Low Payment Processing Rates?
Payment processing costs are determined by your Merchant Account Holder on the nature of your business. Below is a primer on what lowers and increases a businesses payment processing rates:
This is the simplest and easiest. Swiped cards — with a customer present who signs a sales receipt — entitles your business to the lowest rates. Merchants should ask for a picture ID to assure even further security.
One-Time Sale and Easy Payment Billing Models:
Billing your customer once and allowing voluntarily reorder will reduce your processing fees. Payment processors see less risk when marketers offer one-time purchase items. Knowing the consumer won’t be charged repeatedly and that no additional items are being shipped bring comfort to payment processors.
Easy payments are part of a purchase where the total retail price is broken down to several equal payments (usually paid monthly). Think four payments of $39, or five payments of $49. These allow the consumer better affordability and are viewed as safe — similar to one-time sales.
Currently Selling With Low Chargebacks:
Have you been selling during the past three months, with total chargebacks under 1 percent? If the answer is yes, then processors want your business. With low chargebacks, you may avoid having a reserve held or having to sign a personal guarantee.
If you are experiencing high chargebacks (3 percent or more), your application for a new merchant account most likely will be denied. If chargebacks are between 1 percent and 3 percent, you can obtain acceptance at a few processors, but expect to pay higher rates.
Bad Credit or Previous Chargeback Issues:
Merchants with bad credit often get denied a merchant account. If you’ve had a merchant account previously shut down due to chargebacks, expect extra scrutiny when applying again. If you are accepted, you may pay higher rates.
Trial and Continuity Offers:
Merchants with trial and continuity offers are charged the highest rates due to the risk involved. Many merchants ask, “Why am I being penalized when I’ve done nothing wrong?” It’s not your fault — it’s your product type or billing model that is under fire. Payment processors are looking to protect themselves and they adjust their rules and regulations accordingly based on the past track record of similar product offers.
Rates for risk-free trials and have risen 2 percent or more above one-time sale and easy payment billing model products. This is due to high chargebacks, return rates, complaints, and other risks. Many marketers in chargeback trouble are now forced to pay net effective rates of 7 percent to 10 percent for merchant accounts. Many just want to ensure they can process customer payments.
Many marketers have abandoned the trial model and now offer discounted one-time offers — “Buy one, get one free” or “BOGO” offers have become popular. Merchants get accepted with more processors at lower rates and obtain higher processing volumes when they give up selling via risk-free trial.
High-Risk Product Types:
Common product types sold on a risk-free trial include skin care, ingestible items, membership clubs, exercise equipment, and “ways to make money.”