Since you delegate credit card processing tasks to the payment provider, get ready to be charged for its services. Well, you don’t expect to get transactions processed for free, don’t you? Fortunately, there is a variety of pricing plans available out there, so it’s never been a problem to find the solution meshed with your needs.
Payment providers usually predetermine their credit card processing fees (aka discount rates). On average they’re 2,5-4,5% per transaction. Fees are made up of assessment fees, markup fees and interchange fees. Some of them are fixed because they are divided among an issuer, an acquirer, a credit card brand and a processor itself. And some commissions are negotiable as they are linked to various factors, which we go into below.
Now let’s dwell on what goes into credit card processing fees, and how much a merchant service provider will cost to your business.
Assessment fees, otherworldly dues, are money charged by a payment processor to pay for card association services. Visa, MasterCard, Discover and other brands don’t work for free, so they bill you for the ability to use their cards and process payments on their networks.
The amount you pay depends on your money turnover and the card network used. These are some more factors that affect how much the assessment fees will be: your transaction volume, a total number of foreign payments and a card type used.
Card brands review their dues and change them twice a year. According to the latest data, the assessment fees are as below:
- AmEx – 0,15%;
- Visa – 0,14% for credit cards; 0,13% for debit and prepaid cards;
- MasterCard – 0,13%;
- Discover – 0,13%.
When paying for their purchases, customers may want to get their money back. The reasons can be different, among the most common ones are poor product quality, wrong size or colour, and so one and so forth. Transactions, especially virtual ones, are often susceptible to fraud. And all those problems are beyond a merchant's responsibility. It is an issuing bank that carries the can for chargebacks, refunds and other handling costs.
Interchange fees are designated to help an issuer handle those expenses. Each card brand decides on the amount to pay. Just like the dues, interchange fees can be changed twice a year.
Take a glance at the factors that influence the fee rate:
- Transaction type. For example, card-not-present payments cost more than in-person ones;
- Your business type. It can be low- or high-risk. And if your store goes with a high-risk tag, you have to pay more;
- Your average ticket size. The more you sell, the higher your fees;
- Card type. Debit, credit, prepaid or reward. If you let your clients use the latter, the commission is usually higher.
Markup fees may also be called payment processor’s fees. They are what you pay to make avail of the provider’s services. Most of the time, companies ask merchants to cover a commission per transaction, and that’s all. But some providers might want you to pay one-time fees for the following:
- PCI-compliance. PCI DSS certification is obligatory for merchants who take payments online. No matter your business type, you should get one unless you want to be exposed to fines. Payment providers adhere to the standard and take responsibility for your transaction security. However, some companies charge additional fees for this service.
- Chargebacks. There are lots of reasons why clients file chargebacks. If you’re interested, find out all of them in our article “What is a chargeback: The answers you’ve been looking for”. But here is a thing – some providers want merchants to pay extra fees if a customer demands their money back.
- Account registration. The fee incurred when you set up your account. For merchants, however, it should be a wakeup call as normally providers don’t charge money for that.
- Cancellation. If you sign up an agreement for a specific term, you might be asked to pay some extra when terminating a contract.
- Minimum processing. Make sure to discuss this fee with your provider. Some companies want you to process a certain number of transactions in a given amount of time. If you don’t, they’ll charge you a minimum processing fee.
- Support/service. The amount you pay monthly or annually just to keep your account up and running.
Those are the most common fees, but there may be some other incidental charges. Make sure to investigate all commissions your provider has. Don’t hesitate to ask for details and clarification if needed. And note that with the right provider, you can expect to be charged modestly, but with the wrong one, you might be in dire straits. So, take your time to choose the best one.
When using Tranzzo, you’ll pay a specific fee for every transaction. It already includes interchange and assessment payments. We charge no monthly fees and hidden commissions for anything in-between. Find out more about our pricing plans by this link.