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What most merchants don't realize is that they are significantly overpaying for their existing account. Some merchants may even have a good idea that they are overpaying, but don't realize how easy it is to switch their account. The more volume you are processing as a merchant, the more you'll save by switching to a less Low Rate Merchant Accounts.
The discount rate is the rate that banks charge each other to process transactions and is used to manage the risk associated with transactions as well. There are three different discount rates, there's the qualified discount rate, the mid-qualified discount rate and the non-qualified rates. These rates vary depending on the type of credit card and some other components of the transaction.
You have a discount rate that represents a percentage of your overall volume, but you'll also have a per transaction fee which is a flat fee charged on all transactions. This fee is charged to cover the cost of sending those transactions electronically. This is a revenue center for both the banks as well as the merchant account companies but should still be something you're aware of as a business owner.
Financial Institution - For you merchants who are processing smaller ticket items, the per transaction fee usually represents a larger percentage of the overall transaction amount. Keeping this per transaction low is even more important that your discount rate if you have a low average per transaction.
Merchants processing high tickets, the discount rate will usually always overshadow the per transaction fee simply because a $.25 per transaction fee for a $5,000 product is extremely small where a higher discount rate of say .5% higher on that $5,000 transaction represents an increase of $25. So if you process the higher ticket items, you need to negotiate as low as you can the discount rate even if you pay a higher per transaction fee.
Switching your merchant to a new provider is easy. Generally it only takes a few minutes to complete an online application and a few minutes of verifying your prices and fees to know that you're saving money. Although the time span for switching to a new account isn't quick, the actual time you personally spend is typically less than 30 minutes.
One of the reasons many merchants won't switch their merchant accounts is because they have an existing contract for which they have an early termination fee. The irony here is that for most accounts, the savings on switching to a lower priced account far exceed the early termination fee. Some merchant account providers even offer a waiver or reimbursement to provide incentive for merchants to switch so if you find the right merchant account provider to go through, you'll have that early termination fee with your existing processor covered.
If your equipment is not PCI compliant, this may be a great time to switch to a new account. For most merchants, Processing Equipment is most likely already PCI compliant. Many merchant service providers now offer free equipment for new merchants including those switching over from another provider. Reprogramming your existing equipment is also an option and most merchant service providers will give you the reprogramming for free as well.
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