If you have searched the internet for merchant account comparison, chances are that you have landed on some pages that have charts that show rates from different providers for discount rates and other fees. Exactly how useful are the 
merchant account comparisons? Frankly, their useless!
First of all, most all of these type sites are affiliate programs who get a piece of the pie. Nothing wrong with that, it’s advertising. But the simple fact is, those charts don’t know who you are. Therefore, they can’t accurately place your interchange rate, which is the starting point for your effective credit card processing rate. The credit card merchant account world can be incredibly difficult to understand. Even people in the industry are sometimes baffled, so how should you expect yourself to be able to cipher through the industry language and figure out a merchant account comparison?
Two words: Interchange Plus. To understand interchange, let’s dissect it into two areas:
- The interchange table and where your company fits in it. Every company fits into one of the industry categories within the interchange table. At that particular interchange rate for a given company, you can consider this as ground zero; Zero profit from a discount fee is being made by the merchant account provider. So, to think you can get a discount rate quoted at that interchange rate is, well, fruitless, i.e., it won’t happen. The question becomes how much over interchange can I get my merchant account at?
- Plus: You want a rate that is the smallest percentage over your interchange rate as possible. It would be helpful to understand the term basis points here. Basis points are simply fractions of a percent. In other words, 50 basis points equates to 1/2 of 1 percent. What a merchant account provider will give you is dependent on your volume, or in some cases expected volume. If you already have a merchant account, simply give the would-be provider some recent statements and let them quite you. If it’s a new merchant account, have some discussions and paint the picture as best you can. Your goal, assuming all other things equal, is to get the best possible rate you can that is in the contract as interchange plus pricing. If the provider quotes you at 30 basis points, you then know you are being charged 3/10 of one percent over ground zero.
Downgrades and other fees: Some transactions can be downgraded for corporate cards, loyalty cards, etc. Check your quote and compare the possible surcharges. The great thing about interchange plus pricing is that you always know that any downgrades are priced at the downgrade interchange rate plus the same fractional percentage. Otherwise, it’s simply too difficult for a business owner to know if the downgrade rates are favorable.
Compare monthly fees, statement fees and setup fees too. Every provider has costs associated with underwriting a new account, so if someone says free, you can bet there’s a good chance you’ll pay for it in some other way. Bottom line advice: Look for interchange plus pricing and choose a company that will stand behind what they claim with a good guarantee.
