The Merchant Processing Guru Tip#7: Know your “effective rate”! What is an “effective rate” you ask? Quite simply, it is the percentage of your monthly credit card processing volume that is actually paid to the credit card processing company. Say for instance you had a volume of $10,000.00 for one month and your total fees were $325.00 for that month. Then you would take $325.00 divided by $10,000.00 which would be 0.0325 which is 3.25% of your total income from your Visa & MasterCard sales income. Discover is now part of MasterCard and may be included in those sales if you are not receiving a separate discover statement any longer. Do not include your AMEX sales, you can work that out separately on the AMEX statement.
What to look out for: Make sure you have your exact total of sales and exact total of charges. Some statements are harder to figure out than others, especially if they are showing last months charges with this months processing statement. If you would like help with this, just let me know. Even I have had to look closer to make sure that I got all the details and I have been doing this for years.
Why is this important? Well, first of all you will know what accepting credit cards is actually costing you. Always a good thing! Secondly, if you are between 2.25% & 2.5% then chances are you are set up fairly well. There may be some savings still to be had and it is worth looking into with the right person who will give you a truthful answer. If your effective rate is any higher than 2.5% – 2.75% , then you can be sure that the likelihood that you are paying too much for your credit card processing service is probably quite high. To find out how high fax your statement to me at: 888-729-9267 for a comprehensive analysis.