Credit Card 101: Your Practical (And Quick) Guide To Credit Card Processing Fees And Rates

credit card processing fees

In today’s world, credit cards are king. If you plan to process credit cards as payment, the maze of fees and rates can start to get downright confusing.

From hidden costs like credit card transaction fees to interest rates, it’s important to understand each fee and what it means.

Read on for this practical guide that can help you regain control over your credit card processing costs.

Interchange Rates

Major credit card corporations like Visa, Discover, American Express, and MasterCard use a schedule of fees known as interchange. These companies set the rate but the money is directly paid to each of the card issuers’ individual bank.

When a customer pays you using a credit card, the issuing bank that issued the card transfers that money to your merchant bank. At that point, they’ll receive the funds from your customer.

Since the money has to change hands, a fee is associated with the transaction. This is known as an interchange rate. These fees also cover and protect against potential risks such as fraud.

It’s almost impossible to determine what interchange fee level your transactions will be processed under. There are hundreds of different levels that are taken into account.

These fees are the largest part of what you can expect to pay in credit card transaction fees. The rates or fees are actually the same for all merchants across the board.

Pay close attention to your payment provider and their particular pricing structure. The interchange fees could be passed onto you, or they could be lumped into a single rate. The latter option is usually more appealing since it’s a slightly better deal.

Credit Card Transaction Fees: Dues and Assessments

Every time a credit card is used, the information must pass through a complex network. Dues and assessments are fees that are charged by the card associations to cover a variety of different things including access to the payment network.

The dues and assessment fees also cover international transactions. These tend to be more costly due to exchange rates. It also covers things like merchant location fees, which applies to companies who have several locations.

Every processor charges the same dues and assessments since they are not able to be changed. The fees could be built into your rate depending on the issuer’s pricing structure.

Merchant Processor Fees

In order to accept credit cards, you’ll need to sign up with a merchant processor. These companies can either be a standalone merchant processor, or you may choose to use a bank that offers these services.

The merchant processor fees go directly to the processing company, so it’s something you’re able to shop for. Fees may vary which means you should try to find a merchant processor who offers you the best deal.

Merchant processor fees are something you have more control over and you can shop for the best one that suits your needs. Their role is to offer things like defense against chargebacks and customer support.

A merchant processor will work with you on software development to accept credit cards on your website. They’ll also be able to assess any risks that are associated with payment processing.

Additional Potential Costs

Aside from interchange fees, dues and assessments, and your merchant processor fees, there are some other costs to take into consideration. When you’re looking for a provider, be aware of the possibility of extra costs.

An excellent provider may offer these at no cost, while others could charge a fee or not even offer them at all. Some things to look out for include:

  • Recurring billing: If you provide a monthly service, this feature can be extremely helpful. The cardholder will sign up for recurring billing which can reduce your need for collections since the costs are automatically charged to the customer’s card. 
  • PCI Compliance: The Payment Card Industry, or PCI, has several rules to ensure compliance. Find out if your processor ensures this compliance for free or at a very low cost to you.
  • Customer support: Whether you need help with your website and processing payments or assistance with a chargeback, a good processor includes support. This support can be in the form of emails, phone calls, or even online chat.
  • Protection against chargebacks: If a customer submits a chargeback, it can be costly. Ask your processor if they’ll help you with this process. They should have a team of experts available who will work on your behalf to determine the outcome or fight the chargeback.

Interchange Rate Factors

There are several things that go into determining an interchange fee or rate. If a customer uses a debit card, there’s likely no fee associated since they are not utilizing revolving debt to pay for something.

AVS protects against fraud since it ensures that the customer’s information matches their billing address. “Card present” means a customer physically swiped their card. “Card not present” means they submitted the information remotely.

The difference between card present and not present can affect interchange fees. When it comes to interchange, it’s all about the amount of risk involved in each transaction.

Even the type of business you own can have an effect on your fees. Higher risk businesses such as firearms sellers may have a higher rate than a clothing store, for example.

Make the Most of Credit Card Processing

Now that you have a clearer understanding of the many credit card transaction fees, you can see the big picture. Shop around for a reputable merchant processor who will give you the support you need.

For all your credit card processing needs including point of sale and e-commerce, contact us today.