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The issuing bank of a credit card makes their money through different types of fees that they charge on every credit card for each transaction along with other fees charged monthly and annually.

Ideally, the fees that you pay for credit card processing largely depends on the pricing model followed by the merchant provider. That means, you will need to select the right model for your specific type of business so that you do not overpay your provider in fees. For this it is important that you clearly understand how these credit card processing fees work.

credit card processing fees

This guide will explain everything to you regarding how these credit card processing fees work. This guide will enable you to:

  • Eliminate the headache from sorting these credit card processing fees.
  • Choose the best solution for your business.
  • Pick the right fee structure.

Ideally, payment processing fees may be set as a monthly fee that may not have any extra contract or additional markups. However, there may be exceptions.

Factors affecting the fees

Primarily there are four factors that will affect the credit card processing fees you pay whenever you charge a credit card. These factors include:

  • The interchange rate: This is a special rate that credit card issuers such as Visa, Master, American Express, and Discover charge for processing their credit cards. This interchange rate may vary depending on the type of the credit card. That means the interchange rate for a corporate credit card and a reward card may be different. Ideally, these interchange rates are the amounts that the merchant account providers actually pay to the card issuers. Typically, these interchange rates are non-negotiable.
  • The merchant account provider fee: This is the fee or fees charged by the merchant account providers. Ideally, you will need a special merchant account to accept credit card payments so that you can process the credit cards by connecting to the network of that specific credit card. The merchant account provider fee is charged in addition to the interchange rate and is negotiable. These fees are usually based on the type of your business and the volume of your sales. That means different businesses will pay entirely different fees even if it is paid to the same merchant account provider.
  • The processing of card: The fees of credit card processing also depend on how the card is processed. When there is an in-store transaction where the customer swipes their own card it will have lowest fees because such type of transaction will have lowest amount of risk for a fraud. On the other hand, any online transaction made through a website order will have higher risk of fraud just like any keyed-in transactions make during a telephone order and will usually have a higher fee.
  • Setup and monthly fees: Lastly, there may be a monthly or a onetime setup fees charged by the credit card processing companies. These fees are charged for services and support regarding security and PCI DSS compliance. A few companies may even charge an account cancellation fee which can turn out to be costly in case you want to change your service provider.

Therefore, you are requested to visit the websites like and others to know about their pricing model and services included in it. You may be lucky if you put in such an effort because there are several reliable and reputable credit card processing companies that may not even charge any setup, account, or a cancellation fee. These credit card companies are the most popular and also a no-risk option for particularly the small businesses.

Role and importance of the merchant account providers

In credit card processing since you cannot negotiate on the interchange rate it will all come down to the particular merchant account provider you choose as to what amount you will need up paying as credit card processing fees.

These merchant account providers set credit card processing fees being the middlemen between you and your credit card company. They actually follow three different types of fee structures.

Flat rate

In this type you simply pay a flat rate fee irrespective of the type of credit card that needs to be processed. There are a few advantages of flat-rate pricing. These are

  • It is simple as you know exactly the amount that you pay each time you any type of credit card is processed.
  • Especially for startups and small businesses there may be no other charges such as startup, monthly, or cancellation fees.
  • You will have a risk free transaction and start selling right away after you sign up.
  • You can sell online, on mobile devices and in-store and at the same time track sales and inventory for free.

Most importantly, you can save a lot of money in this type of pricing model followed by the provider and check it with your bank statement as well.

Interchange plus

With this type of credit card processing fee you will pay a fixed amount of money over and above the interchange rate for each transaction.

Nevertheless, a few things to keep in mind about interchange plus pricing plans are:

  • It can save you money when your volume of sales reaches a specific level.
  • The rates may vary according to the type of business and sales volume.
  • It can be difficult to understand the difficult process in its set up.
  • It usually comes with monthly fees.

However, this does mean that you necessary pay more to the service provider. In fact, sometimes with interchange plus pricing policy followed by the service provider you may end up paying much lower rate than what you will pay to a flat rate service provider.

Tiered fees

Lastly, you may also select a service provider that has a tiered credit card processing fees wherein this is not added on to the interchange rates as a fixed amount. It will vary of the card type and may also have unpredictable add-on fees with incomprehensible billing statements.

It is for this reason all small businesses should go for flat rate service provider.


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