Why You Should Switch Your Merchant Account Today

If you own a business and accept credit cards you are probably paying a lot more than you should for your merchant account. You’re probably overpaying without knowing that you are or really even caring that much. But when you find out by how much you’re overpaying, you’ll be much more likely to switch to a new merchant account.

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.

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.

Business owners that have a higher ticket item should be more concerned with the discount rates they’re paying far more than the per transaction fees as that represents a larger percentage of the overall fees. If you divide the total amount of fees by the gross volume that you process each month, you’ll have your “effective” rate.

If you are ready to switch merchant accounts, you should start by looking at one of your statements and calculating your effective rate. If you’d rather not have to learn anything about rates and fees and simply want to get someone else to do this for you, find a competent merchant services professional who will evaluate your current rates and provide you some data on what it would cost to switch and estimate your savings. Finding someone you trust is critical as merchant services professionals don’t always have the best reputation for integrity thanks to some in our industry that use deceptive practices and are dishonest.

Most merchant accounts have an early termination fee, so the process of switching accounts may have costs associated with terminating your existing agreement. There are a few options here, depending on how much your early termination fee is and the duration of your contract. Some merchants can save $100 or more per month and keeping the existing account open for $25 per month may make sense. You should check with the provider you’re considering to also see if they offer a reimbursement for switching by paying off your early termination fee for you. Some providers will do this, others will not, but it’s worth asking.

Getting new equipment can also be a benefit of switching your merchant account. Competition for new merchant accounts is fierce so some of the incentives that processing companies are offering include new equipment. So, if your equipment is older or if you just want new equipment, make sure to ask about that and make that a part of your switching strategy.