Does a 1.39% credit card rate really exist?

The transaction brokerage industry has become extremely competitive; average merchants are now a lot more educated on what sort of fees to demand from credit card processing companies and there are probably hundreds of companies offering greatly discounted services now.

The entrepreneurial spirit of the industry has created quite a few offers that are designed to lure merchants into a contract with low rates without really providing them.

Let me unveil one secret:  Visa and Mastercard have minimum “buy rates” for transactions that are identical to every transaction processing company. Slogans offering the lowest credit card rates are generally false, since that rate is the same for everyone.

Every “low offer” out there has some sort of a catch. Processing companies are not in the business of losing money, so they have to make up the difference between 1.39% and 1.65% somehow. There are a few tricks a merchant should watch out for, including:

1. Per transaction fees Usually these kinds of offers bear a $0.25 per transaction fee. This means the merchant will be paying 2.39% for their credit card transactions! Not such a good deal after all.

2. Assessment fees and downgrades Often, companies promote a rate of 1.5% even without a transaction fee. The catch here is that they are only telling a half-truth. The rate will indeed be 1.5%, but the company will add a so-called assessment fee of anywhere from 0.10% to 0.25%. It is never advertised but can be found on the paperwork in the pricing section. After the assessment fee comes the so-called downgrade. The most popular is “non-chip” downgrade that is usually in 0.10%-0.25% range. The trick is that the majority of today’s POS terminals don’t accept the chip cards yet and every transaction processed will be deemed “non-chip”.

3. Annual fees This really only applies to merchants that process a low volume of credit card transactions. There are some fantastic offers out there for businesses that process less than $15,000 in credit card transactions per year. By paying a fee, say $99 annually, the merchant is presumably eligible for a low clean rate of 1.35% with no extras. Too good to be true? Yes. $99 on an annual processing volume of $15000 actually means paying extra 0.66%. Combined with an attractive rate of 1.35% this makes for an actual rate of 2.01%.

4. Introductory rates This is the last resort of the companies that are desperate to get more business. These companies will advertise a low rate (generally between 1.5% and 1.59%) with absolutely no extra fees.  The merchant should always ask the sales representative if these rates are introductory or limited time offers.

One might think that the credit card processing business is full of scammers and liars, but it’s not true. There are a number of companies inCanadathat actually honor the quote they provide and are committed to having high standard of services. They do not advertise catchy “too good to be true” rates, instead they provide an honest straight forward competitive quotation.

The things every merchant should look out for when selecting a new merchant service provider are: moderate rate (between 1.65% and 1.75% with assessment fees already included, per transaction fee equal or below $0.05), normal contract terms of anywhere from three-to-five years and experience of at least five years, no annual fees. These simple rules should ensure the selected provider to be the right one for the business.