Understand the advantages and disadvantages of using direct debit versus credit card direct debits.
As has been pointed out many times, understanding how payment processing works can be very difficult.
In this article, we wanted to summarize the advantages and disadvantages of direct debit versus credit card debt.
What is direct debit?
Direct debit, also called "EFT" for "Electronic fund transfer" means a payment by direct debit from the customer's bank account. This method is automated and allows funds to be withdrawn from the customer's account and automatically deposited into your corporate bank account.
To do this, the customer must provide information via a specimen check:
- Bank number (3 digits)
- Transit number (5 digits)
- Account number (7 to 12 digits)
The processing time for the direct debit: normally the average time before having the deposit in your bank account is 5 working days.
What are the costs associated with direct debit?
The monthly fees associated with direct debit are $ 15 / month + $ 0.50 / transaction *. Note that there is no% charge taken per transaction, which is what makes it so attractive. (We will see the calculations a little later).
* If your transaction volume is higher than average, we can negotiate with the payment processors to get you a better rate.
What is credit card debt?
Debiting by credit card is often easier to understand given its popularity. This automated method makes it possible to know in real-time whether the transaction is approved or refused on a customer's card.
The processing time of the direct debit: normally the average time before having the deposit in your bank account is 2 to 3 working days.
What are the costs associated with taking a credit card?
The costs associated with credit card processing are $ 15 / month for merchant account management and 2.75% + $ 0.25 / transaction * for all card types.
* If your transaction volume is higher than average, we can negotiate with the payment processors to get you a better rate.
Indeed, we cannot compare the rates of the payment terminals with the card present, because these represent transactions, in the eyes of VISA and Mastercard, less risky.
So you can compare the rates to other online payment processors such as Paypal & Stripe. You will quickly notice that the rates offered are clearly advantageous with FLiiP.
The difference, in the calculation:
Concretely, if you compare an average transaction at $ 100 between the 2 payment methods, see what you get:
By direct debit: $ 100 = $ 0.50 / transaction, therefore $ 0.50 in fees.
By credit card: $ 100 = 2.75%, so $ 2.75 + $ 0.25 = $ 3.00 in fees.
The difference obtained is, therefore, $ 2.50 / transaction (for a $ 100 transaction).
If you have any questions, don't hesitate to write to us!