Credit Card Processing Fees – Cost Plus Vs. Tiered Plans

Credit card fees are nasty for several reasons. The obvious one is that they are substantial and can run as high as 4% of the gross card collections. A less obvious one is that we tend not to notice them, because they are quietly withdrawn from the bank account. A quick way to see how much you are paying in total fees is to take the monthly statement and divide the gross card collections by the total monthly fee. Chances are that this will be over 3%. In the December 1st Newsletter, we wrote how most of us are significantly overpaying for credit card processing fees.

We suggest re-reading that issue for a discussion of the differences between "cost plus" plans and the more expensive "tiered pricing" plans which most of us have. We switched to a cost plus plan about six weeks ago and are generally pleased with the results. While the fees are still expensive, it appears that they have dropped by about 1% of total billings. with the cost plus plan, expenses are broken down between "cost" and "plus." The "cost" part of the equation includes the Visa/MC/AMEX/DISCOVER interchange fee and their dues and assessments which get passed straight through to the merchant. The "plus" portion is the processor's markup. With our plan, the "plus" charges include an extra 0.2% charge on gross billings plus 10 cents per transaction plus a few extra dollars each month in service charges. This is split generally between the card processing company and the broker who placed the merchant with that processor.

The new monthly statement is not transparent, but is easier to follow than the opaque statements we used to receive. We set up our cost plus plan with Dental Card Services Alliance. This is not an endorsement, however. There are many such brokers who are arranging cost plus plans for small businesses, and we recommend researching a few of them if you are thinking of making a switch. You might be able to get references from some of their clients as well as possibly lower rates on the "plus" portion of the monthly fee.