We explain why your effective rate may change on month to month basis and you are almost guaranteed to never pay the same amount in credit card processing fees every month.

Clients often call in and ask us why their effective rate may be only 1.9% one month and 2.4% the next month and pretty much never the same. ( For those who don’t know the effective rate is simply the total fees paid divided by the total dollars run through the terminal. For example $190 in fees on $10,000 in sales is a 1.9% effective rate.) What most business owners tend to forget when they look at their monthly credit card processing statement is that there are over 400 different interchange rates. There is no guarantee as to what card types the business owner may be accepting on a monthly basis. This is the reason for some large fluctuations in how much they actually pay for the merchant services every month.

For example. ( This is a simplified example and does not factor in every possible fee…so just go with it…)

One month a business may accept mostly debit cards that carry a rate of .05% + $.22 per transaction and the next month they may take mostly rewards cards that carry a rate of 1.65% + $.10 per transaction. These are pretty extreme examples but if we assume that the business runs $10,000 a month while running 100 cards the difference in their effective rate is pretty large.

The cost on all debit cards would be .05% * $10,000 = $5. Plus 100 transactions @ $.22 = $22. The total cost would be $27 – which is an incredibly low effective rate of only .27%

The cost on all rewards cards would be 1.65% * $10,000 = $165. Plus 100 transactions @ $.10 - $10. The total cost would be $175 – which is an effective rate of 1.75%.

As you can see there is a huge difference when we look at this example. The reality of it is you typically will see a swing somewhere between .25% and .75% on a month to month basis. Sometimes you pay more, sometimes less. BUT. As long as you are on an interchange plus pricing structure you will always get the best price possible on every card you accept. This is also the reason that it is very difficult for us to answer the famous question: What are you rates? There are so many of them possible and so many possible combinations we cannot tell you what you will pay without looking at your current statement to properly analyze your account.