Higher Risk Doesn’t Always Mean Higher Fees

image via Andres Rueda (Flickr.com)

When it comes to merchant processing, or settlement of electronic payment transactions, it's important to know what to expect and what you're paying for. Crystal Sulzer, managing partner of Ferrari Merchants, explains credit card processing and breaks down the monthly fees.

With 15 years of experience in merchant processing, Sulzer teamed up with John and Stephanie Ferrari, both veterans of the transportation industry, to create a company that addresses the needs of transportation providers. Sulzer stresses that because they know the industry, they are able to charge better rates.

"Ninety-nine percent of the time, we're going to be able to beat the rates out there," she says. "Most of the time, it's 20% savings or more." The company offers a complimentary cost comparison and backs the claim with a price guarantee.

A Higher Risk Industry

Sulzer says many processing companies charge higher rates because they consider livery a higher-risk industry. Payments are usually made with credit or debit cards via online reservations software, which means qualified rates are rare. In her experience, 70% of cards used are corporate ones, which are charged non-qualified rates.

In addition, without being able to verify that the card is being lawfully used by the owner, there's also a higher rate of chargebacks issued by the bank because of a customer complaint.

Sulzer says price is certainly not the only factor clients should consider when choosing a merchant processor. "Everybody is going to beat everybody else by a penny," she says. "What it comes down to is, 'What kind of relationship are you going to have with the company?' And that's where we differentiate ourselves." She points out Ferrari's detailed reporting system and high quality of customer service.  

Sulzer Explains the Fees

The manufacturer (i.e. Visa, MasterCard) sets a non-negotiable interchange rate. A non-negotiable dues and assessment charge is also applied to process the information. Finally, the merchant processing company charges a fee for its services. Sulzer says these merchant processing fees are negotiable, and choosing the right company will lead to better rates.

Ferrari Merchants determines fees based on the sales volume of a client, with larger volume clients priced on the interchange rate, usually the best value. Companies with lower volume are set on tiered rates depending on security at the time that the customer makes a payment.

Qualified rates are used if a card is swiped and the magnetic strip is read. Mid-qualified rates apply if the card is a reward card or uses an address verification service, and non-qualified rates are applied to corporate cards or used when the transaction is keyed in with no address verification.

On interchange, Ferrari’s monthly statements break down by card type so the merchant can see which cards were used by his clients and better understand his rates.

Types of Transactions

Qualified transaction: In general terms, this is the rate charged per each transaction when the card is physically swiped through a credit card terminal.

Non-qualified transaction: In general terms, this is the rate charged when manually keying-in a transaction without using AVS (address verification service).

Things to Consider:

• Make sure the merchant processing company you choose knows your industry.
• The company should meet the Payment Card Industry Data Security Standards (PCI DSS). This means that they’ll make sure to keep you and your client’s information secure.
• Choose a company that will help you prove your case in the event of a chargeback.
• For operators that need a wireless terminal, it’s best to buy one, because in the long run, chances are you’ll be paying more for the lease than the machine is worth.