Cost vs. Convenience for Credit Card Acceptance

 

 

 

 

 

 

 

 

 

 

 

What is the primary reason consumers choose to pay with a credit card? In my personal experience, I would say they choose premium credit cards for payment in order to earn points.

The points are a definite benefit, but the truth is, no one likes paying the price for those points. You’ve heard the old saying “if it sounds too good to be true, it probably is”.  This might actually be about credit card points! ‘Free’ in terms of points, can come at a cost and for most credit card users this cost often comes in the form of a service fee in addition to the transaction amount.

Wouldn’t it be nice to find a happy medium, with schools not having to pay a merchant fee, therefore not discounting their tuition with the additional cost they would have to absorb, and families having the choice of how much they really want to pay for those “free” rewards points when being presented with a lower cost option?

Intelligent Rate can provide that happy medium. 

I will walk you through a simple scenario to explain the concept.  (All data in this scenario is fictional.)

I log into my child’s student account portal to pay the balance due so they can register for classes, get their dorm key, etc., to start off the school year.

My balance due is 10,000.

I choose to use my reward points card (spending my way to a new grill for my deck).  I enter my card number to pay the balance and the screen shows me that I will need to pay an additional $314

However, the screen also shows me that I have an alternative option to use my Debit Card and the cost of using that card will be significantly less, saving me money but no points awarded. Now it’s my decision versus the school forcing me to pay additional fees in addition to my tuition payment for using use my credit card.

Flat Rate vs. Intelligent Rate

Credit Cards can be an expensive part of doing businesses and more and more schools are looking to preserve every penny on the dollars they collect, but customer demand remains high for the convenience of using credit cards.  Intelligent Rate can allow schools to offer a higher level of transparency for informed decision making as well as move away from the disadvantages of offering a flat rate service fee with an industry standard ranging from 2.75% to 2.99%. Customers can choose to use one card if they prefer to pay a lower rate, or another type of card to rack up those points. The information is all there, so they can make an informed choice.   

Flat Rate is the average rate calculated by the industry in an attempt to cover the range of merchant fees charged across the gamut of card programs. This includes Durbin regulated debits at a cost to premium rewards cards.  Average rates can be grossly unfair to consumers, especially those on the lower end of the spectrum who are not receiving generous reward points as they are subsidizing those who are.

Pay for what you get

Let’s describe another scenario. A group of people go out to dinner.  You are on a diet and order a salad and ice water. Others at the table order drinks, appetizers, entrees and dessert. The bill comes and it’s suggested that the bill be split 4 ways.  In this scenario someone is overpaying and 3 people are underpaying. Using the Intelligent Rate solution, everyone pays for what they get.  Each card is assessed precisely based on the card type being used for payment, whether it be a points card or a debit card with no frills.

With Intelligent Rate, you are getting what you are paying for, no more, no less. 

What if you’re not sure which of your cards have the lowest rates when making a payment? No worries, Intelligent Rate also looks at the card type you have chosen and offers the opportunity, if it exists, for a lower card if you would like to enter a different card or payment option (e.g. e-check option at no charge from a checking or savings account to pay that outstanding balance on your bill).

So why not even the playing field for your payers and offer the choice to save money when using a credit card? Or at least get exactly what they are paying for:  points, no points

 To learn more, schedule a demo to review Intelligent Link  now!

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