07 Jul Teaser Rates and the Credit Card Processing Industry
Credit can make running your business easier, but it can also turn into a dangerous trap. While merchant accounts allow you to accept credit payments, the extra charges can wind up costing you too much in the long run. If you have recently received offers with excitingly low interest rates, you should take the time to read the fine print and understand the credit card processing system.
Teaser Rates are Tricky
You are familiar with teaser rates, and you understand that those low rates have serious strings attached. They have been around for years, but they are becoming even harder to understand and decipher as the fine print becomes more convoluted. That 0.39 percent total rate is hard to believe, but you should understand that it might apply only to certain regulated debit cards and not all transactions. Here is what you should know about the processing of cards and how the teaser rates may actually work.
All merchant accounts are charged an identical wholesale rate. The fees that will be added to this include interchange, assessments, access fees, cross-border fees and other dues. When a company claims to have better wholesale rates, then you should be cautious if you proceed with that agency.
Understand Interchange Rates
Part of credit card processing is the interchange rates. On regulated debit cards, his is a maximum of 0.05 percent plus $0.22 on every transaction. With “Visa eCommerce Basic” credit cards, it is 1.8 percent plus $0.10 on each transaction. With “Visa Rewards 2” credit cards, that rate rises to 1.95 percent and $0.10 on sales transactions.
Consistency is Important
More than low teaser rates, you need consistent charges that you can anticipate. Determine how consistent the mark-up is by taking the rates they are advertising and then subtract the corresponding interchange amount. The differences between cards should be consistent. Providers will sometimes charge different markups. You will accept the terms based on one, but then wind up paying too much because of higher rates on the others. If the mark-up is level across the board, then you can rest assured that you will lower your expenses and increase profit levels.
Before accepting any teaser offers that are filled with fine print, take the time to examine the offer closely. A discount rate on one type of card can become extremely costly if most of your transactions are from another type of card.