Knowledge of credit card processing pricing models can save your business money. In this article we describe the Interchange Plus Pricing model for merchants. We'll compare it briefly to other models, state its advantages, disadvantages and give a practice example.
Why do some businesses get lower credit card processing costs than others? In this video David explores the criteria that cause some businesses to get lower rates than others and techniques that you can use to reduce your processing costs.
It is extremely frustrating for merchants to be notified of an increase to your credit card processing rate. In many cases, these increases may be unfair and add unnecessary additional expense to your business. Fortunately, there are protections in place that can help protect your business should this happen to you.
David breaks down the current interchange rates for e-commerce merchants in Canada for 2023. These figures were taken directly from the Visa and Mastercard Canada interchange tables. These interchange rates apply not just to e-commerce transactions but also virtual terminal and other card-not-present type transactions.
Some payment processors have a 'standard practice' of raising credit card processing costs on merchants. This is dishonest and unethical. In this video David explains when rate increases are reasonable (which is very, very rarely), and how to fight back when it does occur.
Some merchants that use Shopify express frustration over the Shopify percentage based fees that are charged per transaction. In this video David explains why payment processors charge percentage based fees (because of interchange fees and chargeback risk), and why most shopping cart software providers charge a monthly fee, but don't charge percentage based fees. He also discusses some options that some merchants have used in an attempt to lower their Shopify processing costs.
It's completely reasonable to revisit the fees that you pay once in a while. However, in fairness to the processor there has to be some reason why your rate should be lowered. In this video David explains when you should ask for a rate reduction, and how you should approach the conversation so that you can build a compelling reason and increase the likelihood that the processor will agree with your request.
What are credit card assessment fees or card brand fees?
(Slightly edited from video transcript for greater readability)
Key Takeaways
1
Assessment fees
Assessment fees are a small fee charged by the card brands on every transaction. This is where Visa and Mastercard make their money.
2
Don't let them be marked up
Don't let your payment processor charge more than the actual true Assessment fee cost from Visa and Mastercard.
3
Importance of assessment fees
Understanding assessment fees is critical to calculating the total cost of credit card processing.
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Hello, David here at Merchant-Accounts.ca. Today I have a tip of the day and it is:
Do not pay marked up card brand fees or assessment fees when processing credit cards.
In order for this to make any sense you probably have to understand what the card brand fee is (which is also sometimes called the assessment fee). This is a small fee that all merchants incur when processing credit card transactions. The fee comes directly from the card brands (it is where Visa or Mastercard themselves actually make their money).
The actual cost of the card brand fee is very small. At the time of recording this the Visa card brand fee is 0.09% and the Mastercard brand fee is 0.08%. What can cause confusion is that they sometimes show up on a processing statement as either a "card brand fee", or in other cases an "assessment fee". However, regardless of the term used to describe the fee, so long as you understand what it is, and how much it costs, you can make sure that you are not being taken advantage of from a pricing perspective.
These are small fees but that doesn't mean they can't be marked up. There are a lot of really good and really honest payment processors out there, but there are others that take advantage of merchants who don't know better. So you should look at your processing statement and if you're paying significantly more than 0.10% (just to make it easy) for your card brand fee or your assessment fee you should talk to your processor, or better or you should consider switching.
This is one of the few ways that merchants can actually pay a higher rate than they're expecting when they get an interchange plus quote. I don't want to make this video too long. I have other content online about what interchange plus pricing, is and pretty much every merchant should be on it especially if you're processing higher volumes of transactions. Having marked up assessment fees are one of the few ways to be on interchange plus pricing and still not get a good value. You have to make sure the card brand fee (assessment fee) is not marked up.
Summary
This was a very quick little tidbit of advice about assessment fees. Assessments are a very small fee that all merchants incur. It's important to make sure that your payment processor is not marking them up any further than the actual cost as set by Visa and Mastercard.
If you are looking for a new payment processor, or would just generally like to see if your existing merchant services provider is treating you right and would like a quote, reach out to us .
Knowledge of credit card processing pricing models can save your business money. In this article we describe the Interchange Plus Pricing model for merchants. We'll compare it briefly to other models, state its advantages, disadvantages and give a practice example.
Why do some businesses get lower credit card processing costs than others? In this video David explores the criteria that cause some businesses to get lower rates than others and techniques that you can use to reduce your processing costs.
It is extremely frustrating for merchants to be notified of an increase to your credit card processing rate. In many cases, these increases may be unfair and add unnecessary additional expense to your business. Fortunately, there are protections in place that can help protect your business should this happen to you.
David breaks down the current interchange rates for e-commerce merchants in Canada for 2023. These figures were taken directly from the Visa and Mastercard Canada interchange tables. These interchange rates apply not just to e-commerce transactions but also virtual terminal and other card-not-present type transactions.
Some payment processors have a 'standard practice' of raising credit card processing costs on merchants. This is dishonest and unethical. In this video David explains when rate increases are reasonable (which is very, very rarely), and how to fight back when it does occur.
Some merchants that use Shopify express frustration over the Shopify percentage based fees that are charged per transaction. In this video David explains why payment processors charge percentage based fees (because of interchange fees and chargeback risk), and why most shopping cart software providers charge a monthly fee, but don't charge percentage based fees. He also discusses some options that some merchants have used in an attempt to lower their Shopify processing costs.
It's completely reasonable to revisit the fees that you pay once in a while. However, in fairness to the processor there has to be some reason why your rate should be lowered. In this video David explains when you should ask for a rate reduction, and how you should approach the conversation so that you can build a compelling reason and increase the likelihood that the processor will agree with your request.
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Can I Help Lower Your Processing Fees?
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My name is David Goodale, CEO at Merchant Accounts.ca. I launched our business in 2001 and have over 20 years of expertise in the field of online payments. If you have a payments related question or project, and especially if it relates to multi-currency or international e-commerce don't hesitate to contact me. I'm always happy to help with an honest opinion, and enjoy chatting with folks from interesting businesses.
