A Quick and Easy DIY Rate Evaluation

by Neil Moncrief on February 17, 2009

Over the years, I spoken to many business owners who knew exactly what they were paying. They knew their Qualified rates, as well as their Mid-Qualified and Non-Qualified rates. But most business owners just don’t have the time to pay attention to those kinds of details. And even if they wanted to, many statements hide the MQ and NQ rates, disguising them instead as smaller, segmented fees. In those cases, it can be difficult for the casual observer to even locate the rates.

Here’s an easy way to determine your overall cost in less than a minute. In fact, I often use this approach myself to determine whether or not it’s worth if for me to pursue an account. You’ll only need 2 numbers: the total of all transactions processed during a given month, and the total of all discounts and fees paid during the same month.

The first number should be easy to find. It represents your total credit card sales for the month. Usually on the first page of your statement, you’ll see a breakdown of your transactions. It may list Visa, MasterCard, and Discover separately, or there may be line items for Qualified, Mid-Qualified, and Non-Qualified. Regardless, there should be a total shown on the same page. Circle that number.

The second number may be a little harder to find because some processors take money from your daily deposits throughout the month (called “daily discounting”) and then take more from you at the end of the month. In that case, you’ll need to find how much was taken beforehand by locating the Deposits Summary. There, you should see a total of how much was withheld throughout the month. If you find a number like this, circle it. Next, look for a total of all fees and/or discounts itemized in the statement. Since this amount is being withdrawn from your account by the processor, it’s usually labeled as “Total amount withdrawn from your account.” Find and circle that number. If your processor withdrew daily discounts throughout the month, add those two total together. This amount represents your total cost of accepting credit cards for the month.

Now, you simply divide the second number (total cost) by the first number (total credit card sales.) You’ll probably get a number somewhere between 0.0175 (1.75%) and 0.0400 (4.00%). Without knowing anything about your business, I can tell you that 1.75% would be a very low average and 4.00% would be very high. With all fees included, most retail business will be somewhere close to 2%, and most e-commerce businesses should be closer to 2.75%. Businesses that primarily sell to other businesses (B2B) may be closer to 3.50% due to the high number of corporate cards they receive. Keep in mind, these are only examples. Your average will vary based on many factors, including how you receive your orders, what type of cards your customers are using, etc.

If you’re satisfied the results of this quick test, congratulations! If you’re not satisfied with your results, I’d ask you to please give me a call. I’ll look over your results and show you where you’re paying too much. And if you’d like, I’ll offer a rate proposal and calculate exactly what you can expect to save.

I’m happy to provide this information free of charge.  If you found it helpful, please subscribe to my RSS feed so you’ll be notified of future posts.  You can also follow me on Twitter, where I regularly post short tips.  I promise to never spam you or pressure you.  Please forward this to your friends in business, and feel free to rate my post or leave a comment so I’ll know how to improve. Thanks!

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