How CNP Merchants can Better Process Visa & MasterCard
5. Merchant Account Pricing:
Merchant Account pricing is often the hottest topic in merchant circles because it can represent one of the greatest cost centers. We have already learned that fees are typically paid to three parties: the Card Associations (“assessment” fees), the card-issuing banks (“Interchange” fees), and the payment processors (processing fees.) We have also discussed that fact that merchants with high ATVs should scrutinize percentage-based processing fees, while merchants with low ATVs should examine per-item-based processing fees. As you might have guessed what pricing really comes down to is the average ticket value of your product, and what the payment processor whishes to earn on each transaction.
Because both Visa and MasterCard publish Interchange and assessment fees, and because you know what your ATV is, applying a little high school math will let you see what the payment processor is earning. Pricing will also be affected by the size and financial health of your business. Riskier products like pornography and gambling tend to see the highest rats. Regardless of your business, you have the information to determine exactly what you are paying.
Pricing is often presented as combination of percentage-based and fixed per-item fees. Knowing your ATV, converting this confusing pricing to a pure percentage or pure fixed fee is a simple matter of multiplication or division. To calculate your “all-in” processing fees simply divide you total aggregate merchant fees (e.g., discounts, interchange, downgrades, authorization, chargeback, reporting, transmission, etc.), by your gross sales volume. Is it a fair number? Well it’s very hard to tell without understanding your business, but suffice it to say that if your ratio is greater than 2.4%, you should probably review your payment processes