What is effective rate?
Your total card fees for the month divided by your total card sales. It's the one number that shows what taking cards really costs you.
Take last month's statement, divide the total fees by the total card sales, and you have it. It's the fairest way to compare two offers, because it counts every fee, not just the advertised rate.
For example
If you paid $900 in fees on $30,000 of card sales last month, your effective rate was 3%.
Related terms
- InterchangeThe fee the customer's bank charges on every card sale. It's the same no matter which processor you use.
- MarkupThe part of your card fee that goes to your processor. It's the only part anyone can negotiate.
- Flat-rate pricingOne percentage for every card, like 2.9%. Easy to read, but you overpay on cheaper cards like debit.