Credit Card Processing Fees Explained
Credit card processing fees are extensive, complicated, and somewhat overwhelming. Before you can begin to understand processing fees, you need to know about the parties involved with them. Now that we’ve covered all the parties involved, let’s discuss the different types of fees in any given credit card transaction.
In addition to transactional fees, you may be charged some flat fees as well.
Flat fees are always charged, but incidental fees only appear per incidence. All of the above fees fall into one of two categories: wholesale fees, and markups. Wholesale FeesI’m using the term “Wholesale” to help you picture the meaning behind this type of fee, but it can go by other names as well, like, “Base fee” or “Pre-markup” etc Your wholesale fees are exactly like they sound – the wholesale cost of your sales transactions. These fees are determined by the credit card issuing bank and the credit card associations. In other words, don’t try to shop around for lower wholesale fees or rates from various credit card processors. MarkupsYour markup fees are how your credit card processor is planning to make a profit from your business.
Interchange Reimbursement Fees and Assessments: These are the fees the card-issuing banks and the credit card associations charge for each transaction, and they represent the largest expense merchants pay per sale and per month. Interchange fees typically consist of a percentage of each transaction accompanied by a flat per transaction fee. Examples of these non-negotiable interchange and assessment merchant account fees include: Merit 1/ecommerce/CNP fees, NABU/APF/data usage fees, Dues and assessments. Each card association publishes their interchange and assessment fees online. Flat Fees. Terminal Fees: These are charged to merchants who have physical stores, where they directly swipe a customer’s card. Payment Gateway Fees: These are similar to terminal fees, but they are applied to ecommerce businesses instead. PCI Fees: These are fees paid to the Payment Card Industry, either for noncompliance or compliance. Annual Fees: These are fees charged every year to cover the basic use of a provider’s services. Learn more here.