Anyone that’s had dealing with merchant accounts and financial information processing will tell you that the subject might get pretty confusing. There’s much to know when looking for first merchant processing services or when you’re trying to decipher an account that you already have. You’ve has to consider discount fees, qualification rates, interchange, authorization fees and more. The list of potential charges seems to be on and on.
The trap that many people fall into is may get intimidated by the quantity and apparent complexity of the different charges associated with merchant processing. Instead of looking at the big picture, they fixate for a passing fancy aspect of an account such as the discount rate or the early termination fee. This is understandable but it makes recognizing the total processing costs associated with a tally very difficult.
Once you scratch top of merchant accounts the majority of that hard figure as well as. In this article I’ll introduce you to a business concept that will start you down to way to becoming an expert at comparing merchant accounts or accurately forecasting the processing charges for the account that you already enjoy.
Figuring out how much a merchant account price you your business in processing fees starts with something called the effective interest rate. The term effective rate is used to to be able to the collective percentage of gross sales that company pays in credit card processing fees.
For example, if a business processes $10,000 in gross credit and debit card sales and its total processing expense is $329.00, the effective rate of those business’s merchant account is 3.29%. The qualified discount rate on this account may only be 5.25%, but surcharges and other fees bring the sum total over a full percentage point higher. This example illustrate perfectly how focusing on a single rate when examining a merchant account may be a costly oversight.
The effective rate may be the single most important cost factor when you’re comparing marijuana merchant account accounts and, not surprisingly, it’s also among the elusive to calculate. You’ll be an account the effective rate will show the least expensive option, and after you begin processing it will allow for you to definitely calculate and forecast your total credit card processing expenses.
Before I have the nitty-gritty of methods to calculate the effective rate, I should clarify an important point. Calculating the effective rate regarding a merchant account for an existing business now is easier and more accurate than calculating unsecured credit card debt for a new customers because figures are based on real processing history rather than forecasts and estimates.
That’s not point out that a clients should ignore the effective rate of some proposed account. It is still the crucial cost factor, but in the case of a new business the effective rate should be interpreted as a conservative estimate.