I'd like to open up this post with a simple question: In your business, would you ever consider offering your products or services at or below your associated cost?
If you answered 'Yes', let me know what you do and where you work and I'll stop by and pick up a free sample. If you answered 'No' then you understand that businesses simply can not operate by cutting out their margins. Well, credit card processing companies are no different from any other business in that respect.
Unlike most other industries, however, credit card processing companies all have the same basic cost associated with the service they provide. That cost is known as Interchange, dues and assessments (IDA) and no matter who you process with those basic costs will be a component of your overall pricing. In fact, it will be the largest component of your pricing. IDA varies slightly by card type, method of transaction, and sometimes even by the amount of a transaction, but generally speaking ranges from roughly 1.15% to 3.5%.
Now, let's put that into perspective. Let's say that a credit card processor comes knocking at your door and offers you a rate of 1.30% to process your credit cards. Hopefully you'll remember reading this blog and you'll know that there has to be more to the story. There isn't a processor out there that will charge you 1.30% on a card that's priced at a higher rate. It just wouldn't make sense. You'll need to find out what you'll be charged if you run a card with a higher IDA than 1.30%. Find out what all the rates and fees are and get it in writing.
