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Misconceptions in Credit Card Processing Comments Off

Misconceptions in Credit Card Processing

Credit Card Processing

Misconceptions in Credit Card Processing

There are many common delusions in credit card processing and sales reps can utilize those to strategy you into overpaying. In this blog, we’ll clear up these credit card processing delusions to assist you to avoid common drawbacks and misleading sales spin.

Misconception 1: Flat Rate Pricing is the most economical

Flat rate pricing, where a processor renders you a fixed rate for transactions, looks easy. Rather than of various interchange rates, you will just experience a single rate. Organizations like Square, Stripe, and PayPal render flat rate pricing. You may experience to see it as 2.75% (in the situation such as Square’s swiped transactions) or 2.9% + 30 cents (in the situation like Stripe’s online transactions.)

The fact is, flat-rate pricing can be the most economical option, but only for enterprises that satisfy very specific criteria. In the case of Square, for instance, it will be your least cost option if your average transaction is below $10 OR if you just receive a few thousand dollars per month in credit cards. Or else, competitive interchange plus pricing will be reduced cost.

The sense is that flat-rate pricing is more or like much higher than the “wholesale” cost to proceed with your transactions. Irrespective which processor you opt for, that company incur interchange fees to process cards. In return, the company charges you to back their costs of interchange addition to a markup for their profit.

With flat-rate pricing, the processor charges you single rate irrespective of how much the transaction costs at wholesale. On interchange plus, the processor gets along the wholesale interchange costs to you and then endorses a separate markup.

The change between the interchange costs and the rate you pay is the money the processor makes. On interchange plus pricing, you would see reduced costs when the transaction costs are lower because the processor gets along the lower interchange costs. On flat rate, the processor exists to charge their one flat rate. So, when a transaction costs them lesser to process, they earn more money rather than passing the savings to you.

Where does this misconception originate from?

There are two causes for this misconception. The first is enterprises that would genuinely pay less if they look to sign up with a flat rate company. A coffee outlet with $5 average transactions, for instance, could be stated well over Square’s 2.75% irrespective of how many interchange plus processors they coordinate with. So, to them, they figure out flat rate, see that it’s an economical option for their situation, and tout it as the least cost option. While that’s certain for their business, it’s not a truth for companies that do not have the same kind of processing profile. Pricing for credit card processing is highly business-specific. What’s the least cost for one enterprise, won’t mandatorily be the lowest cost for yours.

The second reason is businesses that move from “tiered” pricing to flat rate. Tiered pricing is blurred, expensive, and complicated. An enterprise shifting from tiered pricing to flat rate will generally see a decrease in cost, but they could reduce costs even more if they chose to opt for competitive interchange plus solution instead. But, they may not recognize the comparisons between interchange plus and tiered (which both indicate more detail than a flat rate statement and looks more complicated) and thus evaluate that flat rate is lowest. The cheapest cost pricing for your business will vary on your specific requirements and processing volume. Alone due to another business secured low costs with one solution doesn’t necessarily indicate it will be the lowest cost for you.

Misconception 2: Interchange Plus Pricing secures You from Being  Burst

While it’s certain that interchange plus pricing is more clear and has the potential to help you protect the lowest costs, be sure that it’s not a silver bullet. The fact is, interchange plus pricing can still be calculated move. At Ipaytotal, we are majorly seeing processors “pad” interchange.

Here’s how it goes. You move out and learn all about processing. You’ve read Ipaytotal’s credit card processing model, you’ve figured out on interchange plus is the fittest for your business, and you know how to differ markups to get the lowest cost.

The processor gives you a nice, low markup and you enter in. The processor then processes to make up for the low markup by enhancing the interchange rates. Instead of passing interchange fees to you at cost, the processor adds markup to interchange but spares it labeled as an interchange. Even worse, they generally only apply it to some interchange classifications, making it more difficult to spot.

In the instance below, we figure out a business’ processing statement and observed padded interchange in few categories. We just write them what the true interchange cost has to be, together with the cost if they do business with had been charged according to actual interchange. After that, we also contain what the business was legitimately charged and calculated the overage.

As you can make out, overcharging can add up swiftly. This business paid around $78 over the real interchange cost. That doesn’t include for other fees that which will be paid to the processor. This is closely the hidden costs of calculated interchange plus pricing.

How to bypass Padded Interchange

Keep than assured that you’re getting interchange plus with actual pass-through pricing, where interchange and assessments are given to you at cost. The best way to ensure true pass-through is to use Ipaytotal. All of the accredited quotes you accept from processors in our sphere are true pass-through pricing as a component of our contractual agreement with the processors. Besides that, Ipaytotal audits your processing statements to make sure that processors don’t cheat on you. Ipaytotal is free to use, making it a no lose a game for businesses that don’t want to lose money on processing fees.

Misconception 3: You’ll receive the Best Pricing by eliminating “Middlemen.”

In merchant services, Few processors try to keep it sound like you will be “going direct” to the card companies or assume that they can assist you “avert the middleman.” In actuality, no one moves to “direct” the card companies. There is most of the time a processor to assist the transactions.

Besides this, while Visa and Mastercard do establish interchange rates, your processor is actually responsible for your whole processing costs. Markup, Pricing model and interchange padding all do confirm a crucial a role in how much you will pay. It’s not certain to get a merchant account along with Visa or Mastercard and “go straight” to ‘eliminate the middleman’ for securing lower costs.

Misconception 4: You Can’t Get the least Pricing Unless You’re a Big Enterprise

Small enterprises generally think that they are not big enough or significant enough to get lower pricing, but that is just not certain. Here at Ipaytotal, we keep on helping small businesses get the similar great pricing that larger companies enjoy. The source for securing good pricing is education and assurance. If you move into it thinking that your business is too little and resigning voluntarily to whatever rates a processor offers, you’re drowning yourself.

How to Get Better Pricing as a Small Enterprise

To get the better pricing as a small business, move into it thinking that it can happen. Don’t resign on your own to higher pricing just because you are not a publicly traded organization. Be practical about what pricing you can receive but just do not assume that you need to make $1 million/year before you can get reduced prices.


If you are looking for a Reliable Merchant Account Provider, you are in the right place, as iPAYTOTAL provides the best solutions for Low and High-Risk businesses. We guaranty quick real-time credit card processing, top-notch services and at reasonable rates. Give us a call at +44 800 776 5988 or get in touch with us through our website.

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