Average Ticket

This piece of the credit card processing fee pie probably gets the least amount of attention but is vital to understanding your Effective Rate. Simply put, Average Ticket is the average sale price of the items in your business. 

What is Average Ticket?

Average Ticket refers to the average sale price of the items in your business. It’s calculated by dividing your total revenue from credit card transactions by the number of transactions. This metric plays a crucial role in determining your effective rate, yet it often receives little attention.

Examples of Average Ticket Calculation

July Card Mix:

  • If you process 1,000 credit card transactions in a month and generate $30,000 in total revenue, your average ticket is $30:
    • $30,000 / 1,000 = $30.00
  • If you process 500 credit card transactions in a month and generate $50,000 in total revenue, your average ticket is $100:
    • $50,000 / 500 = $100.00

How Average Ticket Affects Your Effective Rate

Your effective rate is influenced by your average ticket because of the structure of interchange fees. Let’s explore this with an example:

    Example 1: Lower Average Ticket

    • Mastercard World Elite:
      • You sell a bottle of wine for $10, and the customer pays with a regulated debit card.
      • The regulated debit interchange fee is 0.05% + $0.22 (approximately $0.27 in total).
      • The interchange fee for this transaction is 0.27%:
        • $0.27 / $10.00 = 0.27%

    Example 2: Higher Average Ticket 

        • You sell a bottle of wine for $50, and the customer pays with the same regulated debit card.
        • The regulated debit interchange fee remains 0.05% + $0.22 (approximately $0.47 in total).
        • The interchange fee for this transaction is 0.09%:
          • $0.47 / $50.00 = 0.09%

    By increasing the price of the bottle of wine from $10 to $50, you effectively lower your cost by 0.18%

     

    The Impact of Average Ticket on Costs

    This example illustrates how a higher average ticket can reduce your effective rate, even before your credit card processor adds any fees. Consequently, fluctuations in your average ticket can significantly affect your effective rate month-to-month.

    Understanding and managing your average ticket is vital for optimizing your credit card processing costs. By keeping an eye on this metric, you can make informed decisions that positively impact your bottom line and ensure more predictable processing expenses.