Knowledge of credit card processing pricing models can save your business money. In this article we describe the Interchange Plus Pricing model for merchants. We'll compare it briefly to other models, state its advantages, disadvantages and give a practice example.
Why do some businesses get lower credit card processing costs than others? In this video David explores the criteria that cause some businesses to get lower rates than others and techniques that you can use to reduce your processing costs.
It is extremely frustrating for merchants to be notified of an increase to your credit card processing rate. In many cases, these increases may be unfair and add unnecessary additional expense to your business. Fortunately, there are protections in place that can help protect your business should this happen to you.
David breaks down the current interchange rates for e-commerce merchants in Canada for 2023. These figures were taken directly from the Visa and Mastercard Canada interchange tables. These interchange rates apply not just to e-commerce transactions but also virtual terminal and other card-not-present type transactions.
Visa and Mastercard charge a very small fee called a card brand fee (also sometimes called an assessment fee). We will explore these costs and explain when they are incurred. Learn more about Visa and Mastercard assessment fees.
Some payment processors have a 'standard practice' of raising credit card processing costs on merchants. This is dishonest and unethical. In this video David explains when rate increases are reasonable (which is very, very rarely), and how to fight back when it does occur.
Some merchants that use Shopify express frustration over the Shopify percentage based fees that are charged per transaction. In this video David explains why payment processors charge percentage based fees (because of interchange fees and chargeback risk), and why most shopping cart software providers charge a monthly fee, but don't charge percentage based fees. He also discusses some options that some merchants have used in an attempt to lower their Shopify processing costs.
How much are credit card processing fees in Canada? Use our interchange chart and fee calculator to determine your exact processing costs.
How To Figure Out What Your Discount Rate Actually Is?
(Slightly edited from video transcript for greater readability)
Key Takeaways
1
Discount Rate
The discount rate is the percentage that you pay for each transaction that you process.
2
Calculating your discount rate
(Total dollars paid to your credit card processor - Monthly fee ÷ Total dollars processed) * 100 = Discount rate (%)
Need help with this topic? Or a rate quote?
Whether its questions about this article, or you want to see how we can lower your costs. Don't hesitate to contact us.
Hello, David here at Merchant-Accounts.ca with a really short, quick but awesome tip for business owners and it's how to figure out what your discount rate is. Stay tuned. We'll dig in in one second.
Discount rates
Discount rates are confusing and I have other content about different pricing models, flat pricing, interchange plus pricing, and qualified and non-qualified pricing. Forget all of it for one moment because to figure out your discount rate, all you need to know is this.
The discount rate is the percentage that you pay for each transaction that you process.
Calculating discount rates
Obtain at your statement for last month. Look at the total dollars that you paid to your credit card processor. Now, subtract away your monthly fee and with what you're left with, divide that number into the total dollars you processed.
(Total dollars paid to your credit card processor - Monthly fee ÷ Total dollars processed) * 100 = Discount rate (%)
If you had, say a hundred dollars in fees and twenty of it was a monthly fee, you take that away, now you're left with 80, and let's say that you processed $4,000 that month, you divide 80 into 4,000 and you multiply the result by a hundred, it turns it into a percentage.
Total fees paid to your credit card processor = $100
Monthly fee = $20
Total dollars processed = $4000
(100-20 ÷ 4000) × 100 = 2% Discount rate
This is your actual effective discount rate, meaning the average discount rate that you pay for every single transaction that you process per month.
It's great because it shines lights in those dark corners. There's no way to hide from it if your processor is not treating you right. You'll know if you're paying a high rate. It'll be really obvious if you're paying a pretty good rate, say two percentage points or something. That's a pretty good deal and this is a way for you to know that you're getting a good deal. I'm not going to go on any further.
Conclusion
This was a super quick video. If you have any other questions though, reach out to us at Merchant-Accounts.ca. I would be happy to try to tackle them here on the channel. Thanks for watching. Have a nice day. Bye now.
Knowledge of credit card processing pricing models can save your business money. In this article we describe the Interchange Plus Pricing model for merchants. We'll compare it briefly to other models, state its advantages, disadvantages and give a practice example.
Why do some businesses get lower credit card processing costs than others? In this video David explores the criteria that cause some businesses to get lower rates than others and techniques that you can use to reduce your processing costs.
It is extremely frustrating for merchants to be notified of an increase to your credit card processing rate. In many cases, these increases may be unfair and add unnecessary additional expense to your business. Fortunately, there are protections in place that can help protect your business should this happen to you.
David breaks down the current interchange rates for e-commerce merchants in Canada for 2023. These figures were taken directly from the Visa and Mastercard Canada interchange tables. These interchange rates apply not just to e-commerce transactions but also virtual terminal and other card-not-present type transactions.
Visa and Mastercard charge a very small fee called a card brand fee (also sometimes called an assessment fee). We will explore these costs and explain when they are incurred. Learn more about Visa and Mastercard assessment fees.
Some payment processors have a 'standard practice' of raising credit card processing costs on merchants. This is dishonest and unethical. In this video David explains when rate increases are reasonable (which is very, very rarely), and how to fight back when it does occur.
Some merchants that use Shopify express frustration over the Shopify percentage based fees that are charged per transaction. In this video David explains why payment processors charge percentage based fees (because of interchange fees and chargeback risk), and why most shopping cart software providers charge a monthly fee, but don't charge percentage based fees. He also discusses some options that some merchants have used in an attempt to lower their Shopify processing costs.
My name is David Goodale, CEO at Merchant Accounts.ca. I launched our business in 2001 and have over 20 years of expertise in the field of online payments. If you have a payments related question or project, and especially if it relates to multi-currency or international e-commerce don't hesitate to contact me. I'm always happy to help with an honest opinion, and enjoy chatting with folks from interesting businesses.
