How to Deal With Credit Card Mumbo Jumbo

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IMPORTANT FACTS: Most merchant account providers simplify the complexity of interchange by bundling merchants' Visa/MasterCard rates into two-tier billing of “qualified” rates (for U.S. consumer credit and debit cards) and “non-qualified” rates (for corporate cards, foreign cards, rewards cards, and all other card types). While this is simpler, it also masks the true cost of a transaction and means most merchants pay more than they should on almost all types of credit and debit cards.
To understand and appreciate “interchange-plus” pricing, also referred to as “cost-plus”, it is important to understand what makes up interchange. Interchange is the set of rules and fees that a merchant’s processor (the “acquiring bank”) pays to a customer’s credit card company (the “issuing bank”) when merchants accept Visa and MasterCard transactions. Interchange, which makes up the bulk of what merchants pay in their discount fees, is paid to the bank that issued their customer’s card for their role in facilitating a sale.
Regarding using your LOCAL BANK, no local bank processes their own credit cards, they are simply a middle-man for a specialized acquirer. Look for an ISO or MSP that focusses on Interchange-Plus pricing.

Sloane Bouchever of AZ 3:20PM October 17, 2008

For most small businesses, going through a third party for credit card transactions simply does not make good common sense.
USE YOUR LOCAL BANK!! Remember, all but the smallest of towns and even some of those, have locally owned banks or smaller regional chains. These banks want and need and most importantly VALUE your business.
I have owned and operated small businesses all my life. I have never had a problem with getting credit card services through a local bank, and I sincerely doubt that YOU will IF you have decent credit, and don't overdraw your business checking account.
What's the difference? I've never paid more than 3% for discount fees to process the cards and even then it goes DOWN as the ticket sales and overall volume goes up. Most times after the first year, the fees were down around 1.25% to 1.75% with zero problems!! The only extra thing I ever had to pay for was an electronic terminal compatible with the bank's clearing house system. Even then they gave me six months to pay with NO INTEREST. THAT is customer service. ASK FOR IT!!! If you don't get it, move your accounts to another bank that will give you what you deserve.
Balance the discount statements every month, just like you should be balancing your checkbooks. That way you can track the cost of doing credit card business and make certain that it is worthwhile to do so.
For what my suggestion is worth, stay away from the big national and international banks. They really can care less about you and your business.

Gerry Kamp of NY 3:22AM July 04, 2008

Well done!! This article opens the door to encourage small business owners to take the time and consider merchant service fees as a % of gross sales. This % can very easily be reviewed back two or three years. Then, shop the market. Go to your current provider, large national banks, and also smaller outfits or specialty outfits such as Cocard Synergy.
Call me with any questions.
Truly yours,
Rory 707-256-9648

Rory Q Lynch of CA 1:28PM July 03, 2008