Should
I choose a higher discount rate
and lower transaction fee
or vice versa?
- by
iMerchantNetwork.com
The discount rate is the percentage of each sale the bank
keeps.
Per transaction fees are an additional fee per transaction
ranging between $.10 and $.30.
A common misconception by merchants
is thinking that lower discount rates and higher transaction
fees are more cost effective.
Perhaps, but let's do the math first.
If you have low ticket sizes of about $20, it’s in your best
interest to negotiate a contract with a higher discount rate
and lower transaction fees.
If you have high ticket sizes of about $200, it’s in your
best interest to negotiate a contract with a lower discount
rate and higher transaction fees.
Here is an example to consider
for “swiped transactions” (meaning the credit card is present
at point of sale).
Low ticket size & high volume:
1.49% discount rate, ($.30 per transaction x 100 transactions)
$20 item = $59.80
1.59% discount rate, ($.20 per transaction x 100 transactions)
$20 item = $51.80
1.69% discount rate, ($.10 per transaction x 100 transactions)
$20 item = $43.80
High ticket size & low volume:
1.49% discount rate, ($.30 per transaction x 10 transactions)
$200 item = $32.80
1.59% discount rate, ($.20 per transaction x 10 transactions)
$200 item = $33.80
1.69% discount rate, ($.10 per transaction x 10 transactions)
$200 item = $34.80
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iMerchantNetwork.com
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