Recently, we discussed the types of rate structures most banks, processors, ISO's etc use when setting up merchant accounts. While it is very important to be aware of these it is also very important to read your contract before you sign. Some companies will quote the proper type of merchant account (MOTO, swiped, etc) at an extremely low initial rate without going over the additional rates/fees in fine print. As we say here, if a deal looks too good to be true, it usually is!
One must keep in mind that every merchant account provider is playing with the same interchange costs for rates...it's just a matter of how they structure them. Some companies can be very ingenious with their marketing and packaging of rates in order to give the impression that their deal is better that everyone else's.
Here's an example: Costco Merchant Account
In big bold letters they quote a very low MOTO rate of 1.99% but in smaller italics they mention that other cards process at higher rates. They don't disclose these rates until you have gone through the entire online application process and have received your contract. With Costco (Elavon) all rewards cards or transactions not using AVS will come through at the mid qual rate of 2.96% and all corporate cards at the non qual rate of 3.8%. They also throw on a $20 monthly minimum to insure that the merchant will be paying at least $20 a month in fees even if they haven't processed a cent. Plus, if the merchant wants a virtual terminal, that will cost more as well. Not such an amazing deal after all.
As a merchant inquiring about rates, one should always ask these five questions:
- What is the rate for a normal swiped/keyed in card?
- What is the rate for a rewards card?
- What is the rate for a corporate/foreign card?
- Is there a monthly minimum?
- Are there any other hidden fees?
And of course always look over the terms and fees before you sign...
