It is essential for merchants to adapt to the changes in the e-commerce industry by accepting various types of credit cards. However, for every payment provided with a card, payment processing fees may get a toll on the total company’s profit. To help merchants choose the best option and be ahead of the game, we have compiled an article about some general types of credit card processing fees.
A merchant service provider that gives you access to the tools for handling all transactions, is usually the one who arranges credit card processing rates. In addition, three more players determine the credit card processing cost: card issuer (a bank or another financial institution), credit card network (Mastercard, Visa, etc.), and a payment processor. We shall examine the five types of fees that make up the whole processing fee for a business.
An interchange fee is provided by the merchant account to the card-issuing bank for every transaction made via credit card. Interchange fees are important to cover fraud, handling costs, and the risk of verifying the payment. Such credit card networks as Visa or Mastercard have their own interchange fees, which are usually adjusted twice a year. The interchange fee is subject to factors related to the risks with the cardholder. These factors include:
Interchange fees should not be confused with the scheme fees which the acquiring bank pays to the particular card brand such as Visa, Mastercard, American Express, etc. This type of fees covers the price of the services provided by the card network and consists of the percent fraction of each transaction.
A payment processor’s fee is incurred for the card processing service. This fee, unlike the one discussed above, is open to negotiations, as there are many payment processors on the market with their own pricing strategies.
Merchant account fee is the money you pay your merchant service provider for processing card transactions. For example, some providers charge a fee per each transaction. Since there are many merchant service providers available, it is important to do your research and choose the one with the lowest fee rates.
Assessment fees are paid directly to the card networks once a month and are calculated as a percentage of your monthly sales. This type of card processing fees can be lower than others, although it usually depends on the card network, the volume of transactions, type of cards used, and type of transactions (either local or foreign).
Let us now provide some tips to help merchants reduce credit card processing fees.