As you will learn, giving you, the merchant, a fair and honest price is a choice by the processor. Most processors choose to make as much money in a short amount of time as possible instead of building a relationship with their clients. DynaPay believes in offering low prices, great customer service, and building a strong trusting partnership with our clients. We are able to offer you high savings because we choose to.
To understand the different pricing models deployed by processors you first need to understand how the Card Issuers (MasterCard, Visa, Discover) pricing works. The fee amount paid to card issuers is called Interchange. Each card issuer has hundreds of different card types that each have a different interchange cost. The cost varies based on card type (debit, credit, rewards, business) and whether that card is swiped or hand keyed. If it is hand keyed the cost differs based on the information you input at the time of the transaction such as zip code, sales tax, and invoice number.
- Visa debit card swiped has a cost from Visa of 0.05% and $0.22 per transaction.
- Visa rewards card swiped has a cost from Visa of 1.65% and $0.10 per transaction.
- Visa rewards card hand keyed with zip code has a cost from Visa of 1.95% and $0.10 per transaction.
- Visa business card swiped has a cost from Visa of 2.20% and $0.10 per transaction.
- Visa business card hand keyed with no zip code has a cost from Visa of 2.95% and $0.10 per transaction.
The card issuers also have fees called Dues and Assessments. They are as follows:
- MasterCard - Assessments = 0.11% of total volume. Dues = $0.0185 per transaction.
- Visa - Assessments = 0.11% of total Volume. Dues = $0.0195 per transaction.
- Discover - Assessments = 0.105% of total Volume. Dues = $0.0185 per transaction.
Now that you understand how the Card Issuers price their fees we can look at how a processor charges their fees on top of the Interchange.
Cost Plus Pricing
Cost Plus Pricing, otherwise known as Interchange Plus, is the type of pricing DynaPay most commonly uses. DynaPay adds a flat percentage and transaction fee on top of the Interchange. This is by far the most honest and straight forward way to price a merchant. The simple reason being it is easy for you as a business owner to see exactly where all of your fees are being allocated. This also gives you the ability to control your costs from the Card Issuers by choosing to swipe a card or by entering zip code on a hand keyed transaction. This isn't the case for how most processors price their clients.
Tiered Pricing structure is the most commonly used. The processor will offer you a base rate which most business owners mistake for their only rate. This base rate is actually your Qualified Rate. What you may not realize is you also have a Mid-Qualified and a Non-Qualified rate which are usually much higher than the Qualified Rate that you were quoted. The only time you receive your Qualified rate is on a swiped debit or credit card which is not a rewards card. In most cases, less than 50% of your transactions fall into this qualified range. Any other type of card or transaction you accept will fall into a mid-qualified or non-qualified rate which are normally 1-3% above the quoted qualified rate. This structure makes it difficult or impossible for you to know exactly what your fees are paying for and makes it impossible for you to control your costs from the Card Issuers.
One Rate Pricing
Some processors will offer one single flat rate for all transactions. This rate is always high enough that the interchange cost is covered and the processor makes a good amount on the transaction. Although it sounds good to know exactly what you are paying before you accept a transaction, merchants often pay much more with this pricing model than they need to.
Flat Fee Pricing
Some processors will offer you a flat fee to pay each month, for instance, pay $275 per month each month. What they often will not tell you is you will pay that fee up to a certain transaction volume you accept. After you reach that set threshold, you will be charged a percentage per transaction on top of the flat fee you pay per month. This pricing model usually doesn't benefit the merchant unless you fall within an exact small volume range each month, which is usually too unpredictable to do.