What is a discount rate?
The discount rate is the percentage deducted from a credit card sale that goes
to Visa, MasterCard, American Express or Discover. For Visa and MasterCard,
it might be as low as 1.59% for businesses that "swipe" credit cards through a
processing terminal such as retail stores and restaurants.
Those businesses that take orders over the phone or through the mail, or on the
Internet, are service providers or concessionaires who are unable to swipe
their customers cards. They need to manually "key" in the card information using a
processing terminal. Because the terminal isn't reading the data on the credit
card, the processing bank considers this a transaction involving greater risk.
Therefore, the Visa/MasterCard discount rate can be as high as 2.35%.
Other factors that influence the discount rate are those businesses that do a
combination of both "swiped" and "keyed" transactions, average ticket and
monthly volume, and specific industries that are considered very high risk such
as travel. American Express calculates rates based on average ticket and
monthly volume as well as how sales are processed and rates can vary from 2.95% -
3.75%.
It is vital to consider all factors when being quoted a rate. For example, if a
merchant is set-up for processing as a card swipe and begins processing most
of their sales manually, he will be notified by the processor of a rate increase.
All processing is monitored by quality assurance to prevent abuse in the credit
card processing industry.
Are there other fees?
Transaction fee $.20 for swiped transactions, $.30 for keyed transactions.
Bank statement fee $9.00 per month. Monthly minimum/Non-activity fee
$20.00. When sales are made, transaction and discount fees are generated.
These must equal $20.00. If the fees generated fall below $20.00, then the
merchant is charged the difference. For example, a mail order merchant with a
discount rate of 2.49% needs to do approximately $1,000 in sales per month to
generate $24.90. This meets the monthly minimum. If he has sales of $500,
then he generates $12.50 in fees so he would only make up the difference of
$7.50. Some processors waive the monthly minimum but do require that the
merchant's bank account be established at the processing bank. This allows that bank
total control over the merchant's account. Select a processing Bank that will deposit funds into your exsisting Bank account.
Equipment
Fees vary from $25.00 for a terminal alone or software up to $49.00 for a
cellular, portable terminal. For more information on equipment, see our product page.
