encounter Merchants who tell us they don't need
our services - or don't want to have us check their
pricing - because they have a "great, low rate."
While there is a chance they do in fact have a great,
low rate, the odds are otherwise.
When a merchant
service provider quotes you a straight rate, such
as 1.2%, it sounds great. Merchants often take
the deal, signing a multi-year contract with cancellation
They often discover later, much to their chagrin
and after their provider has disappeared, that
the "rate" they were quoted - and which
prominently appears on their contract - is not
the rate they are actually getting.
Why? It is because what we call a "rate
jockey" has failed to educate the Merchant.
Few Merchants understand how rates actually work
and apply. This is not the Merchant's fault -
it is the fault of their provider. Providers simply
don't want Merchants to know about something called
Tiered pricing reflects the simple fact that
Visa and Mastercard do not treat all credit cards,
or transactions, the same. Different kinds of
cards are classed as different types of transactions
and different rates apply.
When merchants look at their statements and cannot
figure out why the rate they were quoted and that
appears on their contract does not seem to apply,
it nearly always is because of tiered pricing.
Indeed, merchants sometimes find that less than
10% of all their transactions actually fall into
the "too good to be true" rate category
that appears on their processing agreement.