As a business owner, every penny matters. Imagine saving $30,000 per year on credit card processing. How would you reinvest that money into your family entertainment center (FEC) or amusement park? A new attraction? A new hire?
Knowing the difference between your transaction rate and effective rate could save you a lot of money.
You may have a great transaction rate for credit card processing at your FEC, but what you should really be concerned with is the effective rate. Let’s take a look at each:
Transaction rate is the amount paid specifically for each charge posted.
Example: Interchange + 0.2% and $0.10 per transaction
Effective rate is the amount paid per transaction AND all additional fees
Example: Interchange + 0.2% and $0.10 per transaction and any monthly fees, PCI fees, hidden fees, etc.
So you can see that while someone may have an attractive transaction rate, once you add in all of the extras, their rate might not be that appealing. A 2.2% rate sounds great until it’s really 4% with all the added-on junk.
How can you calculate your effective rate? It’s easy! Divide your total fees deducted by the total sales in any given month. Example: $2200 fees / $100,000 sales = 0.022 = 2.2%
You should expect to see 2 – 2.2% for card present transactions and 2.7 – 3.1% for card not present (online/phone).
There are many names for hidden/junk fees, including:
- Statement fee
- monthly fee
- yearly fee
- PCI non-compliance
- Batch fee
- Batch Settlement Fee
- Network & processor Access fee
- Discount Adjustment
- Review trackers
- Safer payments
- The list goes on and on!