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What's your real "RATE"?

Understanding your rates will help you navigate the murky waters of the payment processing world.

Leti Ferrari

Last Update vor 6 Monaten

We have been to many events and many merchant's meet-ups and one thing we hear a lot is: "My current rate is 1%". This statement led us to believe that most people processing payments have no idea what they are really paying and they get duped by savvy brokers.


At WAAVE we strive to educate clients and future clients alike because this is key in our quest for transparency. WAAVE is not an ISO (independent sales organization) and we are not a payment processor, we are a  FINTECH company on a mission to bring fair, transparent pricing for legitimate transactions in the High-Compliance space.


So the first thing we want to share with you is the TRUTH about "RATES"

In this article your will learn:

1. What are non-negotiable fees.

2. Most common pricing models, their pros and cons as well as how they can be deceiving.

3. Hidden costs that you will pay even if they don't tell you about it.

4. Understanding WAAVE's pricings and rates.



Non-negotiable rates

The non-negotiable rates are those established by the issuing bank and the card associations.

Interchange Fees:

These fees are commonly referred to as IC
The card associations (VISA, Mastercard, AMEX) Negotiate different terms with all of the banking channels twice per year (April & October). Each card type, from rewards to debit, and in each industry segment, from retail to hospitality, restaurant to gas stations, has a distinct cost. These costs are known as “Interchange”.

Example: A Debit Card from a large institution, i.e. Bank of America, has a cost of .05% and .22 cents While a Black AMEX can cost you 3.03% in IC alone.

Surprisingly, pre-paid cards IC is extremely high compared to regular debit cards and these are prevalent in online transactions for CBD, Kratom, Seeds, etc...


Association Fees:

Otherwise known as Assessment or Pass-Thru Fees. These small but prolific fees are placed on every transaction and are how the associations make their money while Interchange fees go to the issuing bank. Most ISOs add them to your cost and many don't disclose this. WAAVE does not pad association fees...ever.

E-commerce Surcharge: 

Card Not Present or CNP carry an inherently higher risk. Managing these transactions' risk has additional costs compared to transactions done through a card present swiper.

High-Risk BIN cost:

This cost applies to High-Compliance transactions only. If you are not working with a High-Risk BIN included in your fees your transactions are not transparent to the bank. The cost for this can vary from Bank to Bank and also depends on the kind of items you sell.

Gateway Fee: 

Some setups require you to pay for up to 0.25 per transaction to Payment Gateways such as NMI, these fees are taken from your bank account and are on top of all the fees described above. Processors never cover these fees, in fact, many add to them as an additional revenue stream. 


Conclusions: If your fee doesn't cover IC, association Fees, and High-Risk BIN and e-commerce if your account is for online processing, your processor or ISO is not being transparent with you, or even worse, they are not transparent with the bank. This can have terrible consequences for you as the merchant.


 So if someone is telling you, your fee for your particular industry is abnormally low such as a Stripe-like fee of 2.9% for online sales of Kratom and Deltas something is amiss. 



Now that you understand the basics we will reveal the many pricing models out there and what they all really mean.


Pricing Models 

We are going to review the most common pricing models in the industry and explain the pros and cons of each



ONE

Rate Plus. (old school, yet still used pricing) The client is given a rate, ex. 1.99% .20 cents per swipe. This base rate is only for some transactions. The rest are priced with a “surcharge” which can add an additional .99 –

1.59%+ on top of cost. This model is used only for card present transactions.


Pros: Absolutely none, it just sounds cheap.

Cons: This is a very deceptive pricing model, you never know what your cost will be.


TWO

Three or Four Tier 

The client is given three rates. Qualified, Mid-Qualified, and Non-Qualified. Seems simple, yet the way the system is designed is to drive as many transactions to the Non-Qualified bucket as possible, which is the highest!


Pros: None.

Cons: This is very deceptive in its application as in reality you will always pay the highest tier


THREE

IC + Margin

The client is told exactly how much they will be charged on every transaction. There are still companies that will “pad”  interchange costs (WAAVE never does), so even though you can clearly see the “cost” of each card, it may still be wrong. That said, you will see each card type that you process and can easily do the research to see.


Pros: This works well for card present transactions, it is transparent and fair if the IC is not padded.

Cons: In High Compliance transactions you must make sure that the margin includes the High-Risk BIN cost otherwise you will see up to 1% in additional costs and if they are not using a High-Risk BIN the relationship is not transparent with the Banks and you could end up on the MATCH list.


FOUR

Flat Rate Pricing (Interchange and Margin together in one place) It’s all just baked in. You pay one amount and that’s it. The bank, the associations, and the processor make a profit on anything above the cost of each card. Some processors will actually have two rates (Card Present/Card Not Present).


Pros: You know exactly what you will pay allowing you to plan your pricing structure and costs every month without hurdles, this is the best option for E-Commerce.

Cons: When someone pays with a debit card your service provider makes more money (but sometimes they cover excessive costs for you) In reality popular pre-paid cards are as expensive as reward cards so it is really not a huge issue anymore.

If the Flat Rate excludes any of the non-negotiable costs, the model becomes deceiving and more expensive to you.


FIVE

Alternative Pricing (True Cash Discount, Surcharging, etc.)

This pricing model is the fastest-growing trend in payments today. In these programs, you are actually passing along the costs to your customers. These programs have many State and card brand rules, so it’s important to know what they are.


Pros: Your processing cost can be as low as 1.5% which is great! 

Cons: This is only recommended for Card Present transactions, it results in a higher cost for your buyers, it can be very complicated to configure, and it is not available in all states.


Hidden Fees 

They exist and most processors have them, so you need to know what they are so you can ask the right question when selecting a service provider


This list is not all-inclusive, some processors and ISOs get very creative when it is time to overcharge you.

Extras-Numerous little monthly, quarterly, and annual charges that you receive include:

  • Monthly Account Fees
  • Padded Chargeback Fees
  • Risk Management Fees
  • Program Fees
  • PCI or compliance fees
  • Non-PCI compliance fees
  • On File Fees
  • Access Fees
  • Statement Fees
  • Annual Regulatory Fees
  • Debit Access fees
  • Holds & Reserves
  • Among others...

Now that 1% from our opening paragraph has a whole different meaning, doesn't it? 

Payment processing for High-Risk merchants like you is a shady business.


At WAAVE we call you High-Compliance not High-Risk and we like to do things differently, we truly believe our way is the most beneficial way of operating for our clients.


The WAAVE way

Understanding our pricing models and fees


WAAVE uses three of the pricing models described above.


E-commerce: 

We offer only a FLAT RATE option. The rate varies depending on what you sell and your volume but this is the most consistent way to price your transactions.

The big PRO of working with WAAVE is that we cover ALL your non-negotiable fees and almost all other Fees in that one flat rate.

This includes:

  • IC
  • Association Fees
  • E-Commerce Surcharge
  • High-Risk BIN
  • PCI Monthly Fees
  • Statement Fees
  • Program Fees
  • Risk Management Fees
  • Gateway Fee


WAAVE does not pad Chargeback fees or other fees such as ACH return fees, or reversal fees. Those are established by the bank and we do not add margins to them.


The only extra charge you will have is a PCI non-compliant fee, and you will only be charged if you do not complete the annual PCI compliance questionnaire. Completing this step takes 10 minutes so if you do it, there will be no additional fees.


Our contracts clearly state your Flat Fee and your authorization cost but also our WaaveCompliance subscription of $100/m 


Gateway Cost:

If your setup requires a Gateway integration we will cover your per-transaction fee by discounting your authorization cost the monthly cost of the Gateway is additional and you will clearly see this in our agreements. 

It is a $25/m subscription


Conclusion: Our rate is all-inclusive and all costs are transparently displayed in your Agreement. No surprises.

No need for backup processors because we are legit and our fees reflect this too. 
Transparency keeps your account in good standing with the banks.


Card Present Transactions:

For card present setups we offer an IC + 1.5% Model.

This covers 100% of the non-negotiable fees applicable to card present transactions as well as the program fees. 


If you would like to reduce your rate to only pay 1.5% on all cards no matter which one the buyer uses, you can join our Alternative Pricing Program where we will legally configure your account to share the IC cost with the buyer. 
Our Program has multiple options and we will share this with you at onboarding.


Questions about the program? Ready to onboard? 
Would you like us to review your current rates and contract to help you lower your existing fees? 

Please email our team at [email protected] or call us at (888) 439-0240 ext. 4


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