The issue that you describe where your prior merchant account provider billed you a downgrade rate for 90% of your transactions isn't really because they were "high-risk" (they weren't, you have no downgrades). It's an example of "marking up the downgrades" which is a strategy that unscrupulous merchant account providers use to increase their profit. http://transfs.com/blog/marking-up-downgrades/
What they really mean is that the interchange rate that your transaction qualified for is worse than the rate that they set to be your default or "qualified" rate. http://transfs.com/blog/what-is-interchange-again/
These billing tiers are a problem because there is no standard on what is "qualified" and what is "unqualified", it varies between processors and between customers within the same processor. http://transfs.com/blog/tiered-pricing-for-merchant-accounts...
There is a way to solve those billing tier ambiguities (which never are in the favor of the businessowner) - its called interchange plus pricing. Insist upon it, every processor can do it, for any size business.
Basically interchange is the wholesale rate that visa/mc charge the processor. In an interchange-plus pricing scheme the processor pass those charges on to you and explicitly disclose the markup you are paying above that wholesale rate. It's the best way to ensure no funny business is going on with your rates - http://transfs.com/blog/why-you-should-want-interchange-plus...
Only accept interchange plus or a no-downgrade flat percentage (like Paypal offers) - it will save you money and aggravation.
This is another of the problems with the payments industry. A serious lack of transparency pervades it. I never knew what was going on with our payments and fees and such. They just kept getting higher every couple of months. They hide behind wall-of-text terms of service (pages and pages of it), and ridiculous application processes wherein you don't know what your rates will be until after you jump through all the crazy hoops and send a bunch of faxes back and forth for several weeks.
Obviously, I've got a lot of hostility about the payments industry. Switching to PayPal (which took less than 24 hours to setup, and took just a few minutes of my time for filling out the application) was a breath of fresh air over Authorize.net, where I had to deal with a mentally retarded reseller (I'm not being facetious; retardation is the only explanation for some of the questions she asked and her grasp of the English language, despite being a native speaker) for three weeks to get things working.
We've had a merchant account for several years, the last few on an interchange-plus plan. Last weekend, we sat down and calculated the average interchange-only discount rate, i.e., before the "plus" of the merchant account provider, for the last four months. We found the average interchange rate, including the interchange transaction fees, was about 2.05%.
Given that PayPal only charges 2.2% + $0.30 per transaction for businesses with > $10K in sales, it seems to me that it is increasingly difficult for any merchant services provider to compete with PayPal in the online space, given the high basic interchange rate.
The added benefits of not having to deal with the cost and complexity of PCI compliance and a separate credit card gateway has made us decide to switch to PayPal.
What they really mean is that the interchange rate that your transaction qualified for is worse than the rate that they set to be your default or "qualified" rate. http://transfs.com/blog/what-is-interchange-again/
These billing tiers are a problem because there is no standard on what is "qualified" and what is "unqualified", it varies between processors and between customers within the same processor. http://transfs.com/blog/tiered-pricing-for-merchant-accounts...
There is a way to solve those billing tier ambiguities (which never are in the favor of the businessowner) - its called interchange plus pricing. Insist upon it, every processor can do it, for any size business.
Basically interchange is the wholesale rate that visa/mc charge the processor. In an interchange-plus pricing scheme the processor pass those charges on to you and explicitly disclose the markup you are paying above that wholesale rate. It's the best way to ensure no funny business is going on with your rates - http://transfs.com/blog/why-you-should-want-interchange-plus...
Only accept interchange plus or a no-downgrade flat percentage (like Paypal offers) - it will save you money and aggravation.