What Are Credit Card Processing Fees and Costs? ✔️ PurePay
All You Need To Know About Credit Card Processing Fees
  1. Interchange Fees
  2. Scheme fees
  3. Payment Processor’s Fees
  4. Merchant Account Fees
  5. Dues and Assessment Fees
  6. How To Reduce Credit Card Processing Fees

It is essential for merchants to adapt to the changes in the e-commerce industry by accepting various types of credit cards. However, for every payment provided with a card, payment processing fees may get a toll on the total company’s profit. To help merchants choose the best option and be ahead of the game, we have compiled an article about  some general types of credit card processing fees.

A merchant service provider that gives you access to the tools for handling all transactions, is usually the one who arranges credit card processing rates. In addition, three more players determine the credit card processing cost: card issuer (a bank or another financial institution), credit card network (Mastercard, Visa, etc.), and a payment processor. We shall examine the five types of fees that make up the whole processing fee for a business.

Interchange Fees

An interchange fee is provided by the merchant account to the card-issuing bank for every transaction made via credit card. Interchange fees are important to cover fraud, handling costs, and the risk of verifying the payment. Such credit card networks as Visa or Mastercard have their own interchange fees, which are usually adjusted twice a year. The interchange fee is subject to factors related to the risks with the cardholder. These factors include:

  • The card type. Debit cards with pins have a lower interchange fee than credit cards. Rewards cards, however, have a higher interchange fee.
  • The transaction type. Any transaction made with a card, for example, point of sale purchase, usually has a lower interchange fee than a transaction without a card, such as mobile transfer. In that sense, the use of a card is less risky.
  • The business type. High-risk businesses like CBD or gambling will pay more than ordinary business merchants.

Scheme fees

Interchange fees should not be confused with the scheme fees which the acquiring bank pays to the particular card brand such as Visa, Mastercard, American Express, etc. This type of fees covers the price of the services provided by the card network and consists of the percent fraction of each transaction. 

Payment Processor’s Fees

A payment processor’s fee is incurred for the card processing service. This fee, unlike the one discussed above, is open to negotiations, as there are many payment processors on the market with their own pricing strategies.

Merchant Account Fees

Merchant account fee is the money you pay your merchant service provider for processing card transactions. For example, some providers charge a fee per each transaction. Since there are many merchant service providers available, it is important to do your research and choose the one with the lowest fee rates.

Dues and Assessment Fees

Assessment fees are paid directly to the card networks once a month and are calculated as a percentage of your monthly sales. This type of card processing fees can be lower than others, although it usually depends on the card network, the volume of transactions, type of cards used, and type of transactions (either local or foreign).

How To Reduce Credit Card Processing Fees 

Let us now provide some tips to help merchants reduce credit card processing fees.

  • Avoid CNP transactions. Card-Not-Present transactions are riskier hence they incur more charges. 
  • Reduce chargebacks. Chargebacks can wreck a business, so try your best to avoid any of them. Implement a verification system such as an address verification service or biometrics to authenticate payments.
  • Consult with an expert in card processing. Most merchants do not have enough competence regarding card processing fees. Make sure you are aware of all the risks and fees for your business as well as of the effective rates for credit card processing. 

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