Merchant Credit Card Processing Fees Explained

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    Business owners who own a website or a brick-and-mortar store need to sign up for a merchant account in order to accept debit card transactions and credit cards from their customers. Credit card processing comes with different fees depending on which credit card processor you go with.

    2020 Findings from the Diary of Consumer Payment Choice state that 42% of participants prefer to pay with debit cards, followed by credit cards at 29 percent, and cash at 23 percent. Merchant credit card processing fees involve the cost of shouldering risk on behalf of a business, including payment processing fees and interchange fees that take place during a transaction.

    What Are The Fees for Credit Card Processing?

    Each time a customer makes a transaction with a credit card, businesses need to pay fees to the issuing bank in order to accept credit as payment. These fees depend on the type of credit cards you accept and are made up of the following charges:

    Interchange fees

    Also known as a swipe fee or a discount rate, interchange plus pricing fees are paid by the business to the credit card issuer. This amount can be higher for online purchases due to the increased risk of fraud for a non-physical card. Some factors that impact this number include the total amount of the transaction, business industry, and type of card being used.

    These interchange rates are often stated as a percentage in addition to an additional fixed amount, that is usually no greater than $0.25.

    Payment processor fees

    Additional fees charged by your payment processor are processing fees that include monthly or annual fees to manage your account, equipment rental fees for point of sale systems and terminals, withdrawal fees, statement fees, and more.

    Assessment fees

    The assessment fee is a relatively smaller credit card processing fee, which is paid directly to the card network, such as Visa, MasterCard, and Discover. This figure depends on your total monthly sales volume as opposed to a per-transaction basis.

    What is the Average Merchant Fee for Credit Cards?

    While figures can vary greatly, the average credit card processing cost for companies range between 1.95% – 2% for Visa, Mastercard, and Discover transactions. This figure rises for online shops to approximately 2.30% – 2.50% per transaction.

    On top of this, merchant fees charge additional fees depending on the total volume of your sales transactions, the amount and risk involved in a typical transaction, and their typical pricing model.

    Frequently Asked Questions

    What is a Merchant Account?

    A merchant account is a type of bank account for companies that enables them to accept and process debit and credit transactions. They charge additional fees on top of credit card transaction fees to facilitate electronic payment transfer.

    How Do I Get a Merchant Account?

    To get approved for a merchant account, you'll need to submit and gain approval for a merchant account application. This depends on several factors including:

    • The personal credit history of the company owner
    • Length of time the company has been established
    • Whether the company has had previous merchant accounts
    • Type of industry and level of risk
    • Incidences of bankruptcy and late payments

    Higher-risk businesses may be charged higher credit card processing fees to compensate for the risk involved.

    What Are The Lowest Credit Card Processing Fees?

    For businesses with low monthly processing volumes, Square has one of the most affordable flat-rate pricing models that can e cheaper in the long run. However, the cost of credit card processing fees depends on your volume of transactions, and you might be able to score better deals if you have a higher volume of transactions.

    What Are Credit Card Processing Companies?

    Credit card processors, who are also known as merchant service providers enable you to credit card payments at your business on your site and in-store through a payment gateway. One major benefit of these providers they enable you to view your transactions, fees, chargebacks, and other statistics on a single dashboard.

    What Are The Best Credit Card Processing Companies?

    The most reliable payment processors in your area can be found on the Better Business Bureau site where you can check whether the company has faced any customer complaints. Some good options include Helcim, PayPal, Square, Stripe, Fattmerchant, and PaymentCloud. However, it's important to do research into their pricing structures and overall suitability to your business needs.

    Partnering With the Right Credit Card Networks

    Choosing a credit card payment processor is not an easy decision to make. Because of this, you should compare all your options including security features, accepted payment types, third-party app integration, their industry relationships, and the quality of customer support they offer. They should also offer compatibility with the major credit card companies for maximum revenue.

    For more advice on choosing the best processing services for credit cards, feel free to contact us on our site at Processing Card. Whether you're a small business or a large one, we provide detailed comparisons between different providers to find the best fit for your brand.

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