There are several different types of credit card processing and merchant account “plans” to choose from when you want to process debit and credit transactions at your place of business. For many people, understanding the rates, fees, transaction costs, and other such details related to costs of processing debit and credit payments can seem rather complex and complicated. Basically, there are three main methods to choose from; flat rate, tiered rate and interchange-plug processing.
The fees charged each month are based upon the volume of transactions processed, the dollar amounts, and the processing method used. To help give you a better understanding of processing fees, let’s take a look at the three different methods currently used.
Flat Rate Processing
On the surface, flat rate processing sounds appealing to many small businesses because they are charged a flat rate for all debit and credit transactions. Flat rate processing accounts can be set up quickly, and they are simple to use because you do not have to set up your own merchant account but, rather, share a payment facilitator’s merchant account with numerous other businesses and individuals. One of the more popular flat rate processors is PayPal.
The biggest disadvantage to using flat rate processing is that the markup on the interchange rates is often much higher than if you had your own merchant account. Furthermore, flat rate processing is not regulated, which means the processing costs can increase at any time, without any notice. For businesses with a high volume of transactions, this is one of the worst methods to use because it will eat away at your profits.
Tiered Rate Processing
This processing method offers different tied levels based upon the type of transaction. Fees include the interchange rate plus a varied markup rate for each tiered level, with fees increasing as you move from “qualified,” to “mid-qualified,” to “non-qualified.”
The problem with this type of processing is if a transaction is not processed according to the merchant agreement, it is processed as either a “mid-qualified” or “non-qualified” transaction, both of which have higher fees. Just like flat rate processing, tiered rate processing is not regulated, so the provider can shift transaction types into any tier at any time, as well as adjust their markup.
Interchange-Plus Processing
This processing method is one of the most transparent ones because all fees are clearly outlined. Each transaction type is broken down, based upon the cost of the interchange rate, to process the payment and the markup added by the provider, which provides consistency, making it easier to monitor the true costs of processing credit and debit transactions.
In the past, only businesses that processed large volumes of transactions could choose interchange-plus processing for their merchant account, leaving small and medium businesses to either use flat rate or tired processing methods. However, that is no longer the case, and Leap Payments offers interchange-plus processing for businesses of all sizes.
In addition, we offer our Lifetime Rate Lock because we believe that caring for our customers means helping keep their transaction fees and costs down, without the worries of rates increasing unexpectedly. We guarantee our rates will not increase for the life of your account!
No bait and switch, no teaser rates, no gimmicks; just simple, straightforward, and honest pricing, combined with the best merchant services. To learn more about our Lifetime Rate Lock and interchange-plus processing, please feel free to contact Leap Payments at (800) 993-6300 to speak with a representative today!
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