Pub. 18 2019-2020 Issue 2

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 3 , 2 0 1 9 28 new jersey auto retailer How to Pick the Best Credit Card Processing Rate Plan For Your Dealership BY STEVE WEISSMANN When it comes to accepting credit cards, cost is always a concern for business owners. To fully understand the impact a payment processing rate plan has on your bottom line, you need to understand your rate plan options. There are three common rate plans: Flat, Tiered and Inter- change-plus ( IC-plus ). Unethical Merchant Account Providers will put businesses on variations of another rate plan called Billback, which should be avoided at all costs. For the sake of this article, we're going to focus on the three most common plans. IC-plus offers the best credit card processing rates on the market. But, depending on your processing volume and how established your business is, Tiered or Flat may be a better fit for your business. It’s important to know that all credit card processing rates start with the wholesale cost ( Interchange ) to run the transaction, which varies based on card type and method of transaction. This cost is posted by each card brand to its website. Visa, Mas- terCard and American Express publicly post their Interchange fees. Discover does not. Now let’s get into the nitty-gritty of each rate plan. Flat Rate Plans A flat rate plan is not the best credit card processing plan for traditional merchant accounts. Flat pricing is only offered by Payment Facilitators ( PayPal, Stripe, Square ) who essentially lend out their own merchant accounts to anyone needing to process payments. Because each facilitator works off a single merchant account, they can’t offer different credit card processing rates to their customers – hence Flat pricing. Flat pricing is a mix of rates and fees that, together, create one fixed rate regardless of card type or transaction method. Flat pricing is unregulated and often increases processing costs, especially for debit card transactions, as you can see on the accompanying graph. This rate plan is not typically the beta option for businesses processing a high volume of transactions. If you run a large transaction or process a high monthly volume, you’re at risk for long-term fund holding. As businesses grow, they tend to move away from Flat pricing plans. However, because Payment Facil- itators do not underwrite their customers before on-boarding, Flat pricing is a good option for new businesses looking to start processing transactions right away. Tiered Rate Plans This rate plan bundles transactions into three different tiers ( Qualified, Mid-Qualified and Non-Qualified ) based on certain