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Updated by 11.20.2023
Reviewing Credit-Card Processing Costs
Accepting charges encompasses an overwhelming amount of extensive and complicated fees. This handy guide explains the essentials so you can anticipate your overhead costs.
Knowing which players participate in credit-card processing will help you understand the related fees. You’ll encounter these financial intermediaries between your customers and company:
- Credit-card associations: Card creators like Visa and MasterCard set rules for all parties.
- Issuers: Banks including Chase and Citi and some associations like American Express and Discover issue credit cards.
- Processors: Acquiring banks are messengers between sellers and associations. These acquirers pass authorization requests and batched details to complete your business transactions. Different entities might generate monthly statements, handle tech support, and deposit money in your corporate bank account for each charge.
- Merchant-account providers (MAPs): An acquirer may connect you with financial institutions, double-duty acquirers, or independent sales groups that manage card-processing aspects including sales and support.
- Payment gateways: Special portals route sales from online shopping carts to acquirers. E-Complish’s credit-card processing services include RecurPay, which simplifies ongoing periodic transactions. This PCI-compliant solution stores patrons’ credit-card information securely for quick, easy recurrent retrieval and charging.
- Non-negotiable wholesale fees: Associations and issuers determine these consistent pre-markup or base fees, representing your transactions’ wholesale costs. So shopping for lower rates is pointless.
- Negotiable markup fees: Credit-card processors use markup fees to make profits off your business. Reputable ones set modest amounts. But others use confusing pricing models and terms, so compare merchant-account markups.
Every card association’s wholesale rates include two non-negotiable, per-transaction fees:
- Interchange reimbursement expenses: Card issuers and associations charge the highest amounts per transaction and month. Typical interchange fees combine percentages of each payment with a flat 10-cent-per-sale surcharge.
- Assessments: The standard assessment basis is a fraction of each month’s total payment volume. For interchange-plus price structures, processors may mark up your wholesale rates by adding a quarter percent plus 10 cents. Tiered plans range from qualified (lowest rates) to mid-qualified (average) to non-qualified (highest). They include processors’ margins, so determining exact amounts is difficult.
Flat fees names, values, and applicability vary, but monthly statements always include some of these:
- Terminal fees: Card machine providers impose these fees on customer charges in merchants’ physical stores. Save money by purchasing — not leasing — terminals.
- Gateway fees: Providers levy the e-commerce version of terminal fees. E-Complish charges a percentage of each online transaction.
- Payment card industry (PCI) fees: Following regulations consistently involves paying compliance fees to your MAP. Noncompliance penalties for not upholding mandatory PCI standards can be costly.
- Annual fees: Some MAPs charge yearly fees for basic service usage.
- Early termination fines: Canceling your merchant contract early incurs fees.
- Monthly fees: MAPs levy recurring fees to cover call-center expenses.
- Minimum fees: Some MAPs charge variable fees for not reaching certain monthly or yearly transaction totals. Annual minimums are about $50,000.
- Statement fees: Your MAP may charge up to $15 per month for statement processing costs, which electronic bills can avoid.
- Online reporting fees: Most providers waive these fees or lump them with others if you choose online statements.
- Network fees: MAPs pass card networks’ non-negotiable costs on to merchants.
- IRS reporting fees: Merchant account rates for reporting your transaction data on Form 1099-K to the IRS run $2-$5.
Incidental fees on a per-incident basis may include:
- Address-verification service fees: These charges apply only to e-commerce and phone payments.
- Voice-authorization fees: Making toll-free calls to verify information for transaction authorizations is necessary rarely.
- Retrieval-request fees: Every customer disputing a sale initiates a retrieval request, chargeback step one.
- Chargeback fees: Expect these fees besides losing money from uncollected credits.
- Batch fees: You’ll incur these fees per submitted transaction batch.
- Non-sufficient funds fees: These occur if your bank account’s balance can’t cover all merchant account costs.
Merchant Account Pricing Models
- Interchange plus: Offering the greatest transparency and most logical terms, this option’s monthly statements itemize wholesale and markup fees.
- Tiered: Most firms use this bundled model. Not meeting all qualified transaction-processing criteria could downgrade you to the more costly mid- or non-qualified level.
- Subscription or membership: This newer choice charges transaction costs separately from markups without percentages. It offers big savings for large amounts without reducing transparency.
- Blended: One uniform percentage and transaction cost applies to every charge, despite wholesale levels.
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