What is a Good Effective Rate for Credit Card Processing?

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Golden colour payment card in a card reader on white surface - What is a Good Effective Rate for Credit Card Processing?

You may be doing some calculations and want to know just exactly how much your processing fees are when it comes to credit card transactions. This is smart after more you can deduce the better off your bottom line will look. There are many factors though and no one answer fits all. By understanding a few key ideas when it comes to this process you will be able to estimate these fees much easier. The first thing you must understand is effective rate. So in this article, we will take a look at that as well as some other key factors that you should think about when trying to figure out not only what is a good effective rate for you but also what does the overall fee look like. Let’s start with the basics and discuss just what effective rate is.

What is Effective Rate?

Stripped down to the barest of definitions your effective rate is the money your fees average in correspondence with your overall volume of sales. This metric is expressed in a percentage. This, however, is not the definite number rather just an estimation of the fees regarding sales. The typical average rate offer depends on the processor you decide to go with. Most often you will get a quote of anywhere from 2.5% to 3.5%. This is, of course, negotiable and by no means a for sure offer. Some merchants can utilize their high sales volume to get a better rate and vice Versa.

Other Things to Consider

Understanding an effective rate can help you determine many things when it comes to your business but there are also a few other things you can factor in that will help you be more precise when it comes to your processing fees. These are:

Processing Method

There are two divisions in this factor. You have the car-present and the card-not-present. If you are a merchant that swipes cards, then that is a card-present system. This may change the lower overall fees. The other option pertains to online or e-commerce stores where the card is not swiped, tapped or inserted. These as you may guess charge higher fees.

Average Sale

This is the overall average of your typical credit card transaction. The larger the sum the higher the fees.

Card Charges

Depending on whether your customer likes to use debit or credit can affect your fees as well. Debits traditionally charge fewer fees than credit.

These are all factors that have an impact on your overall fees and therefore, in the end, will influence your effective rate.

Final Thoughts

So, what is a good effective rate? The best answer to this question is the lowest you can get and remember these providers do allow for a little negotiation. However, as a basic guideline, you should look for a typical rate to be between 2.5% to 3.5% as we stated above. Once again though that is still negotiable and with a higher sales volume, you can negotiate a better deal.



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