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The funny thing is that cost plus pricing is often the best way for the merchant to save on processing, but it is also the hardest to explain, and as a result, most merchants don't go for it. We will do our best to explain it here, and hopefully, you will take advantage of it as a result.
Fundamentally, it is very simple. You only pay a small percentage, less than one percent above what the actual costs are for the service. Typically, when merchants are quoted a rate, it reflects only a base rate, but many transactions fall into categories which do not fit the base rate and the merchant is charged more. There are many, many categories of non-base rates (see interchange rates).
To make it easier on themselves, processors have generally lumped the various rates together into two or three categories. These are downgrade categories and are usually divided into mid and non-qualified transactions. These transactions cost the merchant more. Various things can cause a transaction to be considered not qualified, such as manually entering the transaction when you are suppose to swipe, or not including certain data when a corporate card, or not closing the batch in time, or when the card being used had rewards associated with it, such as frequent flyer miles. It seems the number of transactions that will not qualify at the lowest rate is increasing.
Many processors make most of their money from these non-standard rate categories and often don't want the merchant to fully understand them it seems. When doing the cost plus model, you don't have to worry as much about the downgrades, because no matter what category a sale falls in, you only pay a small percentage over the real cost for that category. The processor may not make as much money, but it is a bit of a trade off for them, because at least under this model, they know that they will never lose money on a transaction, whereas it could happen with the other system
If you are interested in this system, ask us about it and we can tell you if it is a good fit for your situation. We will also show you how to minimize having transactions downgrade in the first place.
Get an economical credit card processing account for your Point of Sale (POS) needs. We offer a full range of merchant services including a large assortment of excellent credit card machines and credit card terminals. We have years of experience in helping business get merchant accounts and increasing their sales. Thank you for considering Acceptance Services as your merchant provider.
