To answer this question, you need to understand the various pricing methods employed by credit card processing firms.
Pricing Models of Credit Processing Companies
Pricing models have a significant impact on your negotiation ability; they able you to understand how to breakdown the costs.
The four significant types of pricing models are:
1. Tiered Pricing
This is the most expensive and the least flexible pricing model. Moreover, not much information is provided in this case in terms of the cost breakdown. It blends all the types of fees into various pre-determined categories. This is usually done on the basis of nature of your business and the type and nature of your transactions.
2. Flat Rate Pricing
Flat rate pricing offers one basic price to all the customers. This is a model usually used by online processing companies like Square and PayPal. This oversimplified nature of pricing attracts small business owners; however, the merchant is not in control of the charges in this case. You cannot negotiate in this model either. Moreover, the markup fees are highest in this model.
3. Interchange Plus Pricing
This model is highly negotiable, especially if your business has a high transaction volume. This is because this model keeps a distinction between assessment and interchange fees.
4. Subscription/Membership Pricing
This model also keeps a distinction between markup fees and wholesale costs; however, their method is a little bit different. It consists of transactional charges and a flare rate monthly fee, for availing the services of the company. This model is highly effective if your business has a high transaction volume, and the chances of negotiation are high.
Other negotiation factors
Some other factors that can affect your ability to negotiate –
- Company Size: In the case of large firms, the number of customers is more, so they value individual customer less. Smaller companies would be more open to negotiations, as they work with you on your business proposal.
- Business Standing: BEfore negotiating, you need to understand what your business is contributing to the processing company. Especially consider the risk factors and transaction volume. The more your value is, the more you can negotiate with the credit processing firm. You can establish trust with the company by consistently making the payments on time and reducing the risk of fraud. This would increase the chances of negotiation turning in your favour.