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 Upon further review, however, we found that additional fees were being withdrawn on a daily basis.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?
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