Published December 21st, 2015 by

Get the Best Retail Credit Card Processing Rates

Money concept with investments icons design, vector illustration 10 eps graphic.If you have a storefront business that processes the majority of your transactions inside your store, you’ll qualify for retail credit card processing rates. The good news is, these 'card present sales' allow for some of the lowest rates available. Card present sales are also known as swipe transactions – don’t mistake card present sales for manually keyed-in credit card processing transactions, however. To get the best retail credit card processing rates, you’ll need to make sure that your whole team is swiping as opposed to manually entering credit card transactions whenever possible. The difference between manually keying in your credit cards and swiping is that the magnetic strip offers you more security. With that reduced risk of fraud, your rates will be comparatively lower. Why there is Less Risk for Retail Purchases In addition to reducing the risk of fraudulent charges by swiping the card in store, there are a few other factors that come into play when the rate structure is developed for your business. The merchant services company will also take into account your AVT, or ‘average ticket size’. Generally speaking, the lower the average cost of your transactions are, the better rates you’ll get. We’ll go into the specifics later, but take the example of a local gourmet coffee shop as an example of how lower AVT poses less risk to the financial institution: When each consumer files into the coffee shop and they purchase their lattes, teas, or espressos, the cost most likely won’t get the better of twenty dollars. This store makes their money in smaller purchases with relatively more visitors than say an electronics shop selling flat screen TVs. If customer xyz’s purchase later results in a chargeback, the coffee shop owner will feel much less of a pinch than the electronic shop’s owner. A chargeback refers to a disputed charge which the retailer has the responsibility to make good on – when you accept credit cards at your establishment, you offer convenience to your customers and even increase the likelihood that they’ll buy from you, but it does come with a bit of a risk. Chargeback tip: If you’re made aware of a dispute, respond as soon as possible to boost the likelihood of resolution. This way, you may be able to avoid fees or even better, keep the sale. As the price of the service or product increases, so does the risk of chargebacks and fraud, but the merchant services company will also take into consideration the type of business you run in regards to what products or services you sell. You’ll either be rated as low risk or high risk, and we’ll touch on what that can mean for you a little on down in the blog. A Breakdown of Retail Credit Card Processing Rates Your rates and fees will vary depending on what merchant services company you decide on. That’s why it pays you to research a few companies, get quotes, and make sure you understand all the details. Here’s a snapshot of the common, recurring rates/fees that you can find:
  • Debit Card Network Fee
  • Qualified Transaction Rate
  • Mid-Qualified Transaction Rate
  • Non-Qualified Transaction Rate
The per-transaction rate will be figured by taking the average sale amount, the percent of card absent sales you have, and your business risk. Here’s a short description of the debit card network fee and each transaction rate. Because the more you understand, the better you can structure your plan and find the best merchant services company. Debit Transaction Types There are three debit transaction types and they are signature debit, PIN debit, and card-not-present debit. Since you’re a retail business, you’ll want to focus on the signature debit and PIN debit particulars. PIN Debit – These transactions refer to the customer swiping the card through your card terminal as well as entering their PIN (personal identification number) on the keypad. Depending on the specific requirements, your customers will most likely need to key their PIN in for the debit transaction because it is processed directly from their financial institution. Signature Debit – When your customer chooses the “credit” transaction for an in-store purchase, they will swipe cashierthe credit card and then either the digital signature capture will prompt for a signature or they will sign the printed cash register receipt. The processing network used by each type of transaction is the primary difference between the PIN debit and the signature debit transactions. In signature debit transactions, the payment is routed through the customer’s credit card network (i.e. MasterCard or Visa). A PIN debit payment is processing by the banking networks (i.e. STAR, NYCE). These payments are considered “online” payments because the banking networks correspond with the specific type of card, and often happen in “real time”. The fees incurred by these charges will have to do with the method of capture, the size of the customer card’s issuing bank, and your business type. You can also expect to pay a provider markup, which remains predictable, and can vary depending on tiered pricing factors. Qualified Transaction Rate – This rate will account for most of the charges you’ll see. You’ll see debit purchases and many non-reward cards typically fall within this rating tier. When you call for a quote, you’ll likely only be given this rate because it is the lowest possible applicable rate, so you’ll also want to inquire about the other tiers as well. Mid-Qualified Transaction Rate – When the card doesn’t qualify for the lowest possible rate, you’ll be charged a slightly higher transaction rate. Some business cards and reward cards will fall under this tier. Additionally, you may see this rate if your staff manually keys in the card as opposed to the swipe transaction. Non-Qualified Transaction Rate - This rate could apply to the transaction if there is missing information during the verification process, or if the card that’s being processed doesn’t qualify for the lower rates. You could also see this rate for manually entered transaction. How to Avoid Rate Increases
  • To reduce your risk of fraudulent charges and lower your transaction rates, you’ll want to go the extra mile and make sure everyone is trained on the importance of the swipe transaction when possible.
  • Make sure your opening and closing staff members properly audit transaction totals each day.
  • Ensure that you’ve “batched out” by the 24-hour mark. Batching refers to settling charges at every terminal and forwarding the completed transactions to the financial institution.
  • If possible, add security measures during the transaction.
Making sure that you and everyone on staff understands the different types of transactions and what they mean can make a big difference for your bottom line. As you call for quotes, make sure that you understand what the terms are for each tiered rate. Here’s a handy checklist to help you get the information you need to make an informed decision when it’s time to choose a merchant services company:
  • What, if any, cancellation fees apply?
  • Will I need to sign a contract? If so, check the details carefully before signing.
  • What monthly fees are included?
  • What will be the monthly minimum purchases that apply?
  • How available is customer support and do charges apply for service?
  • Are their upfront costs for setup?
More to consider:
  • If you’re also making a decision on a POS system, consider what functions will benefit you the most.
  • If possible, view a demo of the software to determine which one is right for you.
  • Avoid purchasing more equipment than truly needed.
  • Is it easy to upgrade or downgrade if your business grows?
  • As far as leasing vs purchasing, you may find that purchasing will be your best bet long term. You may be locked in to a long-term contract otherwise.
If you want to find out more about your options in equipment for your terminals, read more about point-of-sale options. [caption id="attachment_605" align="alignleft" width="300"]Business people discussing financial reports during a meeting Business people discussing financial reports during a meeting[/caption] If You Have a High Risk Business If your business has been labeled high risk, you may be happy to find out that it isn’t necessarily a bad thing. Consider the fact that many of low-risk requirements are actually limitations for doing business. For instance… You won’t have to worry as much about chargebacks because you’re already paying higher rates to compensate for the risk. You won’t have a limit to how high of transactions you process. Your customers regularly charge over $500? No problem! You won’t have limits on the type of products or services you offer. Some examples of high-risk business models include: cannabis shops, Amazon stores, telemarketing merchants, health and weight loss products, pharmaceuticals, and travel arrangements. Those types of business, among several others, have higher chargeback rates, in general. Now, if your business model is considered low risk but you are having a high number of chargebacks, you’ll want to figure out where the problem is and fix it in-house. For instance, you may want to provide better or more responsive customer service, work to build more value in the product with follow-up marketing efforts, or train your sales staff in lower-pressure sales techniques. Find the Best Retail Credit Card Processing Company While there are pros and cons with being labeled low risk or high risk, becoming a merchant who accepts debit and credit can only do great things for your business. Recent studies have shown that businesses can miss out on an average of 7K in sales each year because they only accept cash or checks. Considering that the world is moving farther away from cash with even more payment options cropping up, it pays to get set up and find a company who is willing to find you the best rates. Sources:
  1. Investor’s Business Daily, “Businesses Miss Out on Sales,” 23 5 2012.
  2. Merchant Maverick:
  3. Quickbooks: Everywhere!

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