Wouldn’t it be nice as a business owner to have free merchant account services? Yep! And it’s actually possible!
At The Transaction Group (TTG) we have a solution that allows businesses to process credit cards via their merchant account for free. But before getting into how this works, let’s go back in time and review the early years of merchant accounts.
The Youth of Credit Card Processing
In the 1950’s, technology was advancing at a rapid pace. Although the idea of paying on credit was nothing new, the invention of a plastic payment card with a magnetic strip certainly was. These nifty pieces of plastic provided a value-added benefit to both consumers and merchants.
The credit card offered incredible convenience for consumers, allowing them to make purchases for goods without the need for cash. Consumers began to subconsciously and consciously spend more money and make larger purchases, knowing that they would not have to pay right away.
Every merchant that chose to accept credit card payments benefitted through higher sales revenue from customers. Merchants loved the new ‘buy now, pay later’ concept.
This concept seemed like a win-win for everyone. Well, maybe not. In order for a merchant to accept credit cards, a service is required that somebody has to pay for. The providing of free merchant account services was never part of any plan.
In addition to the upfront costs for the development of card reading equipment, the financial institution pioneers had costs associated with facilitating transfers of funds from the buyer’s bank to the seller’s bank. Also, these financial institutions carried the costs of the risk of facilitating a bad transaction.
The founding credit card companies created a rate system to cover costs as well as profit from the new system. This rate system, now known as interchange, allowed credit card issuing companies to take a small percentage of each sale.
Today, many banks and financial institutions issue their own credit cards on behalf of the 4 major credit card brands. In order for a merchant to process the transaction, companies called merchant account providers are required. These companies earn a very small percentage of each transaction. The bulk of the processing or transaction rate is the interchange fee.
Merchants & Merchant Accounts
As stated above, merchants enlist the services of a merchant account provider in order to make the whole transaction work. The merchant is responsible for the costs associated with these services. Consumers, however, may not ever consider that every time they swipe a card, it costs the merchant money. For all they know merchants get free merchant account services from the credit card brands.
Interchange rates are adjusted as much as twice per year by the credit card brands. These rates usually go up, not down. When rates go up, the merchant’s rate from their merchant account services provider goes up. While an average credit card processing rate may be about 2.5%, business credit cards and rewards credit cards can cost a merchant between 4-5%.
A customer is provided with the convenience of paying with a card and can even earn money using it, but the merchant has to pay fees for that customer’s convenience? Hmm. Doesn’t that sound backwards?
Well, to most of us, yes. And that’s why our free merchant account services solution was created.
Cash Discount Pricing Model
Merchant accounts will always have a fees attached to them. Even if a merchant services provider were kind enough to offer their services for free, there’s no getting around the interchange rates.
So, technically speaking, our free merchant account services solution is not free. But it becomes free based on this unique model.
The model is called cash discount pricing. Rather than charging customers a fee or surcharge for using a credit card, a common but illegal practice in many states, customers receive a lower price on products when they pay with cash.
A merchant has the ability to set a standard price for their goods and services and set a cash discount price for customer that decide to pay with cash.
If prices are set accordingly, the difference in pricing for customer using a card will offset the credit card processing fees, essentially making this a free merchant account services solution.
The determination of pricing is the responsibility of each merchant. Many merchants prefer to offer small cash discounts, yet are still able to cut down on fees by up to 90%.
Our system enables each merchant to set a cash discount price between 1% and 4% or even flat dollar fee per transaction. Our system automates the entire process, so that a merchant never has to remember to manually calculate a reduced price at the point of sale.
Get Started Today
As logical as it is, you may be with us in wondering why this solution wasn’t the plan from the start. We can’t answer that. What we can say is that this solution is a ‘no-brainer’ and every merchant should be using it.
So if you’re tired of paying high credit card processing fees and are ready to get set up with our free merchant account services solution today, give us a call. We look forward to saving your business money. 888-383-8056.