Credit Card Processing Fees Explained: A Breakdown for Businesses

Gone are the days when cash transactions reigned supreme. Nowadays, accepting credit card payments isn’t just a perk you offer; it’s a necessity. And while credit cards have a convenience factor for your customers, they come with heavy processing fees that impact your bottom line if you’re not careful!

Here, we’ll break down these fees so you can better understand your options and where your money is going.

Why Do You Pay Processing Fees in the First Place?

Credit card processing fees are just another cost of doing business. They’re the fees that your company incurs when accepting payment through a debit or credit card.

The fees compensate the entities that are involved in processing a transaction, like the:

• Issuing bank
• Payment processor device
• Card network (American Express, MasterCard, and Visa, for example)

The Three Components of Credit Card Processing Costs

1. Interchange Fees

Interchange fees are the heaviest (most expensive) component of credit card processing fees. That’s because they’re set by the card networks and paid to the card-issuing banks.

These non-negotiable credit card fees for businesses vary depending on a variety of factors, including:

• The industry you’re in
• The type of card used (such as debit or credit)
• The transaction amount

2. Assessment Fees

Also known as network fees, assessment fees are charges from the card network, but this time, they’re the fees they charge for your business to use their payment infrastructure. Typically a small percentage (typically much lower than interchange fees), these fees are more predictable. Assessment fees are usually consistent across all transactions with that card’s network.

3. Processor Fees

These are the fees charged by the payment processor or your merchant service provider for handling the transaction. Depending on the processor or provider, these fees can include:

• Statement fees
• Gateway fees
• Monthly or per-transaction fees

As such, these fees vary drastically depending on the processor or provider you work with. Let’s learn more about the costs associated with the payment processors themselves.

Payment Processor Pricing Models

There are three standard pricing models when it comes to payment processors.

Interchange plus pricing: Often considered the most transparent and cost-effective pricing model, interchange plus pricing involves the business paying an interchange fee plus a fixed amount set by the processor. For example, if the interchange fee is 1.7% and the fixed fee is 0.3%, the total fee would be 2.0%. Many business owners like this model because it’s easy to see exactly what they’re paying to the card networks (interchange) and the processor.

Our virtual terminal solutions offer interchange plus pricing!

Flat rate: Flat rate pricing is straightforward; businesses pay a fixed percentage of every transaction. Companies looking for predictable fees may lean towards this model. However, a flat rate model could be quite expensive if you have a high volume of transactions.

Tiered: Tiered pricing can be complex, as transactions are categorized into different tiers, each with its rate. An example of a tier may be a “qualified transaction,” which typically applies to standard credit cards. Because of the unique rate structure on tiered pricing, it can be tricky to understand your real processing costs.

Looking for Low Fees & Tailored Solutions? Turn to The Payment HQ

Here at The Payment HQ, we offer several payment processing solutions, including:

• Merchant services
• Virtual terminals
• ACH payments
• Integrated software vendors

We not only tailor processing solutions to fit your business needs, but we can also tailor your pricing plan. We even have zero processing fee options to explore. Find your cost-effective, custom solution today!