Simple Way To Determine Credit Card Processing Costs

An easy way to keep tabs on your processing costs is by simply taking the total you were charged for credit card processing and dividing it by the amount you processed. This gives you your effective processing rate. Many merchants already know this simple trick, however if you do not, I ask you to give it a try now.

There are many variables involved that could make your rate higher or lower. One is the fact that Visa, MasterCard, and Discover all have per items that are charged that range from $0.05 to $0.22 in addition to the network processing fee charged by your processor. This results in a higher effective rate for merchants that have small average transactions, conversely merchants who have a high average ticket will have a lower effective rate. Another major factor is dependent on if the merchant processes cards by swiping or by key entering the transactions.

The following is a few examples of each:

Card Present Transactions
A merchant who processes credit cards card present swiped and has an average transaction of $25 should have an effective rate of right around 2.25% give or take a few basis points.

A merchant who processes credit cards card present swiped and has an average transaction of $1000 should have an effective rate of right around 1.25% give or take a few basis points.

Card Not Present Transactions
A merchant who processes credit cards card present swiped and has an average transaction of $25 should have an effective rate of right around 2.53% give or take a few basis points.

A merchant who processes credit cards card present swiped and has an average transaction of $1000 should have an effective rate of right around 1.68% give or take a few basis points.

Summary
Based on the above examples you should be in the below range once you have calculated your effective rate.

Card Present Transactions - 1.25% to a 2.25%
Card Not Present Transactions - 1.68% to a 2.53%

If you found that your effective rate is much higher than the above mentioned the most likely reason is the Durbin Amendment that went in effect October 1st, 2011.This amendment to the Dobbs-Frank Wall Street Reform and Consumer Protection Act of 2010 significantly reduced the cost of debit card processing.

The effective rate is by far the easiest way to determine what you are paying to process credit cards. This is why each and every custom savings analysis I prepare for a merchant includes their current effective rate and the new effective rate based on the proposed new credit card processing costs.

If you do the math and your current company just doesn't add up contact me so that I can prepare a custom savings analysis for your company. Visit this link where you can upload your current processing statement to have one prepared for you today. You have nothing to lose but everything to save!

Have a safe and happy weekend!