Credit Card Processing Residual Income: Merchant Services Commission Structure
Are you going through different merchant services sales jobs and thinking if you can make enough money from selling merchant services to afford a luxurious life? Well, the answer to this depends on how much work you put in. Since you will be relying on the commission and monthly income you get for each sale, your earnings will directly be dependent on how much you sell.
However, we have created this guide to give you a general idea of how to calculate your earnings and the things to consider when looking at the residual income structures offered by the merchant services agent programs. That being said, let’s dive right in:
How Much Can I Earn Selling Merchant Processing?
The first question that comes to mind of everyone taking up the merchant services sales jobs is; how much will I earn? And that question is fair because you need to pay the bills and keep your belly full. So to know how much you can expect if you become a credit card processing agent, you need to know about the sources of your income.
In merchant processing sales job, you have two ways to earn the greenbacks, the first one is by selling the processing program to the merchant. The second one is by selling/leasing the equipment like POS terminals. Now the most lucrative between both is the former one because by getting the merchant onboard, you will be getting residual income for as long as he is using your credit card processing company.
The second one is also not bad if you can manage to lease out or sell a couple of machines per month. You can combine both to increase your revenue as well, but since residual income is the most practical and long term earning approach, we will focus on it for this guide.
1. Making Money with Residual Income:
When you sign up a merchant for your merchant services agent program, the company will receive a percentage of the amount for every transaction processed via credit cards by that merchant. So as long as the merchant is happy and continues to work with the company, they will get some % of the money from every transaction, and you will get your split from it.
Now speaking of the ‘split,’ the industry average is around 50%. This means if your processor receives, let’s say, $0.1 for a specific transaction and the interchange rate/transaction fee is $0.03, then you should get $0.035 based on 50% sharing of remaining $0.07. Now there are some things you need to be careful about when it comes to the calculation of your income, and we will cover them later in this article.
Coming back to the topic, if you sign up 10 agents a month, and each merchant is giving out an average of $100/month to the credit card company (after interchange/transaction fees), then your split becomes 50$. If we multiply this by 10, then it becomes $500. This $500 is going to be added to your account as long as the merchants are working with you, and you own them regardless of how many sales you make in the coming months.
Some companies take away the right to own the residual income if the agent doesn’t make X amount of sales, don’t work for them. Processors like North American Bancard let you have your residuals no matter how your sales numbers are; this ensures you have a stable income coming in and your bills are being paid.
Now, if you let’s say keep bringing 10 merchants a month, then in one year, you have 120 merchants. Let’s say 20 of them closed the business or switched to another processor; then, you are still left with 100 merchants after one year. So with 100 merchants, your per month income should be $50 x 100 = $5000. Now multiply it with 12, your second year’s income should be $60,000 for the second year.
Is it bad for someone who started with $0 in the first year and is now making $60,000 per year? And keep in mind, we haven’t even added the merchants you will be bringing for that second year. We are just calculating for the merchants you brought for first year. So this is the basic calculation, you can crunch the numbers as per your goals and see how much you will be making.
2. Making Money by Selling Equipment:
This is another form of making some money along the side. However, most of the credit card processors in the United States offer terminal for free of cost to their merchants, which is why this mode of earning is actually not really profitable now. Depending on the processor you are working for, you might have the option of selling or leasing the equipment like the POS terminal or the mobile payment system or any other credit card processing device.
If you sell the terminal to the merchant, then you will get some sort of commission on the sale. You can know better about the percentage of commission from your credit card processor. Another option is leasing the equipment for monthly rent, which can be anywhere between $30 and $60.
You will, of course, get some percentage from that Commission as well, so depending on how many equipment you sale or lease per month, this type of income can also be added to your overall earnings. However, this kind of selling is not encouraged because most of the giant credit card processors like the North American Bancard offer the terminals for free to their merchants. This helps the agents bring more sales as everyone likes freebies.
Things to Keep in Mind While Looking at Residual Income: Do You Own Your Residuals?
When considering a merchant services career, there is one important thing that you need to keep in mind, and that is if there is a per month sales quota set by the merchant processing sales program you are going to work with. There are some programs that require the agents to make X number of sales per month to keep their previous residuals.
So this means if you are unable to meet their required number of sales every month, then not only will you lose your stable monthly income in the form of residuals, but the effort and time you spent on selling merchant services will go in vain.
Make sure to always work with a program like the North American Bancard Agent Program where you don’t have the pressure to meet a certain number of sales to keep your previous residuals. You will own all of them as long as they work with the credit card processor.
Don’t Just Consider Residual Split:
There will be some companies that will offer you a low residual split, which can be 30% to 40%. However, we suggest that you don’t just look at the profit split if you are new to the industry. You should see if they are offering any other benefits.
Sometimes, the processing companies offer things like training resources, ongoing support, and help with leads hunting, all of which are very important things to have if you are just starting out. You need to learn the ropes first, so going with this kind of deal is not bad.
How are they Paying High Residual Split?
Different companies have different methods for calculating the agent’s residual split. We suggest that you don’t just look at things on the surface level. If you are getting an offer of 50% split and some good upfront bonuses, then that is a good deal. However, things start to get fishy when the deal is too good to be true. Maybe you are offered a very high split, let’s say 70% to 80%, and you sign the contract just after seeing that.
However, you might end up accepting the kind of merchant services sales jobs where there are no upfront bonuses. If you can live without big bonuses that processors give to their agent, then this one is good enough for you. Some processors might offer both high split and upfront bonuses, and you sign the contract thinking you’ve landed on a gold mine. However, they might increase the interchange/transaction fee by adding some basis points to it.
If you don’t know, the basis point is a unit of measure in finance where 1bp = 0.01% or 0.0001. So if the company is adding BP to the interchange/transaction fee before calculating the profit, then you won’t really get much money. For instance, the processor gets $0.1 from a transaction, and the original interchange fee is $0.03, but the company adds 120 basis points to it, then it becomes (120x0.0001) + $0.03 = $0.042.
So now, your split will be calculated from $0.058, which will obviously be less. So if you get this kind of offer, ask for the ‘Schedule A,’ which is basically a document containing all the costs charged from you.
Making money from merchant services sales jobs can be pretty tough if you don’t know what you are doing. However, if you understand the crucial steps to succeeding as a merchant sales agent –hyperlink to the article I wrote on it- then nothing will stop you from reaching $100k per year in residual income.