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MERCHANT ACCOUNT FLAT RATES
Flat rates for merchant accounts make
the accountants and business owners’
lives much simpler. However, the fact is
that there is nothing called flat fees
with respect to merchant accounts.
Luckily, some fees close to flat rates
exists. The flat rates do not reduce the
processing charges to a distinct rate.
Pricing plus interchange is applicable
to flat mark-ups of discount fees.
Almost all the merchant accounts are on
the basis of bucket or tiered pricing
with non-qualified, mid-qualified and
qualified discount rates. This model
gives way to a concept known as
interchange plus which is applicable to
the direct mark-up of flat rate merchant
accounts which can be achieved by a
business.
The processing charges for merchant
accounts are on the basis of MasterCard
or Visa interchange repayment schedules.
These schedules are responsible for the
amount of transaction of a credit card
an acquiring bank of the merchant should
shell out to the issuing bank of the
cardholder. The inner mechanism of this
process is quite complicated. However,
one must know that various interchange
charges are applicable to the
credit-card transactions.
Due to the existence of various discount
categories, a true flat-rate merchant
account can never exist. However, this
point is not completely true. If a
merchant aggress to shell out for the
highest interchange category, then
he/she can have a merchant account with
flat rates.
However, the
price for this type of account could be
needlessly astronomical. Merchant
accounts having single mark-ups plus the
interchange is the nearest thing to
merchant accounts with flat rates. The
other alternative to this is tiered
accounts which group all the different
charge categories into a few buckets.
According to a merchant service firm’s
CEO, the pricing plus interchange of
tiered rates is a “big joke”. The “joke”
applies to dealers who pay fluctuating
mark-ups after which they end up losing
money in the process. After
understanding about the transparency in
interchange pricing and its benefits,
they will realise the fact about tiered
rates.
After knowing the benefits of
interchange, it is also necessary to
have knowledge about the associated
risks. The service providers for
merchant accounts have risks and real
cost associated in their job. Tiered
margin provides the service providers of
merchant accounts a wider margin when
compared to interchange pricing. Since
the service providers could lose money
in providing interchange pricing, it is
not offered to all the merchant account
holders keeping their feasibility factor
in mind.
A few businesses, especially the newly
established ones, will probably not
acquire interchange pricing. However,
this fact must not be considered a as a
big deal. This is because there are
several reasonable tiered accounts which
can be obtained. The best processor for
credit cards is achievable even by
having tiered accounts. After the
processing has begun, a merchant always
has the option of switching to an
interchange account sometime later.
Hence, there is little cause of worry if
a merchant is unable to get as
interchange account right away. |
