The hidden costs of your credit card transactions

Understanding your true credit card rates can be confusing. Your bank may advertise one low rate, but the rate you actually pay is usually significantly higher. In fact, you may get that advertised rate on only a very small percentage of transactions. All Merchant Processors have their own way of presenting fees and transaction charges, so it is often difficult to make apples to apples comparisons amongst companies competing for your business. The following sections break down the components of the charge to process credit/debit card transactions. Sometimes these fees are hidden, but they are always there in one form or another.

The Two Components of a Credit/Debit Card Transaction

Each time you process a credit or debit card transaction, you are charged an inquiry fee and a percentage of the total transaction. The inquiry fee is a flat amount, typically between 20 cents and 35 cents. The percentage charged, is typically called your “credit card rate” and it is variable based on the type of transaction and the type of card used.

Credit Card Rate Influencers

The rate for each transaction is determined by the following:

1. The card type/card issuer (i.e. Visa, Master Card, Amex, Discover, etc.). Each issuer sets its own percentage rates. This is the wholesale rate to the processor.

2. Whether that particular card type has points, cash back, rewards, perks, or is just a simple check card, they all affect the rate you pay. “2% cash back” that you see on TV, this isn’t free, it has to be paid by someone and that someone is always the merchant.

3. Corporate cards are often viewed as riskier than consumer based credit cards so the higher the risk the higher the cost. Since American Express typically services corporate accounts you will find AMEX processes at a higher rate.

4. The processor is the company that is actually certified to safely/securely process credit cards. These companies charge for their service. These costs, bundled with the wholesale rate they pay from the card companies, make up what is commonly referred to as the interchange rate.

5. Most often there is also a “middle man” which is the service provider. This could be the bank or non-bank merchant service provider that signed you up. The service provider is typically a marketing company that sends you your monthly statement but they don’t actually process any card transactions. They typically resell for a processor and mark up the interchange rate to cover their costs along with inserting their profit. Service providers will also sometimes charge you for miscellaneous charges such as statement fees, per swipe fees, hardware rental costs, monthly minimums, and countless other fees that get hidden into your statement.

6. The type of merchant you are can also affect your rate. In person retailers process at a lower rate than online retailers. Restaurants usually process at a higher rate than the Proshop because fraud is more prevalent at busy restaurants/bars. Again risk always impacts the rate.

7. The way it is processed (i.e swiped in person or manually keyed in) affects your rate. Add to that certain card types such as corporate cards are viewed as riskier than traditional consumer owned cards and they process at a higher rate.

8. The stability and track record of the merchant itself taking credit cards (i.e. the golf course) can have an effect on the rate you pay. If you are a new company or have never accepted credit cards previously, expect to pay a higher rate than an established retailer. Again any time “risk” is involved it affects the rate.

9. Lastly volume is a key factor in your rate. A company that does 2 billion a year in credit card volume will get a better rate than a merchant that does just a few thousand a year.

When looking at your statements try this.

1. Locate your total dollars processed net of any refunds or chargebacks.
2. Then locate the amount “Debited from account” for FEES.
3. Divide your Fees Charged by the total dollars processed, convert to percentage and that is your true cost.

Note: You have two statements normally due to the average ticket variable in F&B. Normally there is a rate and a separate statement from your vendor for your F&B operations. Do not combine them all as this is not the way to do the math. Calculate them separate. Notice your F&B processing by rule of thumb is more than your golf operation. Also take a look over a three to four month period for the best look at your rates, especially if your course is seasonal. Use the high months as a good indicator.

How Teesnap can help you.

Teesnap simplifies all of the complexities listed above and reduces it down to one simple rate – we charge a flat fixed processing on all card types. That’s it! No other hidden costs, it’s that simple. Because Teesnap is a subsidiary of Allegiant Travel Company/Allegiant Airlines which processes multi-billion dollars per year in volume we can pass this tremendous savings onto our customers as part of our solution. We are your processor. Since most of our clients were previously paying between as high as 3.9% we can typically save our clients several thousand dollars per year depending on their volume. Even corporate American Express cards (with rewards), which some courses stopped taking because the rate was so high, are processed by Teesnap at a low flat rate. For some of our clients the savings alone – justifies choosing Teesnap. It also allows you to accept more card types giving your corporate golfers another incentive to play your course.

Send us your two most recent credit card statements and we will tell you if we can save you money. Just email them to [email protected] and one of our agents will review it (risk free) and get back to you. If we can’t save you money we will let you know this too.