January 7th, 2009 by Jamie Estep
Let Your Average Sale Determine “Your” Good Rate
Filed in: Merchant Accounts | 3 comments
Here’s a little comparison on how a business’s average sale size affects their processing cost.
If a business processes $10,000 per month, here is how the business’s ticket size affects their overall cost.
If you have a low average ticket, it is more important to have a low transaction fee than a low processing rate. Conversely, if your average sale amount is greater than about $80, the transaction fee becomes almost negligible.
Knowing how your average ticket size affects your overall cost is extremely important when looking for a merchant account provider. Not knowing how this affects your fees, will undoubtedly cost your business extra. This is yet another reason why shopping for the lowest advertised cost is a good way to get a bad deal.
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The processing fee is the least important one on your application!
How’s that? Quote “shopping for the lowest advertised cost is a good way to get a bad deal”. Hmmm I’m puzzled with this. Low best deals somehow is a good idea, but in this case, it’s the reverse.
This is specifically speaking for the US market. Every processor has just about the exact same cost, so when you find ones that are substantially lower than everyone else (Ex; .5% vs 1.8%), they’re going to make up their money somewhere else, or raise your rate after you get setup. Additionally, downgrades and other fees will make up a huge portion of a monthly bill. If you don’t take these into consideration, or make them the primary consideration, it will end up costing a lot more.
This is so damn complicated. I searched for ages. I found a company that does flat rate Processing for merchant accounts. It’s easier and I know my fixed cost. I consolidated my fixed costs to accept credit cards…. The one thing that the processors didn’t tell me was that my flat rate guys did was that different cards cost different amounts to process. From my understanding(I’m no mathematician) the Flat Rate is directly proportional the the percentage of 3rd & 4th tier cards being used and inversely proportional to the average ticket.
Nice Post. You guys know what you’re talking about, you hit the nail on the head with those charts. if you google around you’ll find the company, I don’t want to post it here. in atlanta.