When I began working in the merchant services industry, I was completely overwhelmed by all the different credit card processing fees. It appears many business owners feel the same way too. They simply look at their total credit card charge every month and move on.
Although credit card processing fees are inevitable, many of them are negotiable. Therefore, it is important to understand each cost. Otherwise, you could end up paying more than you should.
Since there are a lot of different fees, I am going to break this up into two parts. In this first post, I will cover the core fees, which make up most of the overall charges.
Core Credit Card Processing Fees
Below are the five most important credit card processing fees.
- Rate
- Transaction Fee
- Batch Fee
- Monthly Statement & Service Fee
- Card Association Fees
Rate
The rate is arguably the most significant fee. Merchant account providers give varying rates depending on the type of business. I will dedicate an entire post on rates so stay tuned.
Your rate is a percentage applied to sales volume. However, it is common for merchant account providers to charge different rates for different cards, as well. For example, American Express usually costs more to process for the merchant account provider. Therefore, they charge businesses a higher rate on Amex than they do on Visa and MasterCard.
Transaction Fee
Unlike the rate which applies to sales volume, the transaction fee is a flat fee applied to your sales count. It is common for merchant account providers to charge differently on individual cards too, such as American Express and PIN debit.
Batch (or Settlement) Fee
Every day, businesses generate a certain amount of sales. These sales get submitted (through the terminal or gateway) to the merchant account provider. After reviewing, the business receives the money. Each submission of sales is called a batch.
A batch can have one sale or one thousand sales. Many terminals batch transactions automatically, which is generally done once a day. There is a small fee per batch. Batch fees do not apply on days where you have no sales.
Monthly Statement & Service Fee
Merchant account providers typically charge a monthly fee for providing ongoing customer support and sending statements. This fee applies even if you do not process any sales because it still costs money to keep the merchant account on file.
Card Association Fees
In addition to your merchant account provider, the card associations have fees too (Visa, MasterCard, Discover, and American Express). Unlike the charges listed above, card association fees are unnegotiable. Therefore, they are the same regardless of the merchant account provider you choose.
There are a few hundred card association fees, too. I will dedicate another post entirely on these costs, so stay tuned.
Conclusion
As a business owner, you should take the time to learn about the various credit card processing fees associated with the merchant account provider. Knowing how they impact your bottom will help you make better decisions to become more profitable. Make sure you subscribe to this blog because I will share many tips on how to keep these costs as low as possible!
If you need help understanding your credit card processing statement, please send me a note in the Contact Me section. I will be glad to discuss it with you.
In my next post, I will cover the remaining, less common fees associated with your provider. Thanks for reading!