Credit Card Processing Fees 101

Credit cards have become just about the norm wherever you go today. Because of this, having an efficient credit card processing system is essential. These are particularly important for businesses to stay on top of their transactions.

Having the best processing system in place comes with a certain price. In many ways, it manifests itself in the form of credit card processing fees. Understanding these costs allows you to choose the processor that can give you the best rates in the industry. 

To know more about these accompanying fees and how these impact businesses, read on. We have created this guide to let you in on how credit card processing fees work. Check this out. 

Credit Card Processing Fees 101

What are Credit Card Processing Fees?

Credit card processing fees are a type of fee that each business or merchant is required to pay for each sale made via card. These fees include interchange fees, the payment processor’s fee, and the assessment or service rates. 

This also refers to the type of payment processing that a credit cardholder normally pays a processor for using their product. It is usually charged on a per-transaction basis. 

The three main parties that determine the fees that fall under this are the banks, your credit card network, and the processor. 

Interchange Fees

Interchange fees vary from year to year, especially from the likes of Visa and Mastercard. These account for around 70 to 90% of the total amount businesses have to pay towards the bank or a similar financial institution. 

Interchange fees are further broken down into different categories. Besides the credit card network, other factors that can influence the rates under this are the type of credit card and the merchant category you fall into.

This would also take into consideration the type of processing you have used. That could include whether the merchant opts for a swiped payment, a credit card inserted into the terminal, and the like. 

Merchant Account Provider Fee

For you to be able to let your customers pay by credit card, you’ve got to link a merchant account to a credit card network. 

For this merchant account service, you will be charged a fee on top of your interchange fee. This fee can depend on the volume of transactions you have as well as the type of business you have.

They can charge you a fee per transaction or charge you a lump-sum fee per month. That is something you have to figure out with your merchant account provider. 

Why Do Credit Card Processing Fees Exist?

These types of fees exist to provide credit card companies compensation for the services they have rendered. In this case, it pertains to the purchases done via credit. 

Using a credit card means that individuals are obtaining money upfront or money that they still do not have from the respective financial institution. 

In return for these services, credit card companies and other similar merchant levy interchange fees on credit card payments. 

Online Versus In-Store Payment Fees 

Processing fees also depend on risk. So in-store physical payments with a card are less risky and so the fees are lower. 

If you process fees online, you will likely be hit with higher processing fees because online payment is riskier.

How Fees Affect Businesses

Credit card processing fees can negatively affect businesses due to extra costs. Business owners are left to pay for these fees in order to accept credit card payments from various customers. 

They do this to stay on top of their game and to remain competitive in the field. With these charges racking up, business owners may sometimes find themselves wondering if they can charge customers for those fees.  

Many credit card companies discourage this type of practice not only because it puts the burden on the consumer. It also discourages customers from using credit cards, as customers have to pay their own credit card fees. 

Moreover, this can put merchants at a, especially if their competitors have a better fee structure.

Credit Card Processing Fees 101

The Bottom Line

With more people using credit cards, gaining a clearer understanding of what credit card processing fees are and how these affect businesses is a must. 

This way, you know how to best proceed so that you can offer your customers the best payment options without affecting your bottom line.