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Credit Card Processing Rates – What Factors Determine My Rate?

Savings on Merchant Processing Fees

There  are many factors that directly impact and determine how low your rate can be, some of these rate factors are the % of swiped versus keyed transactions and the type of credit cards you accept. You may be thinking, I take all credit cards such as Visa, Mastercard, Discover, American Express or others. But if you thoroughly analyze your records you will find out that you take X % of check cards, X % of corporate cards, X% of business elite cards.

Also, your geographic location plays a role as well as your business SIC code. For example: are you in automotive industry, grocery or restaurant business?

The #1 most important factor to determine how low your rate can be is working out what your average credit card ticket is. You can find out exactly what this is by dividing your total credit card sales by your total number of transactions for a full calendar month.

So if you did 500 transactions to process $20,000, than your average ticket is $40. Unless you make major business changes, typically your average ticket won’t deviate more than $10 from month to month.

The Higher Your Average Ticket Is – The Lower Your Rate Can Potentially Be

Let’s take 2 totally different businesses except for the fact that they both process $30,000 per month; a coffee shop and an automotive shop.

The coffee shop pays 2.6% in fees each month whereas the automotive shop only pays 1.4%. Why does the coffee shop have to pay $360 more each month?

The reason is because the coffee shop has to access the credit card networks a few thousand times to process 30,000 since their average ticket is only $10. The automotive shop only has to run 10-15 transactions to process this same amount.

Moral of the story is all businesses are not created equal, especially when it comes to the fees associated with accepting credit cards. Just because your neighbor, the Jeweler, has an effective rate of 1.6% each month doesn’t mean your frozen yogurt cafe will get this type of rate. Its simply impossible.

Donnie Troy
Donnie Troy

1Quest Payment’s mission is to help as many merchants as possible find the best credit card processing solution so they can focus their time and energy on growing their business. Contact Donnie today, call 1.800.413.7573 or use our contact form