Global Pay Payments

TRUE PRICING

Unveiling the true cost of payment processing

and how can Global Pay Payments can save you money.

Sales Department Email: [email protected]

Office: 901-318-4700

© Copyright 2014 Global Pay Payments, LLC. All rights reserved.This document is condential and proprietary. Distribution or other use of this
document is prohibited without express written consent from Global Pay Payments.
 “What is your rate?” This is the most commonly asked question by
businesses looking to accept credit cards or change providers. However,
the more important question that merchants should be asking is, “How
Price structure and overall
much will it cost me to process credit cards with you?”
cost is significantly more
important than a rate quote. Whether you choose to use our services or not, we encourage you to
take a moment to review this document; it exposes unfavorable pricing
structures used by most Merchant Account Providers.

Traditionally, a simple, easy-to-reconcile merchant services rate structure or True Pricing

was reserved for large businesses with high leverage. Global Pay Payments has recently
decided to level the playing field and make True Pricing available to business of all
sizes, and in the process take the mystery out of the cost of card acceptance.

If you were asked what it costs your business to accept credit cards, odds are
you would not be able to give an accurate answer. All of the fees associated with
processing credit cards can be very confusing. To make matters worse, Merchant
Account Providers profit from making fees difcult to understand; it enables them to
charge more.

Business owners are frequently puzzled by service rates and fees. They wonder:

1. Why am I charged different amounts depending on the type of card used?

2. Who keeps the 1.5% to 3.0% of my hard-earned sales that are siphoned away
“surcharges” and “fees”?

The answer to these questions revolves around “Interchange” and “Dues and
Assessments”.

Interchange is a fee that Visa and MasterCard require merchants to pay

INTERCHANGE card-issuing banks (e.g. Capital One, Citibank, Chase, etc.) for accepting
their credit and debit cards. It is comprised of a series of over a hundred
( What issuing banks collect ) different rate categories, containing requirements which must be satised in
order for a transaction to qualify for a specic rate.

The rates are set collectively by banks that have a vested interest in Visa and MasterCard
since many issue both credit and debit cards. The bulk of interchange fees are paid to
issuing banks and are collected from merchants via Merchant Account Providers. The
True Pricing

fees are deducted after merchants submit transactions for processing.

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 What criteria are used to determine interchange rates?
Interchange rates are established at different levels for a variety of reasons but are based
primarily on the level of risk involved in the transaction.

Factors that effect interchange rates include:

• The type of card used (rewards or standard)

• The type of transaction (credit or debit)
• How the transaction was initiated (card-present or card-not-present)

Dues and assessments are membership fees paid by financial institutions

DUES AND to Visa and MasterCard to finance their roles in the following:

ASSESSMENTS • Setting rules • Network operations

( What Visa & MasterCard collect ) •

•
Establishing pricing
Marketing/branding
• Technology development, fraud
management, and much more

Dues and assessments have no categories, rules, or criteria. They are

simply a set percentage of the amount of the sale and are the same for every
transaction processed. As of October 2013 Visa’s dues and assessments
fee is 0.11% of the transaction while MasterCard’s is 0.115%.

PRICING STRUCTURE SCHEMES

Bucket Pricing:Used by PayPal, Square, Intuit & Most Processors

Merchant Account Providers traditionally charge for transactions using tiered pricing
schemes commonly referred to as “bucket pricing”. In bucket pricing, the 100 plus
levels of interchange are separated into “buckets” commonly labeled qualified,
mid-qualified and non-qualified.

Transactions (where consumer credit and debit cards are swiped) will be charged the
base rate (lowest fee) and likely hit the “qualified” bucket. Higher-rate transactions
commonly referred to as “downgrades” will be charged more and labeled mid-
qualified or non-qualified.
True Pricing Unveiling the true cost of payment processing

Problems with Bucket Pricing Schemes

Merchant Account Providers use their own discretion to determine what buckets the
100 plus categories of interchange will be separated into. And, it is often not defined
in a merchant’s agreement with the Merchant Account Provider. Since the criteria
for this decision is proprietary, inconsistencies are common between providers. This
makes it nearly impossible for merchants to accurately compare pricing from one
provider to the next. Transactions that would land in the mid-qualified bucket with
Provider A, may land in the non-qualified bucket with Provider B.

Additionally, Visa and MasterCard make adjustments to interchange categories once

or twice a year. These increases usually affect only one or two interchange rate
03

categories in a bucket.
 The increases negatively affect businesses by raising the cost of card acceptance
and give merchant account providers an opportunity to raise rates on entire buckets.
Finally, under bucket pricing each bucket is priced high enough to cover the cost
of the transaction type with the highest actual interchange fee. Consequently,
merchants pay higher fees for all other interchange types in the same bucket.

A View Into a Mid-Qualified Bucket

Merchant Account Providers using bucket pricing generally place the transaction
types shown in the table below into a mid-qualified bucket. Let’s examine the
actual interchange charges for a $100 purchase across these transaction types and
compare the actual costs to the price charged to the merchant.

A customer initiates a purchase that qualifies for the

Business Card Electronic Interchange Rate Processing
Business Card Electronic interchange category of
Formula
Purchase Interchange Dues and Actual (2.40% + $0.10) + 0.110%. This rate is also the most
Amount Assessments Processing Cost
expensive in the bucket with an actual processing cost
$100.00 X (2.40% + $0.10) + 0.110% = $2.61 of $2.61 for the $100 transaction. Because Merchant
Account Providers using bucket pricing schemes
assess the same fee for all transactions in the mid-qualified bucket, Swiped:
(2.75% + $.25) or Non-swiped: (3.15% + .25) the merchant is charged $3.00 or
$3.40. The Account Provider makes a profit of $0.39 or $0.79 on this transaction.

CPS/Retail Debit Reg Rate Processing Formula Had the customer’s transaction qualified for the least
expensive rate in the bucket, CPS/Retail Debit Reg
Purchase Interchange Dues and Actual
Amount Assessments Processing Cost the actual processing cost of the $100 transaction
would have been (0.05% + $0.22) + 0.110% or
$100.00 X (0.05% + $0.22) + 0.110% = $0.53
$0.53. However, the merchant would have still paid the
bucket rate (2.75% + $.25) or (3.15% + $0.25) and been charged
charged $3.00 or $3.40 In this example, the Merchant Account
Provider would profit $2.47 or $2.87 on the transaction!

Paypal, Square, Intuit

Traditional Bucket Pricing: Interchange + Dues & Assessments
& Most Processors

Transaction Type Mid-Qualified Total Merchant cost Interchange Dues and I/A Cost on $100
True Pricing Unveiling the true cost of payment processing

Bucket Price on $100 Transaction Assessments Transaction

Swiped

CPS Retail Debit 2.75% + $.25 $3.00 .05% + $0.22 0.110% $0.53

CPS Rewards 2TNE 2.75% + $.25 $3.00 1.95% + $0.10 0.110% $2.01

CPS E-Commerce 2.75% + $.25 $3.00 1.80% + $0.10 0.110% $2.01

Signature Rewards 2 2.75% + $.25 $3.00 2.10% + $0.10 0.110% $2.31

Commercial Card 2.75% + $.25 $3.00 2.05% + $0.10 0.110% $2.16

Non T&E Level 2

Commercial Card - B2B 2.75% + $.25 $3.00 2.10% + $0.10 0.110% $2.31

Signature Card Electronic 2.75% + $.25 $3.00 2.30% + $0.10 0.110% $2.51

Business Card Electronic 2.75% + $.25 $3.00 2.40% + $0.10 0.110% $2.61

04 * Interchange rates above are current as of October 2013

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 True Pricing
There is an alternative to bucket pricing available through Global Pay Payments

True Pricing or “pass through pricing” is the answer to unveiling the mystery around
card acceptance costs. Under this unique rate structure, Global Pay Payments clearly
identifies actual Visa and MasterCard fees and plainly shows our exact mark-up (profit).

The costs of payment processing are transparently revealed, easy to

understand, and will save your business money.

True Pricing is the most Under the True Pricing billing structure, the actual Visa and Master
transparent way to charge Card charges for processing are passed through to the merchant, with
out mark-up as previously mentioned. When Visa and MasterCard raise
for processing credit cards.
interchange rates, only the categories that are affected are increased,
not an entire “bucket” containing the many interchange categories that
may not have been impacted.

How Are Rates Determined With True Pricing?

Rates are based on a merchant’s Visa and MasterCard average monthly dollar volume
and average ticket (sale amount). Using these variables, the True Pricing rate is de
termined upfront at the time a merchant signs a contract for processing services and
remains effective throughout the term of the agreement.

Price Comparison Between Bucket Pricing and True Pricing

In the previous example, we compared what a merchant would pay to process a
$100 purchase landing in the mid-qualied bucket to the actual cost of processing
the transaction. Now, we’ll compare True Pricing to bucket pricing using the same
transaction criteria.

The table below shows how the merchant on Global Pay Payments True Pricing would
pay $2.42 less to process the same Visa key-entered check card than a merchant
on a bucket pricing model.
True Pricing Unveiling the true cost of payment processing

Bucket Pricing:
Paypal, Square, Intuit True Pricing from Global Pay Payments
& most processors

Transaction Type Key-entered Visa Check Card Key-entered Visa Check Card

Sale Amount $100.00 $100.00

Interchange Rate NA* 0.05% + $0.22

Dues and Assessments NA* 0.110%

Processing Fee 3.15% + $0.25 .35% + $0.10

Math [$100.00 x 3.15%] + $0.25 $100.00 x [(.35% + $0.10) + (0.05% + $0.22) + 0.110%]

Cost of Merchant $3.40 $0.98

True Pricing Savings $2.42

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* Included in processing fee.

 Additional Comparisons: Bucket Pricing vs.True Pricing
(Each transaction is based on a $100 Visa purchase assigned to a mid-qualified bucket)

The bucket below further illustrates the advantages of True Pricing. In this snapshot,
merchants on True Pricing save on average $0.93 per transaction.

When you factor in annual processing volume, it’s easy to see how True Pricing can
result in significant savings for merchants.

Traditional Bucket Pricing Interchange + Dues & Assessments (I/A) True Pricing (I/A + True Pricing)
Most Processors Global Pay Payments Comparison

Mid-Qualified Total Merchant Interchange Dues and Total I/A Cost True Total True Merchant
Transaction Type Bucket Price Cost on $100 Assessments on $100 Pricing Pricing Cost Savings
Non-Swiped Transaction Transaction Charge on $100 Trans.

CPS Retail Debit Reg 3.15% + $.25 $3.40 0.53% + $.22 0.110% $0.53 .30% + $.10 $0.93 $2.47

CPS Card Not Present 3.15% + $.25 $3.40 1.80% + $.10 0.110% $2.01 .30% + $.10 $2.41 $0.99

CPS E-Commerce 3.15% + $.25 $3.40 1.80% + $.10 0.110% $2.01 .30% + $.10 $2.41 $0.99

Signature Rewards 2 3.15% + $.25 $3.40 2.10% + $.10 0.110% $2.31 .30% + $.10 $2.71 $0.69

Commercial Card 3.15% + $.25 $3.40 2.05% + $.10 0.110% $2.26 .30% + $.10 $2.66 $0.74
Non T&E Level 2

Commercial Card - B2B 3.15% + $.25 $3.40 2.10% + $.10 0.110% $2.31 .30% + $.10 $2.71 $0.69

Signature Card Electronic 3.15% + $.25 $3.40 2.30% + $.10 0.110% $2.51 .30% + $.10 $2.91 $0.49

Business Card Electronic 3.15% + $.25 $3.40 2.40% + $.10 0.110% $2.61 .30% + $.10 $3.01 $0.39
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Average Merchant Savings with True Pricing from Global Pay Payments $0.93
* Interchange rates above are current as of October 2013

In summary,
with the True Pricing structure each and every interchange category carries
a consistent margin providing the business with:

• The most competitive pricing

True Pricing Unveiling the true cost of payment processing

• Lowest processing costs

• A set, disclosed and consistent profit margin
• An understanding of the exact impact from interchange increases/decreases.

If you see the words "qualified", "mid-qualified", or "non-qualified" on your credit

card processing statement, you are over paying.
For more examples of how True Pricing can result in savings for you, contact our
sales professionals today at (901)318-4700 to take advantage of True Pricing
and reduce your costs of card acceptance.

Sales Department Email: [email protected]

Office: 901-318-4700
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© Copyright 2014 Global Pay Payments, LLC. All rights reserved.This document is condential and proprietary. Distribution or other use of this
document is prohibited without express written consent from Global Pay Payments.