12 credit card processing fees you need to know

Any business owner that accepts credit cards will experience certain fees, but the more you understand how they work the better positioned you are to negotiate your rates or dispute...

Any business owner that accepts credit cards will experience certain fees, but the more you understand how they work the better positioned you are to negotiate your rates or dispute any unnecessary charges. The following is a breakdown of some common credit card processing fees:

Interchange fees

The so-called “base or wholesale fees are non-negotiable and determined by the credit card associations and issuing banks. They remain consistent across the industry.” This means you can’t negotiate with them, but you will pay a flat charge (e.g., $0.10) plus a percentage of your transaction amount (e.g., 2% to 3%). Interchange fees make up the largest portion of all credit card processing expenses in general, which is why they’re not negotiable; these costs simply vary depending on how much money is being spent through cards rather than cash or checks

Markup fee

The retail rate is the cost of credit card processing which includes wholesale interchange costs from the carriers in addition to fees for front-end authorization, back-end settlement, reporting, PCI, and acquiring bank. Essentially, the processor profit margin is added to that wholesale rate.

Assessment fees

Credit card associations charge the merchant’s account between 0.13% and 0.15% in assessment fees, depending on which credit card brand they are using – either Visa, Mastercard, or American Express.

Payment gateway fees

You may have heard about terminal fees with this kind of service, but eCommerce has its own set of these. A payment gateway is an online point-of-sale terminal for your business. Some processors offer them for free, so be sure to browse before you make any commitments!

Terminal fees

If you have a brick-and-mortar store, there is a monthly fee for leasing your credit card terminals. If this is something that worries you, buying the terminal outright will get it done easily with no hassle or commitments in one quick payment!

Annual fee

Unlike other providers, you may be required to pay a flat annual fee to your merchant account provider- regardless of the volume of transactions that you process. This charge is not standard across the industry and providers will negotiate with you on this issue.

PCI compliance fee

The fees vary from provider to provider: Some providers charge a special fee in order to maintain PCI compliance, which you are basically paying for protection. You will still be responsible for following security standards in order to remain compliant at the end of the day. Other providers may charge a penalty if you fail or neglect your responsibility of maintaining PCI compliance and then have it revoked later on. Still, others will do everything they can to keep your account out of violation and wave this particular fee altogether; this is what we call best practice.

Monthly fee

Some providers charge a monthly fee for “account management” or something else related. This money is used to cover the call center’s costs. It may be hard to negotiate this, but you can always look for lower monthly fees if needed.

Minimum fees

Your provider may charge a penalty if your merchant account doesn’t process enough sales every year. This is not the case with all providers, however, and you can speak to yours about how this applies to them. It might be negotiable as well! In any case, you should know that most providers offer tiered services which reflect your volume of sales – so it’s good to do some exploring before making a decision.

Paper statement fees

If you receive your merchant account statements in the mail, chances are you’re paying a premium for this service. You may be able to save some costs- and have more time too!- by switching to online statements instead.

Early termination fee

If you sign an agreement and decide not to honor it, the company may charge a penalty fee. If the merchant services provider does not meet your expectations on technology, support, or security for your business, it is better worth paying their fees and finding someone who meets your needs instead.

IRS reporting fees

Your provider will automatically report all your income to the IRS. This is not negotiable and can happen even if you do not want it to.