Most businesses must let customers use credit cards in order to maintain a healthy cash flow. Accepting credit cards as a form of payment might seem obvious, but choosing a payment processing service can be challenging.
It is crucial to pick a processing services provider who can accept a variety of payment methods (such as Visa, Mastercard, Discover, American Express, PayPal, etc.) and maintain the privacy of your customers’ data.
The costs associated with processing payments, the card networks, and card issuers are among the other variables that may affect fees. When deciding which payment methods to accept for your company, you must keep an eye on the monthly fees.
However, how much will you need to budget for in fees? And how do the various fees compare? We’ll go over the fundamental credit card fees with you and provide some advice along the way.
Processing fees for credit cards
The typical transaction processing fee for credit cards ranges from 1.3% to 3.5%. The fees an organization levies will vary depending on the merchant category code (MCC), the type of credit card, and the payment company you select (American Express, Discover, Mastercard, or Visa).
Negotiable charges made by networks and card issuers
You can process credit cards for your company without paying some fees. It is in your best interest to select a merchant services provider that is open and honest about all of its expenses. See if the following fees can be waived by negotiating with your payment processor.
- Account fee: this administrative charge aids in keeping your payment processing account active.
- Fee for the Address Verification System (AVS): this charge is per transaction for comparing a customer’s billing information with keyed-in transactions.
- The batch fee: (also known as the batch header fee) is charged for settling or closing out daily deposits.
- Chargeback fee: every time a customer questions a charge or returns a purchase, they are charged a chargeback fee.
- Contract cancellation fee: you will be assessed a penalty fee if you cancel your arrangement with the payment provider before it expires.
- Hosting fee: for POS systems that use servers, there is a hosting fee.
- IRS reporting fee: this is a merchant-based charge for informing the IRS of pertinent information.
- Marked-up discount rate: This is a fee in addition to the required interchange rates.
- Minimum monthly processing fee: Credit card processors can impose a minimum monthly transaction quota. The minimum monthly processing fee can be charged whether or not you meet their requirements.
- Monthly fee: a flat monthly subscription fee is required to use the software or service for payment processing.
- Payment gateway fee: a charge for processing online credit card payments known as a “payment gateway fee” is incurred due to software and data security expenses.
- PCI compliance fee: fee for maintaining PCI compliance: This is an additional cost.
- Service fee: This fee is related to managing your payment processing account and is similar to the account fee.
- Terminal lease fee: the monthly cost to lease your credit card terminal is known as the terminal lease fee.
- Wireless access fee: for using a POS system that is hosted in the cloud, there is a wireless access fee.