through hobbies or selling odds and ends at flea markets might benefit from a flat rate plan. Usually these individuals or businesses will use card reader attachments that plug into smartphones, and absorb the associated fees as the cost of doing business.  People who only expect to make a few hundred dollars per month may find these fixed-rate solutions to be useful.

If you are planning to expand your business in the near future, then you may want to opt for a more standard merchant-account type. Larger businesses, including home-based enterprises that make more than a couple thousand dollars per month, will see more benefits from merchant services which charge the lowest possible rate based on the type of card used.  For example, debit cards cost a lot less to process than credit cards when PIN numbers are entered. Credit cards cost less when they are swiped through a reader instead of being keyed in manually.  The potential for savings comes not from getting fixed rates but from getting the lowest base rates for processing overall, while all fees are clearly documented.

Why do credit card processing rates vary?  Without delving too deeply into “pricing tiers” for credit cards, the short answer is because credit card companies charge different rates for different card types. Generally, additional charges are tacked on to the “qualified rate” which is the lowest rate you pay when accepting a card. For instance, a “rewards” card has a higher markup than a standard card. A business that is in a “high risk” field where there is a greater danger of chargebacks may pay more for processing than on that is not. An individual business that experiences multiple chargebacks, for whatever reason, is going to be saddled with higher merchant fees as well. If a processor says they can offer a “fixed rate” or “flat rate” that is the same for everyone, then some merchants will be overpaying in order to balance out those at the other end of the risk spectrum.

Capital Processing Network has a more unique approach to fees. We start by qualifying your merchant account statement in order to prove that we can save your business money.  We can outline all of your costs, including fees, in order to compare your current costs with our quoted rates. We can also tailor solutions based around how your customers make purchases. Once you have all of the information in front of you, you can decide whether you would be better off with “flat rate” processing or a plan that puts more money back into your bank account.

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