Mastercard and Visa recently announced they will not enact Interchange increases for online purchases until April 2022 while the economy recovers. However, you may still see price increases if you’re on tiered pricing for credit card processing with Acumatica. In this blog, we'll explain why other pricing models like interchange may be a better choice for your business.
Tiered Pricing is Not What It Seems on the Surface
Many are feeling the pressure to reduce costs, and one way is by negotiating potentially lower rates for your Acumatica credit card processing. There are all sorts of different pricing models when it comes to processing payments. One that we generally don't recommend without close analysis is tiered pricing.
If you haven’t heard of it, the tiered pricing model is defined by The Ascent:
Each transaction in the tiered pricing model is grouped into one of the payment processor's tiers, and each tier has a set fee amount. The payment processor determines which transactions go into which tiers, and it often bases this on a transaction's interchange fees, which are included in the rate.
Unfortunately, many companies with a tiered pricing model find out quickly is that it may be the most expensive of the four pricing models. It’s a bucket system where a debit card falls in this tier; and if it's a rewards card, it falls in this tier; and if it's a business card or corporate purchasing card it falls into this tier. Each tier or bucket’s pricing consists of a specified percentage based on the sale amount that factors in the current rate charged by the payment network, a fixed transaction fee, and you will usually pay a monthly fee to the processing provider.
Why the Tiered Pricing Model May Cost More
A common tier structure you’ll see is bucketed based on qualified, mid-qualified, and non-qualified transaction types. In this case, the qualified tier has the lowest rates, and are the most expensive is the non-qualified tier. That sounds good initially and it’s certainly easy to calculate. However, what we see is that the three buckets as classifications are so broad, you start paying more for transactions that are deemed mid- or non-qualified by the processor. You don’t get a say in the determination of the tier when you take the payment, so if corporate cards are considered non-qualified by your processor, you’re always paying the highest rate.
Also, watch out for tiered pricing based on whether a credit card was swiped or keyed. In other words, it doesn’t matter if it’s a corporate card or personal card, if you don’t swipe it, you’ll never get the lowest rate. Payment processors favor this model in general but especially now because card-present transactions are much less frequent when we order online or place orders over the phone like we have been in increasing amounts lately. In each of those situations, you’re going to pay mid- or highest-tier rates.
And because the payment processor can charge whatever they feel like for that tier and what falls into which tier, when Visa and Mastercard lower rates or keeps them steady as they did recently, you could still see fee increases from your payment processor regardless.
The Ideal is Interchange Pricing
Historically, the Interchange approach to pricing is your safest option for keeping fees down. In this model, the payment processor will keep all your fees separate. Companies like VIP Integrated Payments charge you exactly what the payment network (Visa/Mastercard) charged on the transaction (known as Interchange), plus the payment processor’s markup, and a flat monthly fee.
At VIP Integrated Payments, we typically recommend that our clients consider the Interchange Plus pricing model. It’s affordable for countless business types and has the most transparent fee structure. It’s going to be apparent and predictable what your fees to the card network and to your credit card processor were calculated.
Find a Trusted Acumatica Credit Card Partner
The other easy way to avoid all these traps is to find a trusted expert to guide you. VIP Integrated Payments is a leading provider of integrated payment technology solutions to North American merchants and an Acumatica payments partner. We are differentiated by our strategic partnerships and multiple platform model. VIP provides a broad suite of end-to-end payment solutions and superior US-based customer support. We have spent more than 25 years integrating and developing relationships to help you get the best deal.
Our VIP credit card processing solutions integrate seamlessly with your Acumatica and most other ERP/accounting systems, allowing you to accept credit card payments inside your software. The integration automatically posts payments to invoices, so there’s no need to go back into your program at the end of the day to reconcile your invoices or balance your general ledger, saving you hours and headaches.
Contact the experts at VIP today to start saving time and money with Acumatica ERP integrated credit card payments. You can reach VIP by phone at (888) 791-9390 ext. 101 or email us at firstname.lastname@example.org.