How to Use Flat Rate Merchant Account Pricing

A brand-new pricing model has been making the press release rounds lately that can benefit merchants accepting payments in both card-present and non-face-to-face settings. It is known as flat rate merchant account pricing and we really like it and recommend it to our merchants.

Why a New Pricing Model

This is a perfectly legitimate question. Let me give you some background. We first began offering electronic payment services as a tiny three-person agent of one of the biggest merchant processing companies in the country a dozen years ago and we immediately realized that we had a huge problem explaining to applicants the way the two most dominant pricing structures work. In fact, we still do grapple with the very same issue.

See, it was that what we knew was the credit card processing pricing structure that was certain to save the most money for our clients – the cost-plus – was the most difficult one to explain. There was, to be sure, the odd sophisticated merchant who would explicitly ask for this model of pricing, but these were very few and far between. I have written extensively elsewhere about what interchange rates are and how the cost-plus structure works and still recommend that you can give it a try, if you want.

Even so, at the end we were forced to make the two-tiered pricing model our default option. We didn't love it so much – we still don’t – but it was somewhat simpler to understand. Then again, somewhat is the operative word. Even though a card acceptor who choose this plan had each of their transactions processed at one of only two tiers, the problem was to estimate with precision exactly how a given rate was chosen and merchants were understandably not happy with that.

I actually wrote a rather extensive post on how the cost-plus measures up to the two-tiered pricing model, so you can take a look at it as well, if you need to get a deeper perspective. Nevertheless, the bottom line was and still is that neither structure was satisfactory and our sales staff were spending most of their working hours answering questions about pricing. It was an unacceptable situation.

The Solution: Flat Rate Merchant Account Pricing

Enter flat rate merchant account pricing. We are convinced that it solves both of our issues by being at the same time cost-saving and very simple. Let me quickly go over its main features. Flat rate pricing works by:

1. Processing all card transactions at one single rate.
2. Eliminating the qualified, mid-qualified or non-qualified fee categories.
3. Charging no authorization fees.

So with flat rate pricing card acceptors know exactly how much they would pay for each transaction and can very easily estimate their total processing cost for any given time period, knowing only their total processing volume and the transaction count.