The Green Sheet Online Edition
November 12, 2007 • Issue 07:11:01
Basis point basics
I am an MLS trying to figure out what I am being paid. Can anyone show me how to figure out how basis points are determined?
Example: Auth. count, 10,117; Gross sales, $511,665.64; Income, $17,767.51; Expense, ($12,409.88); Profit $5,357.63; My profit, $2,678.65
Bankcard Federated LLC
We referred your question to Jerry M. Julien, Executive Vice President of Equity Commerce LP. He is on our advisory board and graciously provided the following response:
"Basis points are actually very easy to calculate, so long as you remember 100 basis points equal 1%. The gross sales figure is always the denominator in determining basis point profitability. The denominator is the number on the bottom of any fraction. For example, in 1/2 (or one-half) the denominator is 2. OK, math review lesson is over. In your example, we can calculate basis points for each entry:
- Gross income/Gross sales = 17,767.51/511,665.64 = 0.0347 = 3.47% = 347 basis points
- Gross expenses/Gross sales = 12,409.88/511,665.64 = 0.0243 = 2.43% = 243 basis points
- Gross profit/Gross sales = 5,357.63/511,665.64 = 0.0105 = 1.05% = 105 basis points
- Net profit/Gross sales = 2,678.65/511,665.64 = 0.0052 = 0.52% = 52 basis points
"You can calculate your revenue share split by dividing net profit by gross profit: 2,678.65/5,357.63 = 0.50 or 50% gross profit share."
MasterCard's latest rates
How can I get a copy of the October interchange rates? Under Resources, your site shows "latest rates" for June.
eServe Transaction Co.
MasterCard Worldwide updated its commercial interchange programs and rates on Oct. 12, 2007; Visa Inc., however, did not. MasterCard's October rate changes are now available in PDF format on our Web site, http://www.greensheet.com/pdf/MC_interchange_1007.pdf . Links to the interchange rates that took effect in April and June 2007 are also under the Card Association Interchange Rates header on our Resources page.
Additionally, Visa and MasterCard post current interchange rates and programs at http://usa.visa.com/merchants/operations/interchange_rates.html and www.mastercard.com/us/merchant/how_works/interchange_rates.html, respectively.
In "Mastering the interchange game," by Ken Musante, issue 07:10:01, published Oct. 8, 2007, an editorial mistake altered the author's meaning in the third-from-last paragraph on page 94. The text should read: Additionally, such a transaction is already downgrading to nonqualified, so unless HMS increases fees to card not present merchants, the company will experience a basis point deterioration on 4% of volume. The Green Sheet regrets the error.
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