Merchant Services Statements are notoriously difficult to figure out. Most of the confusion is by design. Merchant Services companies don’t want you to realize just how much you are paying for the service. Along with that is a misconception of how the merchant pays credit card processing fees, which is in part an issue of how the service is sold and quoted.

“What is your rate?” – I hear this question all the time. The question merchants should really be asking is: “What effective rate can I receive”. So what is an “effective rate”? – It is the percent you pay all in after all fees in your statement are counted.

Here is the “secret”. The “rate” most merchants think they are paying, has very little to do with the actual fees being paid. Business owners benefit from knowing what the effective rate is, and how to keep it as low as possible.

So let’s go back to effective rate: If you process $50,000 in credit card sales, and your total fees were $1500.00 then you are paying 3% effective rate (1500/50,000=0.03, move the decimal 2 spots to the right and you have your 3%). I can’t tell you how many times I’ve been told by a merchant – “I’m paying 1.70%”, then we do the math, and they are actually paying well over 3%. Their “rate” really was only available for certain transactions, then the extras kicked in – but that is for another article.

So what is your effective rate? Do the math and once you know that, do you know if that is a fair rate? The average effective rate is affected by many factors, including credit card volume, ticket average, industry, credit card entry method, and even the customer base. A fair rate – one that won’t change over time, can be very different from industry to industry.

It is considered inappropriate in this industry to quote without knowing at least a bit about your business. Although many do quote off the cuff, most true professionals will tell you an effective rate only after careful analysis.

These are a few examples of effective rates I’ve been able to provide my customers, this is verifiable as I have the statements available:

Type of Business	Month/Year	Volume	Fees	Effective Rate
Wine Tasting	02/2017	$71,601.31	$1869.98	2.61%
Fast Casual Food	02/2017	$80,234.60	$1873.56	2.34%
Language School	02/2017	$93,606.36	$2,182.95	2.33%

Please note that these examples, while true, do not guarantee your business can qualify for similar rates, nor is it a promise to provide processing at those levels. (Our lawyers made us add the last J) We do however, have many examples of these types of results depending on Ticket Average, volume, type of business and method of payment entry.

A detailed analysis by merchant services professional can be very beneficial to you – from a Merchant Services Professional you trust. If you would like to know if your effective rate is appropriate for your business and how you can lower it if it isn’t, I am always available to chat.