Membership-Based Credit Card Processing Pricing: A Guide For Merchants

Providers offering membership pricing are usually very good at disclosing every feature that’s included in your membership fee and generally don’t hit you up for additional fees beyond that. However, since they usually don’t disclose how much they would charge for those features individually, you won’t know for sure how much of your membership fee is going toward account fees and how much is going toward payment processing costs.

One important thing to understand about membership pricing is that it doesn’t eliminate incidental fees, such as chargeback fees. If you experience a chargeback, you’re still going to have to pay extra to have it resolved. Most other incidental charges will be passed on at cost in addition to your base monthly membership fee.

Another consideration with membership pricing is that most providers offering this type of processing rate plan will have several membership levels to choose from. As a rule, higher levels come with a higher membership fee but will have a lower per-transaction cost than the less expensive levels. Higher membership levels usually also have additional features that aren’t included in the less expensive levels.

Note that you usually won’t be able to choose whichever level you think is the best bargain for your business. Membership levels are tied directly to your monthly processing volume. In other words, you’ll have to reach a specific processing volume to access a higher membership level. In some cases, your processor will automatically move you up to the next highest level if your actual processing volume for the month exceeds the upper limit of your current level.

The primary advantage of flat-rate credit card processing pricing is that your rates are predictable and easy to understand. However, simplicity does not necessarily mean that your costs will be lower. As is always the case with credit card processing, you’ll have to “crunch the numbers” and compare your costs under each type of processing rate plan to see which one will save you money.

Membership pricing usually works best for businesses with a high number of transactions per month. Having a high average ticket size also helps, as the per-transaction fee can really add up if you mostly process small ticket sales. You’ll also want to consider the impact of the monthly subscription fee. While this can save you money overall, the cost can be prohibitive for very small or seasonal businesses that don’t take a lot of credit card sales.

Here’s a hypothetical example with some very hypothetical numbers.

Let’s assume that your business has an average ticket size of $100 and you process about 100 transactions per month on average.

This gives you a total monthly processing volume of $10,000. Let’s also simplify things even more by assuming that all of your transactions are card-present. With Square, you’ll pay a flat 2.75% for each sale. That works out to $2.75 per transaction or $275 for your total monthly processing costs. Remember that you don’t have any additional fees to take into consideration.

How much would your processing costs be under a membership-based pricing plan?

Let’s assume that your provider charges a $50.00 per month membership fee that includes all expenses associated with maintaining your account. Let’s also assume that your processing rate for card-present transactions is interchange + 0% + $0.30 per transaction. In real life, interchange rates vary wildly and can be hard to predict in advance. However, for this example, let’s use an average card-present interchange rate of 1.4%. So, 1.4% + $0.30 per transaction works out to $1.70 per transaction, or $170 total. Add in the $50 per month membership fee, and you’re up to a total cost of $220 for the month. That’s a savings of $55 per month (or 20%) over using Square.

Of course, this is just a hypothetical example, and membership pricing won’t always save you money. You’ll want to run the numbers using statistics from your own business and rate quotes from actual providers offering membership-based pricing.

Interchange-plus pricing and membership-based pricing models are very closely related, with the biggest difference between the two being markup — interchange-plus pricing includes markup, while membership-based pricing does not.

Interchange-plus pricing is quoted as interchange + 0.30% + $0.20 per transaction, while membership pricing is may be quoted as a subscription fee paid monthly plus interchange + $0.15 per transaction.

The exclusion of markup in membership-based pricing may or may not cause your business to save money. It really depends on your processing volume, the monthly subscription price, and your business’s average ticket cost. Of course, there are other factors that influence cost, such as interchange rates and markup.

The tiered pricing model is the most common pricing model, but it’s also one of the worst for businesses that are looking to save money when processing credit card transactions.

Compared to subscription pricing, tiered pricing is much more complicated, with transaction pricing varying based on card type, whether the card is present, how large the transaction is, what’s being purchased, and a lot more.

Processors take these factors into account and designate transactions as non-qualified, mid-qualified, or non-qualified. Unfortunately, this system makes it more likely that businesses will pay higher prices for some transactions than others.

Subscription pricing is usually cheaper than tiered pricing, as the tiered pricing model includes lots of additional fees. With membership-based pricing, those additional fees are rolled into your monthly subscription costs and won’t fluctuate. Additionally, your per-transaction fees will be lower with membership-based pricing since you won’t be paying markup.