To Swipe or Not to Physically Swipe? By Avi Jorisch

The vast majority of merchants who accept credits rarely, if ever, give serious though to the best ways lower their merchant services fees. One of the most effective ways of reducing fees is to physically swipe credit cards. There are a number of ways to accept credit cards – e.g. online terminals, stand alone terminals, phone authorizations, swipers, point of sale systems, etc. Which is the best method will depend on each individual merchant and their pattern of acceptance.

To begin with, there are five merchant plans on the market today. If a merchant is savvy enough to be on the interchange plus plan – the pricing model where a fixed markup is applied directly to interchange fees published by Visa®, MasterCard® and Discover® - the difference in cost is generally .30% per transaction. If a merchant is on one of the four other plans – e.g. tiered, qualified, flat or billback – the difference can be as 1-2%!

As a first steps, it is important that merchants ensure they are on the interchange plus pricing plan. Following that, business owners should do a cost benefit calculation to see if the cost of equipment and/or the physical rate of acceptance outweighs the cost of buying a physical terminal or phone swiper. Many processors like to upcharge significantly the cost of equipment.  If your merchant processor is offering you equipment for free you may wish to consider why they are doing so – are you doing such a big volume that the cost of equipment is relatively minute? Or are processors submidizing the equipment because the rates they are charging are exorbitantly high. No ones gives away things for free.

Merchants should do the math carefully and ensure they know how to calculate the best deal possible.