Here's a little quiz that will expose how much you know...
or DON'T know...
about how misleading card processing "rates" can be...

You're a business with an average ticket of $50.00.​

Your merchant service provider wants to keep things "simple"...

so they've offered you a flat rate– and YOU get to choose the rate.

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Option 1:   1.75% + 15¢/transaction

Option 2:  1.85% + 10¢/transaction

Option 3:  1.95% + 5¢/transaction

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So... which do you choose? If you think you'll do a lot of volume, do you choose a lower rate albeit a higher transaction fee? Conversely, if you think you'll have a high number of transactions, do you accept a higher rate to get a lower transaction fee?

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Or do you surrender to your confusion, split the difference, and choose Option 2?

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Because we're dealing with two different units of measurement–rate and cents– it's like measuring someone's height and saying "they're 5 feet and 10 centimeters tall!"  We need to convert one unit of measurement into the other so that everything is uniform.

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The easiest way to do this is to look at the transaction fee as a PERCENTAGE of the average ticket. By dividing the transaction fee by the average ticket, multiplying it by 100 (to make it a percentage), and then ADDING it to the rate (which is already a percentage), you get the following:

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Option 1:   0.15/50 = 0.003

                                   0.003*100=0.03

                                                       0.03+1.75=2.05%

                    

Option 2   0.10/50 = 0.002

                                   0.002*100=0.02

                                                       0.02+1.85=2.05%

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Option 3:   0.05/50 = 0.001

                                   0.001*100=0.01

                                                       0.01+1.95=2.05%

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Think of it this way... you're playing "Let's Make a Deal", and are offered the chance to pick what's behind Door #1, Door #2, or Door #3...only to find that all three doors lead to the same room.

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