In the digital age, credit card fees are nearly impossible to avoid. However, an understanding of the fees and options can save business owners and merchants thousands of dollars a year in transactional costs. At some point, every business owner must decide whether to use a tiered pricing model or an interchange cost-plus model. Unfortunately, many business owners don’t know the difference and will often be sold on tiered pricing, simply because the merchant didn’t know there were options.
Before understanding which option is better, one must first understand the fees that apply in each model. It’s important to understand that the sale transaction extends far beyond the customer and the merchant. In reality, the credit card company, i.e visa or mastercard, takes a fee, the bank takes a fee, and independent sales organizations, known as ISO’s, such as Stripe, PayPal, or Square, also take a fee.
With tier pricing, the most common model businesses use, there will be a base rate of 1.69% plus .20 cents per transaction plus a key-in/surcharge of .49-.99% and finally any business card fees. All said and done, the business owner will be stuck paying 3-6% on each transaction. Additional fees may be added if the customer pays with a credit card that rewards them with 5% cashback or other rewards. That 5% has to come from somewhere and rest assured the credit card companies aren’t paying it, so once again, the merchant is left to foot the bill. Other hidden fees include the statement fees, batch fees, access fees, merchant club membership fees, and dozens more. Sadly, many business owners simply assume that these fees are unavoidable and non-negotiable.
Fortunately, there is another option. Interchange Cost Plus pricing accounts were historically only available to businesses with high volume sales, typically over $25,000. However that rule is a thing of the past, and now businesses of any size can access this Interchange Cost Plus transaction model. This pricing system is much simpler as well, with only two fees to take into account, the interchange cost, a flat fee that is paid to the bank and the independent sale organization, plus a small fee per transaction. For example, merchants could expect to pay 1.69% (the Interchange Cost paid to bank and ISO) plus a small markup of .25% plus a .10 cents transaction fee so that the total cost is 1.94% + $0.10. This can be an exceptional option for business owners, but only if they can find a competitive quote.
Global Merchant Innovations, Inc. founded by Sir John Shin in 2006, has been in the financial industry since 1991, when he founded AXIANTA Financial Partners Inc., an independent financial service marketing company based out of Calabasas, California. When he became privy to his client’s merchant processing statements, he was stunned to realize the exorbitant amount of fees they were paying in credit card transactions each month. Global Merchants Innovations, Inc. (GMI) seeks to educate small businesses and start-up entities on their credit card processing options. According to Shin, “Many business owners simply don’t realize how much unnecessary fees they’re forking over each month, that is money that they’d be much better off investing.”
Global Merchant Innovations, Inc. offers a competitive interchange rate (1.69%) and takes just .25% profit while most of their competitors make at least a 2% markup for their profit. For John Shin and his team, this model simply makes sense, at the end of the day they are a financial institution first and their top priority is equipping businesses with the strategies to reduce their expenses and increase the client’s overall cash flow. As a result, the strategies may grow their wealth. By offering this competitive rate, their clients typically have more funds to invest. That is not to say that clients are obligated to invest the surplus that Global Merchants Innovations, Inc. saves them. “We always do what is in the best interest of our clients,” Shin explains, “Some may choose to invest their newfound savings, while others will elect to put their savings towards paying off their debt. Whatever they choose to do with it, savings are savings, and we’re just happy to be able to have shown our clients their options.”
Another big issue that small businesses face is outdated card reading terminals. If a terminal is more than 3 to 10 years old, it will not be capable of processing the new microchips that most credit cards are equipped with today. When a card with a chip is swiped in a terminal that cannot read chips, the merchant may be hit with double the fees. For a limited time, Global Merchant Innovations, Inc. is giving away free terminals to all new customers, when they partner with them.
To learn more about the thousands of dollars you can save your business by switching to an Interchange Cost Plus model, visit www.globalmerchantinnovations.com to schedule a consultation.