All merchants look for the best possible credit card processing rates. And, sometimes, it can seem to be a crapshoot to those who don’t understand payment processing just who qualifies for better rates and who
doesn’t. Here’s a primer.
Swiped Cards: 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.
But what about low rates for e-commerce transactions?
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 $39.99, or five payments of
$49.99. These allow the consumer better affordability and are
viewed as safe — similar to one-time sales.
Continuity or Reoccurring Billing Models: Payment processors want to see merchants offer the consumer a choice to
purchase once or choose to pay on a continuous basis. They
also want to see a chance for the consumer to easily opt out of
a continuity billing program. Merchants billing the customer’s credit card repeatedly after the initial purchase pay more
than one-time and easy payment marketers. However, they
shouldn’t pay as much trial marketers.
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.
Proper Financing: Many merchants apply for a merchant
account improperly financed to achieve the processing volume they require. Some financing is so badly structured that
getting approved at all is challenging. With a brand new
company and bank account, you’ll be asked for additional
paperwork. This can include personal bank statements, tax
returns, company financials, and a balance sheet.
Payment processors look at the average bank balance
during the past 90 days in relation to the processing volume
you are applying for. They like a rotating bank balance with
expenses being paid and money replenished monthly.
Merchants With Good Credit: Good credit is a great start
to qualify for low rates.
Who Doesn’t Qualify?
High Chargebacks: 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
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
Who Quali;es for Low Credit Card
By Curtis Kleinman