The Critical Canadian Merchant Services Guide – Part 7
September 26, 2008 by Admin · Leave a Comment
Become a seasoned Pro at understanding how credit card processing fees work through real life case studies.
Case Study One:
Company A:
- Debit Transaction at 0.12 cents
- 576 Debit Transactions that month
- Total Monthly Debit Business Volume: $13,876.00
- Average Ticket: $23.56
- 0.12 cents x 576 = $69.12 in monthly Debit Fees
Company B:
- Debit Transaction at 0.05 cents + 0.0025%
- 576 Debit Transactions that month
- Total Monthly Debit Business Volume: $13,876.00
- Average Ticket: 23.56
- 0.05 cents x 576 = $28.80
- $13,876.00 x 0.0025% = $46.94
- $28.80 + 46.94 = $75.74 in monthly Debit Fees
You can see that Example 1 is cheaper by $6.62 even though it may initially look like Example Two would have been less expensive. Typically, it is always better to have a flat Debit Fee only on your Debit Merchant Account.
The only time the lower Debit Fee + % works in your favor on Debit Merchant Accounts is if you have very high Debit transactions with a very low average Debit ticket price.
Case Study Two
Company A:
- Credit Card Discount Rate: 2.65%
- No Transaction Fee: 0.00
- 327 Transactions
- $18,267.00 in Credit Card Sales that month
- Average Ticket Price: $55.86
- 2.65% X $18,267.00 = $484.07 in Credit Card Processing Fees that month
Company B:
- Credit Card Discount Rate: 1.89%
- Transaction Fee: 0.10 cents
- 327 Transactions
- $18,267.00 in Credit Card Sales that month
- Average Ticket Price: $55.86
- 327 Transactions X 0.10 cents = $32.70
- 1.89% X $18,267.00 = $345.24
- $32.70 + $345.24 = $377.94 in Credit Card Processing Fees that month
It is obvious in this Example that example two is the better Merchant Account to go with, even though you are paying a transaction fee on top of your Discount Rate for credit card transactions.
Click here for 3 Insider Money Saving Tips for Merchant Accounts
