How Is Payment Processing Priced?
March 26th, 2019

It’s one of the most common complaints we hear from business owners: credit card processing pricing is complicated and confusing. Many are confused about what their rates are, and of course, they question if they’re paying too much.

The good news is that it doesn’t have to be this way. Payment processing doesn’t have to cause confusion and frustration. There are pricing models that are easy to understand, offer transparent pricing, and can lower your processing costs. At Sonder Payments, we are all about transparency. We want you to understand what you’re paying, which is why we’ve adopted our simple pricing strategy.

Let’s take a look at the various pricing models so you can better understand how Sonder Payments can save you valuable dollars. But first, it’s important to have a clear understanding of processing fees. Essentially, every credit card transaction comprises three parts: an interchange rate, assessment fees, and processor margin.

The interchange rate and assessment fees are set by credit card companies and are the same for every business. They are also non-negotiable. Processor margin refers to the fees added by a processor to the interchange rate and assessment fees. These include membership fees, gateway fees, per transaction fees, and more. It’s on these fees that payment processors make their money.

Payment Pricing Models

Understandably, businesses want to have the lowest processing costs possible, which can be achieved by finding a processor with the lowest markup. When comparing payment processors, you likely discover a variety of companies that offer a variety of rates and pricing models. Understanding how these models are structured will help you choose the best processor for your business—and your wallet. Let’s take a look at three of the most common pricing models for card payments:

Tiered Pricing

This is the most common pricing model, but it is also the least transparent. In a tiered model, the processor separates a large number of transactions into three tiers—qualified, mid-qualified, and non-qualified—based on a variety of criteria which is set by the processor. Ultimately, this could allow a processor to process the majority of the transactions at a higher priced tier, such as mid- qualified or non-qualified.

While this approach simplifies your statement by categorizing transactions into one of the three tiers, it unfortunately also creates ambiguity around why transactions fall into one tier over another. It also makes it nearly impossible to know how much of the processing cost is going to your processing company as markup or to plan for future processing costs.

Flat Rate Pricing

Flat rate processors charge a single flat fee for all credit and debit card transactions that covers the interchange fees, assessment fees and other processing markups. This pricing model has become popular because it is simple to understand and eliminates many unexpected fees. However, it’s not transparent nor is it often the lowest cost solution. It usually includes some of the highest percentages, which disguises the processing markup.

Interchange Plus Pricing

In an interchange plus pricing model, a processor will charge the cost of the interchange plus a nominal markup fee, which can be a percentage, a per-transaction fee, or both. For example, a processor may charge a markup of 0.20% and 10 cents on top of the interchange costs of the transaction.

This pricing model is the most transparent because a processor will separate your monthly statement into interchange rates, assessment fees, and markups. You’ll know exactly how much is going to the issuing bank, the credit card company, and your processing company. Since you are aware of these costs from the beginning, it is easier to select a processor that offers fair rates. For this reason, the interchange plus model has the potential to offer the greatest cost savings.

What About Sonder Payments?

At Sonder Payments, we pride ourselves on providing the most transparent pricing, using a pricing model that combines the interchange plus model with a subscription model. Merchants  who process through Sonder Payments pay a monthly membership fee that’s based off of their annual revenue (starting at just $49 per month) and then a fixed amount above interchange, no percentages or basis points required.

Essentially, our easy to understand pricing includes no hidden fees, and you pay just three components:

  1. Membership Fee: Monthly fee based on annual revenue, starting at just $99 per month.
  2. Interchange Rate: This is the cost of completing a transaction, set by banks and card companies. These are identical at every single processor.
  3. Transaction Fee: After interchange, you’re not paying additional percentages. You’ll pay the same small fee for every transaction, no matter how large or small.

Because we’re not taking a percentage of each transaction, our pricing model benefits businesses of all sizes as it offers consistency to a variable cost. If you are a business with larger transaction totals, you will see the greatest cost savings, since you get to keep the additional percentage of your transactions.

If you’re interested in learning more about Sonder Payments, the benefits of membership, or our offerings, contact info@sonderpayments.com or call (314) 722–6424 to speak with one of our representatives.