This brings me to your Cost Effective Rate or Monthly Net Rate and why you need to understand this and how to calculate it.
Because there are so many moving parts to your overall processing, making it impossible for you to keep up with, the CER or MNR is the best and most reliable way for you to make sure where you are with your processing costs. This is because this monthly net rate is a TOTAL of all of those moving parts. Each month when you get your statement you should figure out what the percentage is. The math looks like this:
Cost of processing divided by your total monthly volume equals the monthly net percentage rate.
$100 (cost) divided by $1000 (volume)= .1000% (move the decimal to the right 2 spaces) and you get a monthly net rate of 10%.
For face to face businesses, a monthly net rate of more than 2.5% is usually too high unless the volume is very low. As a rule – the higher the volume the lower the percentage.
E-commerce businesses will always have higher monthly net rates because all of their transactions are keyed in which – as we have learned – have a higher interchange rate.
In Part 1, I indicated that we would talk about what a “processor” is.
The brief description is this: processors are also known as “Acquiring Banks or Acquirers”. These institutions act as messenger between merchants and credit card associations. They pass batch information and authorization requests along so that merchants can complete transactions in their businesses.
Your “Merchant Account Provider” is almost always called “my processor” but in actuality we are “merchant account or services providers” setting up your account for you so that the transaction goes through all of the steps to get you paid when accepting a credit card payment.
I hope this has helped. I know that it is confusing and confounding. But if you have some knowledge of the basics, I believe you are in a better place to make good decisions!
If you would like to get in touch with the author, please contact:
Retriever Merchant Solutions