Reducing Merchant Costs

Precautions recommends that as a high risk merchant, you engage in the best practices for credit card processing. offers risk merchant services to help your business save money. Following are our “Lucky 13” cost-cutting tips and guidelines designed to save you thousands of dollars each year.

1.  Set-up right from the start.

Chances are that when you first registered your business you were barraged with a multitude of calls from merchant service providers offering you the ability to accept credit cards and other electronic payments. If you took one of these offers without investigating your other options, you are probably paying much more than necessary for your credit card processing. The best solution for any business, existing or startup, is to shop around for the best deal possible. The best place to start shopping is the Internet. With so many payment processing providers in direct visible competition of each other, you are sure to find several good merchant processing providers and the best rates available. works with both existing and new merchants. First those businesses that currently accept credit and debit cards, we can quickly demonstrate to a merchant the significant savings offered by converting to the program. For new merchants, even though they can expect to pay slightly higher rates at the beginning, once they show a good history and are able to lower the risk factors of their Business Profile, they can expect their rates to drop every 90 days.

2.  Don’t lease processing equipment.

Whether you buy it from your merchant card services vendor or from another source, purchase your processing equipment outright. Credit card processing equipment isn’t as expensive as many people think, and you will pay many times more by leasing it than you will if you purchase your equipment. Equipment costs from about $150 – $250 for a basic terminal up to $900 for a high-end wireless terminal, with most common terminals falling into the $250 – $350 range. Look around on the Internet for prices on the terminal you are being offered, you will probably find a better deal and a better company.  If you already have existing equipment there should be no reason why you have to replace it when switching processors.  In almost every instance, does not require you to replace your equipment as we can work with all existing terminals.

Be careful about “free terminal” offers.  Acceptable offers like these are ones where your processing rates are competitive and the only is that you remain with the processor for a set period of time, generally less than a year.  Other such offers bury many processing rates and fees in order to pay for the equipment cost. As the adage goes, “nothing is free.”

3.  Your “Base Rate” vs. your “Effective Rate.”

Most merchants only understand their base rate and their transaction fee; however, what they don’t comprehend are all the hidden fees, ancillary charges, and miscellaneous fees that really compromise your overall credit card rate.  It’s amazing how many times will analyze a merchant statement to calculate that the business paying a 2.00% base rate is really paying well over 3.50% effectively.   Take the time to understand all the fees defined on your merchant statement.

4.  Using key information like AVS (Address Verification Service), Level 2 & Level 3 Information

Simple prompts on your credit card machines like address, zip code, purchase order #, invoice # are basic key-strokes that can and will reduce your credit card fees.   In simplistic terms, rates are lower or higher based on levels of risk and the more information a business can provide the issuing and acquiring banks about the customer for verification purposes, the lower your interchange level rates and thus the lower your processing fee.

It is significant how many credit card processing providers and their salespeople are not informed about these features that can greatly impact your bottom-line savings.

5.  Speed of funds deposit – are your funds being deposited in 12-hours?

As the saying goes “Cash is King” – in this regard, will deposit your funds within 12 hours or what is commonly called “Next-Day Funding”.  In addition to™ savings you money on processing rates, the increased cash-flow and related interest is another powerful reason to switch to the™ program.

6.  Proper set-up according to Visa & MasterCard

In simplistic terms, there are 3 types of business types defined by Visa & MasterCard which is determined by the primary method the merchant has for accepting customer charges:  (1) Swiped account like a retail establishment; (2) Mail Order Telephone Order (MOTO) business and (3) Internet or E-Commerce Business.   However, what happens when a restaurant, which you would think is a swiped account, is doing 50% eat-in business and 50% take-out business?   Or when a retailer selling nationally through its catalog is now deriving 50% of its business via the Internet?  Most likely, these businesses will be re-classified to the higher rate because there is a blend of manually swiping cards plus taking credit card numbers on the phone.

Industry type also plays a significant role in determining merchant rates. has worked with 99% of all the various SIC codes and has a clear understanding on best practices for each business type to ensure the lowest rate possible.

7.  Be wary of lowball offers.

So many times, merchants are lured away from their existing providers by rates that seem so much better that what they currently have. Later they find hidden and extra fees throughout their merchant account contract. For the most part, all processors pay the same interchange rates and transaction fees, so if the rate you are being offered is considerably lower than any others you have seen, or you are offered no transaction fees, you should be wary of the offer. The chances are very good that the provider with a very low offer will be making up the costs somewhere else.

The model with transparent pricing plus automated quarterly reviews is designed to reduce your fees based on our risk and underwriting criteria.

8.  The role of your bank in credit card processing.

Many Community and Regional Banks are willing to provide merchant services to their customers.  Many of them do not manage their own merchant services, but rather re-sell services from another provider.  If that is the case, then you are paying extra fees for that middle person (the bank) who is providing no real services. Let your bank handle your savings and checking accounts, but keep your merchant account separate. If you currently are processing through a bank, try comparing rates with  We think you will be happily surprised at the difference in processing rates.

Please note that can deposit your money into any valid banking account; we will only need your Account Number and the Bank’s Transit/ABA Number. It’s as simple as that.

9.  If you are a retail business, get started right away with signature and pin debit.

Signature debit is a relatively new system that gives a much lower processing fee to debit transactions verses credit transactions. A signature debit transaction is when a customer runs their debit or check card like a credit card. Pin debit is where a customer enters their pin number into a pinpad to process the transaction.

You will need a pinpad or credit card terminal with an internal pinpad to use pin debit, but you will eliminate your processing fee completely and have a flat rate transaction fee for every pin debit transaction. Studies have shown that about 43% of all card purchase transactions are Pin or Signature debit. This means that you can save on 43% of your customer’s transactions. The price of a pinpad (about $100) can be quickly paid back from the savings in merchant processing costs – often in a few months, depending on the number and size of your customer transactions.

The cost to process a debit card is typically a flat fee around $.60, whereas credit cards typically cost 2.14% to 3.00% of the total transaction plus a $.25 fee for each swipe. Any transaction over $8-$10 will save the business on processing fees, and also is less likely to be fraudulent due to PIN verification. For example, a $400 purchase may cost the merchant over $10.00 to process via credit card, while a debit card would only run $.60 for that same transaction!

10.  Keeping Your Rates Low.

Obviously merchant card processing providers need to make money to stay in business, but there is a fine line between reasonable charge card rates and charging too much. Make sure when you sign up that your provider will not raise your rates. The only time that you should see a rate change is when Visa or MasterCard raises the processing interchange rate which traditionally occurs twice per year. This means that Visa or MasterCard raises the amount that they collect from each transaction. Your rate will go up proportionally because the entire industry has to pay this extra amount. No company anywhere is excluded from an interchange increase. provides transparent pricing and a guaranteed rate review every 90 days. We price your initial rates based on your company’s Business Profile so if you maintain or improve the risk factors in your Profile, we expect to lower your rates – automatically!

11.  Bundled Rates.

Another very common pitfall is for a business to accept a bundled rate offer. These offers have a very low or zero transaction fee, and an increased processing percentage. If you have a history of processing charge card transactions and can provide a number of merchant processing statements to be analyzed, a good merchant services provider will be able to calculate whether a bundled rate works best for you. For existing merchants, a bundled rate ‘can’ save you money, but if your business has not accepted credit and debit cards in the past, you will almost always pay more with a bundled rate.

Remember that bundled rates are based solely on your average ticket size. If you have a highly variable ticket size or you are a new business stay away from bundled rates.

12.  Promote the Use of Visa & MasterCard & Discover vs. American Express.

We are all trying to keep our sales prices and expenses as low as possible in this difficult economy.   Keeping this in mind, in almost all cases, transactions using Visa, MasterCard and Discover have lower rates than American Express.   Should a customer offer to pay you with their American Express card, ask them if they have another card they can use for that purchase.

13.  Better rates for B2B or business cards.

It pays to know your customers and to know that transactions between businesses typically cost less than those where consumers are involved.  Business credit cards cost less to process than many consumer cards, so we recommend that you promote their use whenever possible. Special prompts for Level 2 and Level 3 are unique features that will institute into your terminals/POS Systems to help reduce your credit card fees. It shouldn’t make any difference to your customers to use their business credit and debit cards.

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