The average credit card processing fee for most businesses is between 1.5% and 3.5% of the total transaction. However, these fees can vary depending on the payment types the business accepts and the pricing model the business uses.
Key Takeaways
1. Credit card processing fees may include interchange fees, network assessment fees, and your payment processor’s markup.
2. Different pricing models (interchange-plus, tiered, blended) offer varying levels of transparency and cost-efficiency.
3. Negotiate and explore alternatives: Don’t be afraid to negotiate with us, your processor for better rates. Consider offering ACH bank transfers as a lower-fee payment option for customers.
Understanding the Breakdown: What Goes into Credit Card Processing Fees?
Processing fees are more complex than they seem. Here’s an overview of the key players involved:
1. Interchange Fees: Major credit card networks such as Visa, Mastercard, etc. control the interchange rates. These fees are paid between the issuing bank (that provides the credit card) and the acquiring bank (yours, that receives the payment). Interchange fees are the biggest chunk of your processing costs, varying based on card type (rewards cards and business cards may cost more to process), transaction size, and even your industry [1]. Unfortunately, businesses have little control over interchange fees.
2. Assessment Fees: Think of these as credit card network taxes (Visa, Mastercard, etc.) levied on each transaction. While a smaller percentage than interchange fees, they can add up [2]. Just like interchange fees, these are non-negotiable.
3. Merchant Account Fees: On top of network fees, your payment processor will also charge their own fees to cover their services. Here’s a breakdown of some common ones:
a. Per-transaction fees: A flat fee assessed for each swipe, dip, or tap.
b. Monthly statement fees: A recurring charge for account maintenance and access to monthly statements.
c. PCI Non-Compliance Penalties: PCI compliance helps safeguard customer information. Failing to comply can result in hefty fines. [6] Learn more
d. Chargeback fees: Fees assessed when a customer disputes a transaction and their bank reverses the charges. These can be expensive, so it’s important to have a good fraud prevention system in place.
e. Early termination fees: A penalty for closing your merchant account before the contract ends.
While some fees are unavoidable, your choice of processor will have the greatest impact on the price you pay for accepting credit cards. Different processors offer varying pricing structures and fee rates.
Breakdown by major credit card networks (average interchange and assessment fees):
The actual fees you pay will depend on your specific business and the type of cards you accept.
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The Many Different Payment Processor Pricing Models
Payment processors offer various pricing models, each with its pros and cons:
1. Interchange-Plus Pricing: This transparent model shows you each fee component (interchange, assessment, processor markup). The advantage? You can negotiate lower per-transaction fees with your processor [4].
2. Tiered Pricing: This bundles fees into pre-determined categories (qualified, mid-qualified, non-qualified) based on factors like card type and acceptance method. While simpler, it can be difficult to predict total processing costs [3].
3. Blended Pricing (or Flat Rate pricing): This combines interchange fees, assessment fees, and processor markup into one simple percentage. It’s easy to understand, but often less transparent and can be more expensive for businesses with high transaction volume [5].
4. Membership-Based Pricing: Here, you pay a monthly subscription fee that covers a certain number of transactions. This can be cost-effective for businesses with predictable transaction volume, but exceeding the included transactions can result in additional fees.
In-person vs. Online Transaction Fees
Generally, online and manually keyed transactions have higher fees compared to in-person transactions. This is because online transactions carry a higher risk of fraud.
Here’s a comparison of in-person vs. online fees for major networks:
The actual fee difference between in-person and online transactions can vary depending on your processor.
Remember, every business is unique. The ideal pricing model depends on your industry, average transaction size, and transaction volume. What works for one business might not be the best fit for yours.
At EPAYMENT, We Tailor Solutions for Your Success
We understand that a one-size-fits-all approach doesn’t work for payment processing. We offer tailored merchant processing solutions to meet the unique needs of your business. Our expert team will analyze your business model and recommend the pricing model that ensures clarity, reliability, and cost-effectiveness in every transaction.
Finding the Right Credit Card Processing Company: Strategies for Savvy Businesses
Knowledge is power, especially when it comes to fees. Here’s how to be a credit card processing pro:
1. Negotiate with your Payment Processor: You have value! Highlight your business’s strengths (high transaction volume, low chargeback rate) and negotiate lower per-transaction fees or monthly fees.
2. Choose the Right Pricing Model: If your business processes many rewards cards, interchange-plus might be better for transparency in negotiation. For predictable transaction volume, tiered pricing could work.
3. Consider Alternative Payment Methods: Explore offering options like ACH bank transfers (lower fees) alongside credit cards to give customers flexibility and potentially lower your overall processing costs.
The type of business you run, your sales volume and average transaction amount all affect costs. While other processors may seem transparent, hidden fees can eat into your profits. At EPAYMENT, we offer custom solutions designed for your business, giving you clear and reliable costs for every transaction.
Let EPAYMENT Help You Find the Perfect Fit and Slash Your Processing Costs!
Contact us today for a free consultation!
Sources
- National Retail Federation https://nrf.com/
- Electronic Transactions Association https://www.electran.org/
- Federal Trade Commission https://www.ftc.gov/
- U.S. Bank Account Services https://usa.visa.com/
- Small Business Administration https://www.sba.gov/
- PCI Security Standards Council https://www.pcisecuritystandards.org/merchants/
