New lower rate for GSA SmartPay cards
GSA launched the SmartPay program almost 20 years ago. Government agencies used the GSA SmartPay purchase cards to purchase services and products last year totaling over $18B. One of the biggest resistant points have been the transaction fees. Government Contractors have thin margins – who can afford to give up another 3-3.5%?
Many Government Contractors have accepted payments at the micro-purchase level – over 20M transactions last year, but have resisted the large purchases. Things could be changing…
The interchange rates for Visa Large Purchase Advantage cards have been extended to GSA SmartPay cards. I’m sure the bank that provides your credit card account called you up to let you know. Wait, probably not. So, let me provide them here. These rates went into effect last Friday.
Visa Large Purchase Advantage (effective Oct. 18, expand to allow GSA Cards):
>$10k – $25k: 0.70% + $49.50
>$25k – $100k: 0.60% + $52.50
>$100k – $500k: 0.50% + $55.50
>$500k: 0.40% + $58.50
If you’re processing credit cards, you already know that the Interchange Rate is only part of the picture, but it is the part that is completely out of your control! The other part of the fee you pay goes to the Acquiring Bank – the company that provides you with the merchant account.
Total Transaction Fee = Interchange Rate + Acquisition Fee
With this change, transaction fees of 1-1.5% (or even less) are achievable through large purchases!
When you factor in the Cost of Money and compare getting paid in 1-2 days versus 30 days, GSA Smartpay cards are starting to look pretty good. Think what it could do for your DSO?
At this point, you may be wondering – as exciting as credit card and purchase card fees are – why are we talking about them in a Costpoint 7 blog? You may find it interesting that last year, over 300 Government Contractors processed payments totaling over $1M each, while the highest total reached $1.6B!
To find out more about lower rates, please check out GovCardConnectSM and CardConnect TM.