What Cost Is Involved In Payment Processing. Merchant Services Fee.
Merchant services fees can simply be defined as a specific percentage of money the merchant pays for services rendered by financial institutions or financial middlemen. The parties or middlemen involved in processing a transaction between a customer and a merchant are Credit card associations, Credit card issuing banks, Credit card processors, Merchant Service account providers and Payment Gateways. The fees can be classified into three:-
Transnational Fees: These are fees the financial organizations charge a merchant whenever a transaction takes place on their online/POS platform.
Flat fee: This is an additional fee that the merchant pays the financial middlemen monthly
Incidental Fees: Incidental fees are only charged per incidence, unlike flat fees. When a chargeback occurs, for instance, a merchant is charged a chargeback fee. Some months they will (hopefully!) not have any chargebacks, and therefore, the fee will not be charged.
RATES OF MERCHANT SERVICES
- Interchange Plus
This is also known as interchange plus pricing. This type of price model is the most transparent among all price rates. Its fees and terms are always straightforward and understandable. Interchange plus differentiate transnational, flat and incidental fees by clearly and individually listing them on the monthly statement of account of merchant services. It could make the statement look bulky and difficult to read, but its okay since all charges are clearly stated out with reasons of deductions outlined.
- Tiered Pricing Model
This is a type of pricing plan that differentiates credit card transactions into three classes namely non-qualified, mid-qualified and qualified. Normally, General rates are the lowest charged, while the rates for mid-qualified are a bit fair compared to the rates of non-qualified which are generally the highest among the three categories. Qualified categories are those that must meet all the criteria’s of a processor, any other thing that shortfall from the complete requirements a processor needs may result to either mid or non-qualified. Majority of business owners are subscribed to a tiered plan, some are not aware of the category differences, this makes it easier for some dubious merchant account processors to take advantage of the rigid price plan to overcharge merchant services. A merchant could end up paying double or excess fees with little way of knowing exactly what they are paying for.
- Membership or Subscription Pricing Plan
This type of ervplan is a new type of pricing system. It is similar to interchange-plus which indicates separate charges ranging from transnational, flat and incidental fees. The major differences between the two type of pricing plans are that in the subscription pricing plan a small percentage is paid as flat fees compared to the interchange plan. Merchants with a large volume of transactions will appreciate this type of charging plan because of the low charges.
- Blended Pricing Plan
This is also similar to the tiered pricing plan only that it does not have the tiers. All transactions are charged equally in terms of fees and percentage. The cost is blended to create a single rate and fee. The transaction cost of this type of pricing plan is considered to be high especially for debit transactions.