Credit Card Processing Fees
When your business sets up a merchant account and begins accepting credit card payments, you can expect to pay certain fees. Understanding the different types of fees that are commonly charged will better positioned your business to negotiate lower pricing and dispute any unnecessary charges.
The following list is a breakdown of the most common credit card processing fees in our industry:
1. Interchange Fees
Also known as the "base rates" or "wholesale pricing", the interchange fees are non-negotiable and are determined by the credit card brand associations i.e. Visa, MasterCard and Discover. These fees makeup the largest portion of your overall monthly processing costs.
Interchange rates differ according to card type, transaction type and business type. There are also other important factors to consider, especially for commercial card transactions where there is multiple levels of interchange; Level 1, Level 2 and Level 3.
For these very reasons it's extremely important that your business works with a payment processor that understands proper interchange rate qualification. That way you can have the peace of mind knowing your business is paying the lowest possible interchange rate on every transaction.
You can view the most current interchange rates and fees by clicking HERE
2. Processor Markup Fees
These are the fees that you pay directly to your credit card processor. It's the profit they make on each credit card transaction. Markup fees can vary wildly within our industry — so it's important to request a full detailed listing of these fees from your current provider. All processor markup fees are negotiable.
Keep in mind that many processors will deliberately make their pricing models complicated in order to hide their markup fees. Some even go so far as to claim their markup fees are interchange fees so that they can avoid reducing them. This is why it's so important to know exactly what you are paying and why.
3. Equipment Fees
These are the rental or leasing fees that many processors charge to retail businesses for their credit card terminal, Pin Pad or other POS equipment. These fees can vary from a few dollars on up to over $99 per month. Equipment fees are usually locked in with a contract or leasing agreement for a multi-year term.
What ends up happening is that your business pays for your equipment many times over again. And even worse is that once your lease agreement has expired, that equipment you now own is outdated and needs replaced. It's a very costly and never ending cycle and it only benefits your payment processor.
Tailored Transactions provides free new equipment to all of our clients. Learn more by clicking HERE
4. Payment Gateway Fees
These fees are charged for the use of an online virtual terminal known as a payment gateway. They normally consist of a flat monthly fee and a per transaction fee. Each payment gateway solution usually offers different versions or upgrades, with each version having its own unique pricing.
5. Annual Fees
Some processors will charge a flat annual or bi-annual fee regardless of your transaction volume. These fees can be very costly with most ranging between $99.00 to $299.00 per year. Annual fees are charged for the sole purpose of making additional profit off of each merchant account. There is no legitimate reason for charging them.
6. Statement or Service Fees
This fee is usually charged on a monthly basis and it covers all the costs associated with paper statements or account maintenance for each merchant account. Normally the fee will range between $5.00 to $20.00 per month and it is negotiable.
7. PCI Compliance Fees
This charge is one of the most interesting and misleading:
- Some providers charge a special fee to "keep" your merchant account PCI Compliant. You're basically paying a premium for protection, however you’re still ultimately responsible for following the security standards to remain compliant.
- Some providers charge this fee if you "fail" to remain compliant. You’re basically paying a penalty.
- Others will wave this fee completely and do everything they can to keep your account in good standing.
8. Monthly Minimum Fees
Most processors will charge this fee if your merchant account does not process a certain dollar amount each month. This fee is usually negotiable and it normally ranges between $15.00 t0 $25.00. It is only charged when your total monthly processing fee is LESS than the minimum amount. This fee helps to ensure that a merchant account does not lose money when there is little or no processing during the month.
9. Early Termination Fees
If you sign a long-term contract and cancel that agreement early, you can expect to pay a penalty. These ETF's can vary greatly in their amount depending on the processor. Some processors only provide a small window of just 30 to 60 days to opt-out of your contract before it automatically renews. That's why it's important to know the terms of your contract and what the penalty is for cancelling it.
Tailored Transactions will not setup your merchant account with a long-term contract. All of our agreements are month-to-month and you are free to cancel it at any time. We never charge an early termination fee for cancelling your merchant account with us.
10. IRS Reporting Fees
Your provider will automatically report all income directly to the IRS (1099-K). This is usually not negotiable.
Hopefully this list of common credit card processing fees will help your business to negotiate better pricing on your merchant account. There are a lot of different options for merchant services providers, but sadly, not all of them are good and have your best interest in mind. So please take the time and research any company that you are considering to use as your payment processor.
Do you still have questions about certain credit card processing fees that you are seeing on your monthly statement?
Please feel free to Contact Us and we will answer any questions that you may have. We are always more than happy to be of help!
Visit us online at www.TailoredTransactions.com or call us directly (888) 669.1686