Credit Card Processing Fees

Understand the cost of credit card processors

Credit Card Processing Fees - You understand how much it costs and how costs are usually structured. The process can be complicated, but it does not have to be much. Let's take a closer look at the costs here.

Credit Card Processing Fees

Break costs

Not surprisingly, everyone who touches the transaction wants to be paid, including the issuing bank, credit card associations (Visa, MasterCard, etc.), the merchant bank and the payment processor.

At the base level, each time you process a transaction, you pay a fee:

Percentage of total transactions: Issuers are paid by taking a percentage of each sale, called exchange. These costs vary depending on many things, like the industry, the amount of sales and the type of card used. At last check, there are almost 300 different exchange rates!

Another percentage of the number of transactions: Your merchant bank takes a shortcut by charging a surcharge fee, the amount here also varies by industry, sales amount, monthly processing volume, etc.

Evaluation Fee: Credit card associations (Visa, MasterCard, etc.) also charge a fee, called evaluation.

The dollar amount for each transaction processed: The payment processor (which can also be your merchant bank) earns money by charging every time you process the transaction (whether sales, declines or returns, no problem). In addition, this can charge for installation, monthly use and even cancellation of the account.

Typically, the first three costs (percentages) are summed and quoted as a single rate, while transaction costs are quoted separately (eg 2.9% + $ 0.30).

How packages are processed

By investigating which type of payment is best for your needs, you are likely to meet several pricing models to process credit and debit card transactions. Understanding how these work-level structures can help you choose the best for your business - no cost you do not have to weigh. See below an outline of the three major structures that are common in credit card processing and take a look at our infographics for cost views.

Lump sum price

Flat rate is the easiest pricing model to understand. This involves the payment of a fixed rate processor for all credit and debit card transactions, which includes all of the fees mentioned above. At PayPal, our fixed rate structure is the base rate of 2.9% plus $ 0.30 per transaction.

Visit our costs page for full details of our fixed prices.

Exchange more price

As mentioned above, each time your customer pays with a credit or debit card, the issuer of your card can charge you a percentage charge, called an exchange. In addition, credit card associations (Visa, MasterCard, etc.) add a fee, called valuation. (People usually combine the two as "exchange fee.") In the exchange model plus the price added, the payment processor will be added marked stay at the top of the bag. For example: profit margin of 2% + $ 0.103 + 1.8% exchange cost = $ 3.90 charge on sale of $ 100.

Although this pricing model gives you a little more visibility in your fare details, the compensation is more complicated your statement to know and reconcile.

Staggered prices

With the differentiated pricing model, the processor takes the exchange rate of 300 or more different and put it in three cubes (or price level): quality, average quality, and not ranked, usually based on the quantity of risk associated with the transaction. .

This makes it easier for you (and them) to understand. However, since the processor defines the levels but wants it, it can be expensive and causes a lot of frustration when it receives its monthly status.

In general, there are three levels:

Qualified Rate: Transactions transferred to a physical terminal with a standard (non-reward) credit card are generally considered eligible. Since this carries the lowest risk, they are processed at the lowest rates. If a customer uses a gift card on a terminal, however, it locks on an unqualified level.

Note: This is usually the first level will be provided by the processor for it - be sure to dig deeper, because most likely there will not be many transactions falling into this basket.

Medium-Qualified Level: Transactions that do not qualify for the lowest rate fall to the eligible average level. For example, if you enter a customer's credit card number, such as for phones and direct mail orders, you will usually pay this higher rate. (Because no physical card is present, this process carries more risk of fraud, therefore, a higher level.) Some put reward cards and transaction processing in the bucket are eligible.

Ineligible: Non-qualified transactions for the previous bucket fall to an ineligible level, the highest rate you can afford. Many prizes, corporate and signature cards may be considered ineligible (depending on the processor). In general, e-commerce transactions are generally considered ineligible. That means that even if someone uses a regular consumer credit card, payments made online will translate into the greater cost to you. As a reference, an eligible card may have a transaction fee of 2.25 percent while the cards are not eligible to have a 3.25 percent, depending on the kredit processor card.3 This is what it might look like :

QualifiedMid-qualifiedNon-qualified2.25 quota% + $ 0253 = $ 2.50, at a cost of $ 100 sale3.00% + $ 0.253 mil = $ 3.25 for sales of $ 1.003.25% + $ 0253 = rate of $ 3.50 on a record of sales of $ 100 in cost.

When comparing different pricing structures, be sure to remember that some additional load processors, and this can be buried in good letter. For example, a processor may charge a cancellation fee if they decide to terminate a contract, even if they feel dissatisfied with their service. You may also be charged a withdrawal fee to move funds from a payment processing account to your business bank account. , although it is a standard activity for sellers. Before you sign any contracts, look for those hidden costs, as they can significantly affect your benefits. In general, understanding price models and costs can help unravel the mystery of choosing payment processors and help you find the right service for your business.