About Interchange-Based Merchant Account Rates & Pricing
OUR QUOTES - INTERCHANGE PLUS MERCHANT ACCOUNTS
See also: Interchange Rate Comparison
Credit Card processing rates are admittedly a complicated and boring subject. Understanding the way credit card issuers, banks, and processors work will help you make an informed decision about what provider / processor is right for you. We take every step possible to price our plans low, but for some merchants, Square or other providers like PayPal might be better values. For most merchants, our pricing and service are going to be a better alternative.
MX Merchant is a smart way to accept payments with super-low rates and more features including an Internet gateway for website ordering and payments, email invoicing, free point-of-sale software and recurring billing.
All credit card processing services, including services provided by Square, PayPal, and any other bank or merchant account provider, are required to pay the Interchange fees charged by card issuing banks and assessments that Visa, MasterCard, and Discover charge. These fees are non-negotiable, and there are no discounts for anyone, even huge providers.
For example, banks charge businesses an interchange rate and transaction fee of 1.51% and $0.10 each time a business swipes a particular Visa consumer credit card. Visa makes money by charging an assessment of 0.11% and $0.0185 on the same transaction. Adding these costs gives us the "wholesale" rate of 1.62% with a $0.1185 transaction fee. Square combines these first two components of cost with its own markup, and then bills its customers their single rate of 2.75%. Our standard quote adds 0.20% + $0.10 to this transaction, resulting in a much lower rate. On a $1000.00 sale, Square would charge a fee of $27.50, while our processing would be $18.44 (1.82% * $1000 + $0.21185). On a $100 sale, Square would charge $2.75, while our processing would be $2.04 on this transaction.
Interchange is the best equivalent of wholesale for credit card processing, and the vast majority of Interchange rates are significantly less than the 2.75% and 3.50% rates charged by Square and others who quote bundled or tiered rates.
If you are considering a service like Square because of the free card reader, consider that they can afford to give everyone free card readers because they charge higher transaction fees. MX Merchant includes a free cloud-based App for the iPhone or iPad that is freely available in the Apple App Store, and allows you to run transactions at our Interchange rates. Encrypted card readers are available too for a reasonable price, so if your volume warrants, processing with your own MX merchant account is a good business decision.
INTERCHANGE VS TIERED PROCESSING
Other merchant account providers may also bundle rates or quote tiered rates and other rate structures, but the provider always has to cover the costs of various interchange fees and assessments, so tiered rates are usually padded towards the side of covering the processor's costs, meaning they are high enough to ensure profit for the processor. For most merchants on a tiered plan, the majority of transactions will fall under a mid or non-qualified tier with a higher rate than the low 'qualified' tier. For this reason, Interchange is a better deal - there are no non-qualified tiers for different card types; the rates are just passed through for each transaction. If you are more comfortable with tiered pricing, we can set you up at rates that compete with any processor, but interchange is the most transparent way to see that you are getting a fair deal. We're offering the MX Merchant service at rates that are extremely competitive and will almost certainly be lower than your current processing in order to include MX in our portfolio of e-commerce services.
Our Interchange Based Accounts are designed to be simple, low cost, and have no hidden fees, setup fees, termination fees, monthly minimums, or risk.
SQUARE, STRIPE & OTHER AGGREGATORS
Square Up and Stripe are not credit card processors - they are aggregators. Square and Stripe use a processor and banks to provide their product, and they are required to pay the same bank interchange fees and assessments that Visa/MC/Discover charge. Square pays these fees and bundles these costs plus their markup into their pricing model.
Square has no monthly fee for their 2.75% pricing structure, and no per-swipe costs. This makes Square (and PayPal) a potentially lower cost option for businesses that are low volume (under $500-1000 / month) and swipe card-present transactions. With Square, transactions that are keyed (card not present) instead of swiped are charged a higher rate of 3.50% of volume plus a $0.15 per item fee. For example, a $100 transaction would incur a hefty fee of $3.65.
Square also offers a flat rate pricing model of $275 / month, but several limitations should be noted with this offer. For one, the limit is 250K/year. Any volume over that limit is charged at 2.75%. There is a transaction size limit of $400. Transactions over this amount are also billed at an extra 2.75%. Also, keyed (card not present) transactions do not qualify under this plan. If a merchant keys in even as little as 10% of transaction volume they will pay a hefty 3.50% plus $0.15 surcharge in addition to the $275 for all keyed volume.
Square is known for having issues with funding, delayed funding, holds, reserves, and fraud-screening. Square also does not give support via phone (we take pride in having real customer service people answering the phone).
Square, PayPal and other similar bundled-rate providers have simplified credit card processing by offering a simple rate structure as part of their intent to attract a large customer base as quickly as possible. For some businesses, their flat rate structure can be attractive. For others, in particular medium-to-large or fast growing companies, the Square rates can be very costly compared with our interchange-based merchant account.
One benefit of Square is that they offer a free card reader. It's easy and fast to get started. And, with no monthly fees (we will waive monthly fees for merchants with qualifying monthly volume), some businesses may rightly find Square to be an attractive option. Some of the businesses that might benefit from Square include businesses/individuals that have low processing volume, or businesses that only process a few transactions now and then. Businesses that have very low individual sales amounts may also benefit from Square's flat rate and no transaction fee. For a merchant with average charges of $5.00, for example, Square's rates would be lower than interchange.
Square's 2.75% is simple, but it's really not competitive with a processor offering good interchange-based pricing. Businesses that should avoid Square and PayPal include businesses that are or will process medium to high volumes, businesses that process large transaction dollar amounts, and businesses that process card-not-present transactions. Businesses that key-in transactions instead of swiping cards should stay far away from Square. 3.50% plus a $0.15 isn't even close to competitive for card-not-present transactions.
PayPal is an important player in on-line payments. It is similar to Square, in terms of it's bundled pricing structure and ease of use. The bundled rates at PayPal are also not competitive with Interchange Plus rates.
For Internet businesses, PayPal is an important payment option to provide because it is trusted and used by many consumers. It's just one of those things - if you are an on-line store, you accept PayPal because it's easy. But every Internet merchant that also has a good Interchange based merchant account knows that when a customer pays with PayPal, they lose money compared with when the customer pays with a credit card.
PayPal's bundled rates for swiped and keyed cards using their reader are very close to being in-line with Square, and are also not competitive with our interchange-based rates.
For service providers, freelancers, skilled workers, or other professionals that bill via email and accept PayPal payments, our Interchange-based merchant account can save significant amounts of money. If accepting payments with high dollar value or processing medium to high monthly payment volumes, the savings can be very significant.
Like Square, PayPal is a fast & easy way to pay and get paid. If you want to get paid more, though, choose an Interchange Plus Merchant Account.