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ECIGARETTE Merchant account effective rate

After a trader decides to opt for a merchant account in order to obtain new processing services, he or she will have to take several factors into consideration. Factors such as discount rates, interchange, qualification rates and authorisation fees have to be considered.

Almost all traders are intimidated due to the apparent volume and complexity of the different charges involved with merchant processing. The merchant account processing fees primarily begins with the effective rate. The effective rate is defined as the total gross sale percentage that is paid by a business as a part of credit card processing fees. The effective rate plays a major role in merchant account costs. While acquire a merchant account, the effective rate may appear to be lesser in comparison with other charges, effective rates allow traders to forecast the total expenses incurred in credit card processing. The merchant account effective rate calculation for existing merchants will give accurate results. However, the results may not be very accurate for new businesses as the estimates are usually obtained using the processing history. However, this doesn’t mean a new merchant should not consider the effective rate.

An effective account is an important factor. However, effective rates calculated by a new business should be regarded as a conservative estimate. It is not at all difficult to calculate the effective rate of existing accounts. All that is needed by a trader is to calculate the fraction of expenses over the gross credit and debit card sales. The gross sale should then be divided by the “total processing cost” incurred every month. This result has to be multiplied by 100.

For example, $ 33 in fees / $ 1000 in sales * 100 = 3.3%

If the effective rate charges exceed the discount rate, the trader will have to make certain adjustments in order to make more money. In this case, it implies that the med-qualified and the non-qualified surcharges are being charged on the account. If one does not notice large discrepancies between the qualified rate and the effective rate, it is better to find out from the merchant account provider how the gap can be closed.

For finding out the effective rate of a new merchant account on the basis of the processing history, one has to apply processing statistics such as the fraction of mid-qualified and the non-qualified transactions, the PIN debit transactions versus the signature, etc, to the rates and fees of new accounts. Finding out the effective rates for new businesses is not simple as the processing history is not present and the buckets are inconsistent. But conservative estimates are still very important for the merchant account of a new business. The real techniques for effective rate calculation are highly evolved.

Merchant account providers take the required details from the traders to provide a reasonable and accurate effective rate. If the merchant account provider has little or no knowledge about the effective rates it is better for the trader to select another merchant account provider. Contact one of our helpful account representatives to assist you in the setup of a high risk merchant account or offshore merchant account for a high risk merchant.