# Thread: need simple formula to calc merchant a/c costs

1. Junior Guru Wannabe
Join Date
Jun 2002
Posts
66

## need simple formula to calc merchant a/c costs

I'm trying to determine whether or not to go with a ThirdParty Payment Processor ... and/or a full-blown Merchant Account solution.

I wanted to know if anyone had a formula or could point me to some methods, means and or calculators that could help me determine my 'break-even' point?

It doesn't have to be down to the dollar precise, esp. since different vendors offer different rates ... but I just need to get some somewhere-inside-the-ballpark figures.

Join Date
Apr 2005
Posts
156

## Re: need simple formula to calc merchant a/c costs

Originally posted by ChoirBoy
I'm trying to determine whether or not to go with a ThirdParty Payment Processor ... and/or a full-blown Merchant Account solution.

I wanted to know if anyone had a formula or could point me to some methods, means and or calculators that could help me determine my 'break-even' point?

It doesn't have to be down to the dollar precise, esp. since different vendors offer different rates ... but I just need to get some somewhere-inside-the-ballpark figures.
(Set up has been disregarded, since its low in 2 checkout (49US) and 0 in carge.com )

That should not be to difficult., since the structure is quite simular.

- discount rate

- transaction fee

- monthly fees

as an example , lets say you have 100 transactions a month, with an average of 100us a ticket.

2checkout

100x .45us transaction fee = 45 US

Discount fee (5.5%): = 550 US

Total cost this month: 595 US

Which equals 5.95%

Authorize.net through charge.com:

100x .25us transaction fee= 25US

statement/monthly fee = 39.95 US

Discount fee: 239 US

Total Cost: 303.95 US

Which equals: 3.04%

Any wiser?

3. Aspiring Evangelist
Join Date
Feb 2005
Location
Europe
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391
There are lots of sites that are made to compare different merchant accounts rate, just search in Google. There you may find Merchant account that will be best for you. Then search for 3-4 3pp and compare rates as it's said here, this will give you the full picture.

4. Junior Guru Wannabe
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Jun 2002
Posts
66
fun2fun

... thank you ... yes, surprising how quickly the \$ add up for a third party processor if/when success occurs (e.g. tons-o-transactions)

Sidorino

...yes, I did google, but I found many of them 'slanted' ... e.g. PayPal's had some awfully high default rates in their calculator, where as some merchants tweaked their forms so they looked great

5. Texan at Heart
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Make sure to also take into some consideration batch fees, retrieval requests, and chargeback fees as well. Of course AmEx and Discover fees are a bit different as well.

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Chesapeake, VA
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Something else that is part of the total cost but difficult to calculate is the approximate % of mid-qual and non-qual sales that you will process as well.

The reason why it is difficult is that the % of transactions that "downgrade" to these categories varies from one processor to another. Thus, if you are comparing to a specific merchant account you could ask the processor if they have any statistics on the typical % of transactions that are qualified or downgraded and then factor in the higher costs on the later.

However, either way - it is definitely a fact that a service like 2CO will quickly add up to be a higher cost with increasing volume that you process.

The other thing to keep in mind is that any customers that you setup for recurring billing on 2CO are somewhat "stuck" there if you later want to migrate them to your own merchant account... you would have to ask the customers to re-enter their billing info on your new system.

7. Junior Guru
Join Date
Jan 2004
Posts
190
Also take into consideration that if you use certain gateways you will be charged a transaction fee.

We use the LinkPoint gateway and are pleased with their services. They do not charge us for transactions or anything for the recurring billing module.

8. Junior Guru
Join Date
Apr 2005
Posts
207
how does the monthly minimum rate on modernauthorize.com compare?

9. Junior Guru Wannabe
Join Date
Apr 2005
Location
Holland
Posts
40
Take a note of the following:
- To calculate percentage from cents per transaction apply 0.cents/Average Transaction * 100.
For example if the average transaction is 200\$ than 45 cents per transaction = 0.45 / 200 * 100=0.22%

PSPs and third party processors separate their fees in between discount fee (% from all transactions) and various transaction fees.
Naturally the higher the transaction is the more good for you to pay small transaction fees (if your average transaction is 500\$ than you don't really care too much whether you pay 30 cents per transaction or even 1\$, it's still a few pennies difference, but if your average transaction is 10\$ than in between 25 cents per transaction and 50 cents per transaction there is a significant difference).

-Third party processors tend to have less transaction fees and other smaller fees but have higher discount fees than merchant account providers.
A lot of merchant account providers are very good in hiding their fees as well, fees which often don't even exist on third party processors (decline fees, statement fees, refund (!) fees, higher chargeback fees, etc...)
However still a good merchant account provider almost always is cheaper than any third party processor.

10. Retired Moderator
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Take a look at this site, it compares quite a few options.

www.merchantcompare.com

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