For the most part, restaurateurs don’t have control over the various fees they incur when cards are swiped in their restaurant. But they do have control over choosing a credit card pricing model – since they have control over choosing a credit card processor.
As a restaurant owner, you want simplicity. You just want to accept payments from your guests – this includes a variety of cards from your guests, while paying the lowest possible rates for each card type.
However, since interchange fees are non-negotiable your hands feel a little tied. This means you’ve got to choose the right pricing model to ensure you aren’t paying a ton of additional charges that don’t add any value to your business.
Choosing the right pricing model from your payments provider is your only chance to do better for your restaurant in this regard and will have a major impact on your
Here are the restaurant credit card processing pricing models to know.
Interchange is a percentage rate set by the banks and payments networks. This rate can vary from restaurant to restaurant making it difficult to give an exact estimate.
Here’s what you need to know.
- You pay the exact interchange fee, plus a fixed processing fee set when you sign up.
- If Card Associations change or reduce the fees, you get the savings.
- Your payment acceptance fees are explained to you in a way that you can understand.
- No hidden fees – Interchange itemizes your “wholesale fees” and “markups” and lists them on your monthly statement.
- Fees can differ based on how the card is captured – in fact, you may be charged more in some cases (e.g. you key in the card).
When processing providers designate pricing by “tiers” – based on a set of qualifying criteria – and price transactions accordingly. For example, in the 3-tiered pricing system, the first tier (lowest cost to the merchant) is a standard transaction or swipe of a qualified card, the second tier might be a higher-cost rewards card, and so on.
The majority of business owners are on a tiered plan. This makes it difficult for them to understand their credit card processing rates.
- Tiered pricing plans categorize credit card transactions into three categories – qualified, mid-qualified and non-qualified.
- Rates vary based on the categories, ahd while qualified rates are the lowest they must meet all of the processor’s criteria to earn that rate.
- Some business owners enjoy the hard-coded rates as they find it easier to understand what they are paying, while it has been said that some processors take advantage and charge excessive fees.
This is a very similar pricing model to Tiered, minus the tiers themselves. The best example of it in “the real world,” would be PayPal.
- All transaction types in this model cost the same percentage and transaction fee.
- All costs are blended together to create one rate and fee, which can result in a higher transaction cost per swipe.
- There is typically no monthly fee.
Flat rate is an increasingly popular pricing model for credit card processing. The easiest way to explain it, and the version of flat rate processing mostly commonly used is where a payments processor charges based on a fixed percentage of credit card transactions.
For restaurants, a flat rate pricing model can come with many benefits:
- Predictable rates restaurants can understand.
- You know your payments processing costs each month.
- Payments simplicity is achieved.
- Transparent pricing with no hidden fees.