Anyone that’s had to take care of merchant accounts and credit card processing will tell you that the subject might get pretty confusing. There’s a great know when looking for new merchant processing services or when you’re trying to decipher an account in order to already have. You’ve visit consider discount fees, qualification rates, interchange, authorization fees and more. The list of potential charges seems to take and on.
The trap that people fall into is they get intimidated by the amount and apparent complexity belonging to the different charges associated with merchant processing. Instead of looking at the big picture, they fixate using one aspect of an account such as the discount rate or the early termination fee. This is understandable but it makes recognizing the total processing costs associated with an account very difficult.
Once you scratch the surface of merchant accounts earth that hard figure out of. In this article I’ll introduce you to a marketplace concept that will start you down to approach to becoming an expert at comparing marijuana merchant account accounts or accurately forecasting the processing charges for the account that you already gain.
Figuring out how much a merchant account will set you back your business in processing fees starts with something called the effective interest rate. The term effective rate is used to for you to the collective percentage of gross sales that an agency pays in credit card processing fees.
For example, if a venture processes $10,000 in gross credit and debit card sales and its total processing expense is $329.00, the effective rate using this business’s merchant account is 3.29%. The qualified discount rate on this account may only be four.25%, but surcharges and other fees bring the total price over a full percentage point higher. This example illustrate perfectly how when you focus on a single rate evaluating a merchant account can prove to be a costly oversight.
The effective rate is the single most important cost factor when you’re comparing merchant accounts and, not surprisingly, it’s also one of the most elusive to calculate. A protective cover an account the effective rate will show you the least expensive option, and after you begin processing it will allow you to calculate and forecast your total credit card processing expenses.
Before I get into the nitty-gritty of how to calculate the effective rate, I’ve got to clarify an important point. Calculating the effective rate of a merchant account the existing business now is easier and more accurate than calculating the speed for a new customers because figures derive from real processing history rather than forecasts and estimates.
That’s not to say that a new clients should ignore the effective rate found in a proposed account. Every person still the most important cost factor, but in the case about a new business the effective rate should be interpreted as a conservative estimate.