What are Interchange rates?

Interchange rates pay for the electronic payments system, a powerful, global network, which enables financial institutions to connect merchants and cardholders.  For any network model to succeed, participants must be encouraged to maintain usage of the network and invest in network improvements. Some brand networks, such as Visa, charge predetermined and centrally set default interchange fee.  


Interchange is recognized globally as an appropriate and essential element in managing the electronic payment network.   The rates are publicly posted, and can be difficult to find by a basic search, but is a necessary part to become an educated merchant account owner.  A merchant understands and accepts the responsibility for the costs associated with the convenience of accepting electronic payments.   These costs can be passed onto the consumer by marking up a product before the sale, or by applying a surcharge fee, which is controversial and illegal in ten states.  


As a CPA, I discourage my merchants from charging a surcharge as it is illegal in some states and is an issue when dealing with electronic commerce as the payment can be from a state where the surcharge is illegal.  Additionally and more qualitatively, I would discourage any business from charging a surcharge as it appears to mislead the consumer.  The price advertised should be the price charged at the checkout or close of the sale.     The merchant should consider the interchange rates as a Cost of Sales (Goods or Services) expense which will directly impact the gross profit (Sales Revenue less Cost of Sales).   It is critical to identify all costs associated with the sales process to ensure the gross margin (Gross Profit / Sales Revenue) actually received is the gross margin budgeted.  


Connected Pay's Operations Consulting division can help you compute a price point which meets your gross margin goals.  Additionally, Connected Pay offers processing rates for Merchants that are typically 20 to 50 basis points (.20% to .50%) over the interchange rate.  To get more information on setting up a merchant account through Connected Pay, please use our Sign Up Your Business page follow this Merchant Account Link, or for general information inquiries please use our Contact Us page.   Feel free to e-mail us with any questions, info@connectedpay.com.


For Visa's view on interchange see Interchange Viewpoint.  For Visa's view on Surcharges see Surcharging Viewpoint.


For Mastercard's view on interchange see Understanding Interchange.  

What is a merchant account?

We turn to the source of all truth on the internet, Wikipedia, which has a good definition.  A merchant account is  is a type of bank account that allows businesses to accept payments by debit or credit cards. A merchant account also serves as an agreement between a retailer, a merchant bank (Acquirer) and payment processor for the settlement of credit card and/or debit card transactions.  To process a transaction through the merchant bank some base costs will always apply.  These amounts are called the interchange rates and they vary based on how the card is processed (swiped vs. keyed entry), what type of card is being used (Visa, Mastercard, Rewards, Corporate), what type of business is accepting the card (supermarket, retail, service).  See my interchange rate post for more info. 

Virtual Terminals

Q: What is a virtual terminal?

Think of a virtual terminal as a credit card terminal (aka a card swipe machine) that is on the internet. Virtual terminals are typically hosted by a gateway companies and are typically used only by the Merchant account owner or their staff. A virtual terminal runs on a computer through a website and as long as you have internet access you are able to process credit cards.

PROS: Having a virtual terminal is a great way to eliminate extra equipment sitting on desks, the virtual terminal is often less expensive than a tradition the hard wired terminal, and it can be accessed anywhere there is a computer. You are able to process Visa, Mastercard, Discover, and American Express cards.

CONS:

You have to manually take down credit card information and re-enter information which leads to errors. Card holders know that if someone else has their credit card data, then that person can fraudulently use their card. If you want instant approval/denial of a card you need to have a dedicated staff or staff team taking information over the phone or in person and instantly processing the card.

My question is: Why take the risk. Why invest the time? Why pay for extra staff?

Connected Pay sought out to solve this problem. As a CPA, I tell my clients that this is a market about doing more with the people you have and need. It is about leveraging your current staff (even if you are the only staff) by investing in time saving tools. Your customers should be responsible to ensure their card holder data is entered properly, after all they know themselves best. You can provide your customers a secure, professional, service-based website where payments are made. By accepting credit cards you can incentive you customers to pay because they may receive rewards points, or it simply provides your customers the ability to pay your bill by using their personal credit.

Connected Pay's virtual terminal is the only terminal that allows your customers to use your virtual terminal to make payments. Our secure Make a Payment site allows customers to enter a few pieces of data provided by you to access your Branded Login Page to pay you. You to elimate the time and costs associated with having to use a virtual terminal. Connected Pay's virtual terminal is built around helping your business grow and giving consumers confidence you are moving with the future.

Please contact Contact Us and let the Connected Pay staff provide you with the time saving, secure, easy solution that you have been looking for. If you are ready to start accepting payments online, complete our no obligation Application Form.

Do I need to install software, have a website, or hire a programmer?

The basic answer is it depends on what kind of business you are. Retail businesses with high transaction volume are generally able to leverage their Merchant account and obtain more favorable processing rates than going through a third party like PayPal. It can be difficult for a retail business to obtain a merchant account if they have a business which the Authorizing bank deems risky, or the Merchant has poor credit/minimal business history. A website is helpful, but with websites such as e-Bay, an online store tends to be easier to set-up than in the past. PayPal and e-Bay tend to be a package deal that favor retail businesses.

Service providers are another story. e-Bay stores do not fit a Service business's needs. A Service businesses tend be be smaller shops with the Owner closely involved in the day to day operations. Obtaining a Merchant account, hiring a programmer, and learning new processing software can be a costly endevor, both in dollar value and more importantly TIME!

The staff at Connected Pay focuses on the service business industry because they understand TIME is the most valuable commodity. If your Service business already has an established website, Connected Pay's service eliminates the difficulty and cost associated with getting your website secure, legally certified, and properly coded by a website developer. If you don't have a website, Connected Pay can be your cost effective virtual terminal. Eliminating website development costs, finding a secure host, high hourly developer rates, on-going maintenance costs and not to mention the need to obtain a merchant account and gateway.

Connected Pay's online payment service requires no software installation, no website is required, and no programmer is needed. You don't need anything special to accept credit cards by using Connected Pay's service. If you are ready to make it easier for your customers to pay you and save you time, please contact Connected Pay today to begin focusing more on your business. Contact Us at Connected Pay.