Credit Card Processing – The key to savings is starting from zero

Credit card processing is one of the greatest expenses that a business has. Consumer related businesses are especially affected by processing charges. That's why it's so important to have a low cost processing solution, and why it's so unusual that many people shop for and compare credit card processors with a backwards approach.

Many people shop for a new credit card processor by using their existing service provider as a benchmark from which to compare new providers. Instead of asking prospective providers how much their processing services will cost, they ask what the savings will be over their existing merchant account rates and fees.

This approach is fundamentally flawed for a number of reasons, the biggest of which is that it allows prospective providers to perpetuate any exorbitant fees charged by the last. The correct way to shop for a compare credit card processors is from the bottom up. In other words, don't compare processors against each other - compare all of them to the actual cost to process credit cards.

Interchange fees published by the card brands such as Visa and MasterCard dictate the underlying costs of all credit card processing charges. Interchange fees are essentially the wholesale rates and fees charged to process credit cards, and they're readily available for download from Visa and MasterCard's websites.

Knowing the underlying interchange costs that your business pays to process credit cards will make it possible for you to find the least expensive merchant account. If you're not sure what the interchange costs are for your business, get an audit from your existing credit card processor or from a website like CardFellow that offers such audit services free of charge. Once you know what the true costs are, you can accurately compare merchant account rates and fees from new providers.

Deciphering the underlying interchange costs that your business pays takes knowledge and practice. Luckily, if you're in the market for a new merchant account you can have prospective companies do the work for you. Ask each company for a comprehensive evaluation of your existing service broken down into actual interchange and association fees versus provider profit. The amount of profit is where you have room to work.