Interchange rates, pricing models, payment gateways, integration software, the list drags on. Establishing a trusting credit card processor for your nonprofit organization can be overwhelming and often times complicated. With fixed rate programs, hidden fees, monthly minimum, cancellation charges, and equipment leases, there are many ways a merchant can fall into a trap of simply overpaying for their service. Unfortunately, some charities aren’t properly informed of the substantial savings received as a 501(c) organization and the discounted interchange rates that apply. That is why it is crucial for your nonprofit to choose a straight-forward provider that meets your charities’ needs.
Finding a credit card processor to handle your financial transactions that you trust can often times be a shot in the dark. While it is not hard to find a credit card processing company these days, finding one that can manage your nonprofit with honesty, integrity and expertise can be difficult.
To understand what Host Merchant Services can provide to you and your nonprofit, it’s important to get a base understanding of interchange rates and how they are determined for your business type. For every credit/debit card there is a pre-set rate that the MSP pays to the issuing bank. This rate is called interchange. Upon completion of a sale or donation the interchange rate is paid to the card issuing bank immediately by the MSP. These rates correlate to the cost that each bank has set for these cards and correlate to each type of industry to reflect the true cost of the risk and processing. These rates are usually based off an average sale of $150 and tweaked almost annually. Sometimes rates can be a full percentage point lower for nonprofits depending on the type of card being accepted which is why it is crucial to pay attention to your statements and your contract. It is our job at Host Merchant Services to always ensure our customers are receiving a fair an honest rate, which is why we find it imperative to make sure your nonprofit is categorized correctly with the bank.
In addition to interchange rates, there are a couple main pricing models available to you through the merchant service provider: tiered pricing and interchange plus pricing. With tiered pricing the underlying interchange rates as well as the card association fees are not revealed. Instead, the Merchant Service Provider will offer the merchant a steady rate. With tiered pricing the merchant pays a specific percent of their sales volume in fees, regardless of the cost of the transaction itself. With tiered pricing, there’s less transparency and more incentive for MSPs to raise fees for their customers without true knowing by the merchant. Interchange plus pricing works by adding a constant margin on the underlying interchange rates. Large volume merchants usually request this pricing model, as it allows for full transparency between the merchant and the MSP. Merchants are able to see the true underlying costs of each sale and ensure the MSP is not charging additional fees. This is why Host Merchant Services exclusively quotes using interchange plus pricing.
Part of your MSP’s job is properly classifying your account with the card associations to ensure that your organization is automatically receiving the lowest possible interchange rates. For a nonprofit to overlook their Merchant Service Provider, could be a step in the direction of overpaying for your service. It is crucial to pick the right provider that is dedicated to providing a full service payment method for nonprofit.