Two of the things that confuse merchants the most are:

1. Why they are charged different amounts when different kinds of cards are used
2. Who gets to keep the 1.5% - 3.0% of their hard-earned sales that are siphoned away as "discounts" and "fees"

A big part of the answer to both of those questions is: "Interchange". 

One of the main ways that you can negotiate a good deal for yourself is to know what others are being charged.  Unfortunately, most merchant account providers are not very transparent in their pricing, we have done some research to shed some light into the murkiness. 

One of the ways the the processors make their money is by making the fees as difficult to understand as possible. Therefore, it pays to know how to read a processing bill so you can know how much you are being charged and figure out if you are getting a good deal.  Most merchants are pricing according to 3-tier pricing, which this section covers.

There are lots of different ways that a merchant account statement can be presented.  The best way, which is most transparent to the merchant, is interchange plus (see "Interchange Plus" and "Reading an Interchange Plus Merchant Statement") and the most common way is 3-Tier (see "3-Tier Pricing" and "Reading a 3-Tier Merchant Statement").  The bill below is somewhere in-between.  It also allows me the opportunity to demonstrate some of the dirtiest tricks played by merchant account providers.

The supply chain for providing credit card processing services is long and complicated.  One key to getting a good deal as a merchant is understanding how it works (see Merchant Account Supply Chain) and with whom you are negotiating. 

Your merchant account provider will charge you a variety of fees.  Since some fees are charged on a % basis, some on a per-transaction basis, some on a per-month basis and some on a per-year basis it can be difficult to compare the price of one merchant account provider to that of another.  One of the main ways that merchants get a bad deal is that they don't notice a "tiny" fee in the small print of their contract that adds up to be big.

Many people are confused about the difference between companies such as Authorize.net, PayPal, CCnow, 2CO, Google Checkout and 2checkout.com.   They all allow the same basic functionality - the transfer of money from the customer to the merchant but the details are important.

Small business owners are incredibly busy people.  They also make the best customers because they

• Make more money on average than other types of workers
• Are sympathetic to business interests - i.e. you know what it's like for a customer to give you a hard time so you cut your suppliers a break
• Are too busy generating new revenue to bargain very hard with their suppliers

Credit card processing services (Merchant Accounts), however, are among the biggest expenses for many small businesses and usage of credit cards is only going to increase in the future.  In the case of my business, which sells satellite radio equipment online, our monthly Merchant Account expenses are more than our Downtown Chicago rent.  By learning a little bit about the industry and taking the time to shop carefully I reduced my Merchant Services expenses by approximately 33% (several thousand dollars / month) which had a very beneficial impact to our bottom line.  These are the techniques I used:

This is a list of the largest ISOs in the country which includes only companies that do not do any of their own processing.  This is based on data from the Nilson Group for the year ended December 31, 2005.