Are You Losing Money with Your Merchant Service Agreement?
When you opened your first medical practice, chances are you decided you wanted to accept credit or debit cards as one option of payment. There’s an even bigger chance you entered into a Merchant Service Agreement without really understanding what you were signing, and now you may be paying more than you need to in transaction and other fees. Tiered Pricing vs. Interchange Plus Do you know if your Merchant Service Agreement is set-up as Tiered Pricing or if it is setup using Interchange Plus pricing? The answer to this question could save your business hundreds of dollars a month in transaction costs. Interchange Fees are set twice a year by the card brands (Visa, MasterCard and Discover). They include a schedule of fees in various categories that different credit card transactions can fall under. There are over 600 different rates outlined in the various fee schedules. Click here to see Visa’s Interchange Reimbursement Fee Schedule for one example of how complex this really can be to understand. Most businesses are on what is called “Tiered Merchant Account Pricing”, meaning depending on the type of card used at your clinic, you pay either a Qualified Discount Rate, a Mid-Qualified Discount Rate, or a Non-Qualified Discount Rate. The rate you are charged depends on the brand of card used, if it is a private or business card, and if the card offers rewards. In most cases, you are probably only aware of the "qualified discount rate", as this is the rate most commonly advertised and discussed when setting up a merchant service agreement. Other things that can affect which tier pricing you are charged include manually entering in the card number instead of swiping the card and not verifying the Zip Code of the card holder. Since you have no way of knowing what type of card your customer may be using, figuring out what fees you will be paying per transaction becomes virtually impossible to predict until you get your statement. Once you start accepting charges equating to more than $25,000 per year, you may be eligible for what is called “Interchange Plus Pricing”. In some cases, a Merchant Service Provider may allow you to have this type of pricing when you first open your business. Interchange Plus Pricing is more straight forward. The credit card processor only charges you two fees: the interchange markup percentage fee and the transaction fee. This means you pay a flat fee regardless of the type of card used, plus a transaction fee for each transaction. Many businesses prefer this pricing structure because it is more transparent. But beware, just because something is more transparent doesn't mean it is always the best solution for your business. If you have not recently met with a representative for your Merchant Service Agreement, now might be a good time to call them and ask them to explain the different fees you are paying. Imagine the difference to your bottom line if you could save even one percent in fees this year.
Article By: Tina Bell
