We performed a statement analysis the other day on a fast service restaurant. At first glance, their effective rate was around 3.5% which is not too crazy for this type of establishment. Upon further review, however, we found that additional fees were being withdrawn on a daily basis. This bumped their effective rate to over 5% which is highway robbery for the cost of doing business with credit and debit cards and amounts to 'double dipping'.
Remember, effective rate is equal to the total amount of credit card fees paid divided by total Non Amex credit/debit card volume. There are different norms for different industries with restaurants on the higher side and medical offices on the lower end. What is your effective rate and is it high or low?
Monday, August 8, 2011
Monday, June 13, 2011
Tiered Pricing WILL NOT capture Dodd-Frank/Durbin Amendment Savings
If your business uses PayPal or GoDaddy for e-commerce or has a tiered pricing structure for traditional credit cards, you WILL NOT capture the savings when the Durbin Amendment becomes law on July 21
The Durbin Amendment is set to become law on July 21 and will effectively lower the debit card interchange rate from an average of 44 cents per transaction to 12 cents per transaction. PayPal's second best merchant rate package is 2.2% plus 30 cents per transaction.
For a $100 debit card transaction done on your e-commerce website, you would currently pay $2.50 to Paypal. When July 21 comes around, you will still pay $2.50 to Paypal. If you were to switch to an 'interchange plus' platform like ours, you would pay $0.12 for the interchange rate plus our negotiated processing fee (call it 10 cents and 0.20%) for a total of $0.42. You would therefore capture the $2.08 per $100 transaction that Paypal otherwise keeps.
Tiered pricing for traditional merchant processing would yield similar results. Please contact me to discuss further.
The Durbin Amendment is set to become law on July 21 and will effectively lower the debit card interchange rate from an average of 44 cents per transaction to 12 cents per transaction. PayPal's second best merchant rate package is 2.2% plus 30 cents per transaction.
For a $100 debit card transaction done on your e-commerce website, you would currently pay $2.50 to Paypal. When July 21 comes around, you will still pay $2.50 to Paypal. If you were to switch to an 'interchange plus' platform like ours, you would pay $0.12 for the interchange rate plus our negotiated processing fee (call it 10 cents and 0.20%) for a total of $0.42. You would therefore capture the $2.08 per $100 transaction that Paypal otherwise keeps.
Tiered pricing for traditional merchant processing would yield similar results. Please contact me to discuss further.
Monday, May 23, 2011
Interchange Plus
We pitched our credit card processing to a potential client using our standard 'interchange plus' pricing model. After he accepted our terms, he told us that his accountant said, "I know they won't give it to you but ask for 'interchange plus' pricing." Fortunately for us, we already use it, the most transparent pricing model in the industry and have entered into another mutually beneficial relationship.
www.keystonemerchant.com
www.keystonemerchant.com
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