Since 2007 we
have been involved in the campground industry marketing credit card services. Dozens
of articles have tracked the changing rate structure currently offered to
merchants of all kinds and we have seen the changes from “tiered rates” to
“interchange plus” rates and, still, it is apparent that there are campground
owners who have NO IDEA of what rates they are paying.
Today, one of our new
associates was told by a prospective customer that they were paying 1.69% on
credit cards. That is either impossible, a miracle or someone who understands
nothing about what they are actually being charged by their processor.
So let’s look at all there
possibilities. If this prospective customer (a nice lady) meant that her
overall rate was 1.69%, that is impossible. The credit card companies, by which
I mean Visa, MasterCard, Discover and American Express charge processing banks
rate that are higher than that. Those banks, generally raise the rates before
handing them off to an Independent Sales Organization (an ISO in Bankese) and
they raise the rates before giving them to an agent who sells them to a
merchants, after increasing those rates once more.
Remember now, we are talking
about interchange rates. Those are the rates set on INDIVIDUAL CARD TYPES by
the card companies. For instance, there are as many as NINE different debit
cards, several different credit cards, many different REWARDS CARDS, lots of
corporate cards, gasoline cards, branded cards like airlines or department
stores, ad nauseum. Each card type has its own rate. There are debit cards as
inexpensive as .61% and commercial cards which can cost 2.79% and those rates
are before the several increases mentioned in the previous paragraph. Most
credit card transactions range in the mid-1.xx% range – unless they are NOT
SWIPED. Non-swiped transactions such as those done over the phone, or by
computer such as reservations or purchases performed in that manner have an
extra cost – as much as 1% more.
To these rates, the ISO adds
other fees such as transaction fees, service fees, batch fees, PCI compliance
fees, annual fees, and a host of other fees which may or may not be added to
the monthly billing.
So if that lady thought her
OVERALL rate was 1.69% she was just plain wrong. What she might have believed
was that she was still on TIERED RATES. 1.69% was a decent rate for a swiped
credit card that wasn’t a corporate card. Of course if it were a debit card,
processed with a pin-pad her rate might have been cheaper – or if it were a
rewards card or commercial card it would have been quite a bit more expensive.
That still doesn’t account for those add-on fees we mentioned above. No, 1.69%
is just about impossible.
You can figure your rates
several ways. First do the simple math. If you did $10,000 this month in credit
cards and paid $300, your overall rate is 3%. That rate is a bit high even if
you have a mixture of swiped and non-swiped transactions. However if you ONLY
swipe transactions that rate is very high, and if you use a pin-pad for debit
card, that rate is exceptionally high.
As a processor, interested
in saving our customers money we find if we are allowed to review the current
credit card processor’s statement from a campground, we can determine HOW to
save the customer money.
Then it’s all up to WHAT is
charged for the PLUS in Interchange Plus. Therein is the secret of the success
of any credit card processor worth its salt!
