Comment by jsherry | Hacker News Reader

Comment by jsherry | Hacker News Reader

If a merchant does at least $13,000 per month in credit card revenue, this is a good deal (read on for assumptions).

Quick and dirty math here: Stripe charges $275 per month for card revenues up to $21,000 per month. I took a look at http://truecostofcredit.com (courtesy of FeeFighters) and the merchant fees per transaction vary widely based on the type of merchant as well as card type. For the sake of argument, let's say the average Visa/MC transactions costs the merchant 1.75%. And let's say that the average AmEx transaction costs the merchant 3.5%. Now let's assume it's an 80%/20% distribution between MC/Visa and AmEx transactions, respectively, bringing a blended rate of 2.1%. Assuming that the merchant is charged 2.1% per transaction by their credit card company, the tipping point is $13,095 of revenue per month. Anything above and beyond that and this is a good deal. Below it, it's not (aside from the fact that's a fixed cost versus a variable one which is worth something).

If the only thing you're selecting your merchant processor on is a couple of basis points, you're going to end up screwing yourself over regardless. You'll never get the real cost of processing out of a traditional merchant processor regardless - in fact, you really can't unless you know the cards* you'll be charging ahead of time. There's a lot more that also matters, like time to receive funds, reserves, chargeback costs, handling, and dispute resolution, gateway fees, breakdown of authorization versus capture costs... the list goes way on.

* Unless you're doing billions of CC volume per year, in which case that turns into real money.

Not all Visa cards are created equal. Different Visas cost different amounts to process, based on a huge number of factors. Debit/Credit/Charge, Intl/Domestic, Business/Personal, Prepaid, numerous sub-categories, etc.

That's a very narrow window of value. If < $10k means you're better off going with the per-transaction rate, >10k but less than $13,095 means you're better off with a regular merchant account and > $13,095 but less than $21k means you're better off with the flat rate, then how many firms would really benefit from this?

Looks like they should say "if you're doing more than $10k (or $13k if you want to bring in the competition), but less than $21k, take this deal". But of course, no one would take it.

Square has value beyond their rate. They also have an interesting/evolving point-of-sale iPad app, and a groundbreaking wallet app. These could help grow business beyond the shavings of a percent that you'd save playing the processor numbers.

And there's value in a simple rate, too. Yes maybe you could run the numbers and find some scenarios where you'd save elsewhere, but it's a very confusing and somewhat deceptive landscape, and if you get it wrong you might actually end up paying more. There's value in knowing that you're going to get a pretty fair and understandable rate up to at least $250K/yr of revenue.

Not "less than 21k." There is no upper bound on the value. You always save money, provided you process upwards of $10k/mo.

A merchant processing 50k/month on square paying 2.75% would save money by switching to the new plan. At least, if I'm reading this correctly.

Except that merchant can't switch to the plan if they process that much, since it is limited to merchants under $250,000/year.

No, it isn't limited that way. It's 0% under 250k, and reverts to the regular 2.75% if you process above those limits.

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