Credit card processing fees vary depending on quite a number of factors, but credit card fees average between 1.5% to 3.5% of the transaction, with additional fees going to the payment processor. Some of the costs that go into the overall fees are fixed and non-negotiable, while others are negotiable. Here is a breakdown of the three main components of credit card processing fees.
- Interchange Fee. Interchange fees are charged by the credit card issuers (banks) and often take the form of a percentage of the sale plus, in most cases, an additional fixed amount averaging between $0.10 and $0.25. Interchange fees are the biggest part of the overall fee, and vary depending on how the payment is processed, the card network, whether you are in a high risk business and other factors.
- Assessment Fee. Assessment fees go directly to the credit card association (Visa, Mastercard, etc.) and, like interchange fees, vary depending on transaction size, the type of card being used and other factors. These fees typically range from 0.12% to 0.15% of the transaction.
- Payment Processor Fee. These fees, assessed by the card processor or merchant account provider, are fees or service charges that may be assessed on each transaction, as a flat fee or a blend of both. These fees are negotiable.
The four major credit card associations — American Express, Discover, Mastercard and Visa — have different assessment fees. So, if you accept more than one brand of card, as most merchants do, your overall fee will be a blend of rates.
Interchange rates vary depending on whether a credit or debit card is used, whether the card is swiped, manually entered, used online or used on a mobile device, or whether the transaction is a card-not-present (CNP) transaction. In addition, if your business is assigned a high risk Merchant Category Code (MCC), your fees will also be higher than what is assessed to medium-risk and low-risk merchants. The reason for the differing ranks is the amount of risk associated with each type of payment.
Interchange fees and assessment fees are applied consistently to all merchants, although they are fairly complicated structures with different percentages being applied to each transaction based on the nature of the transaction and the risk level of the business.
With respect to payment processor fees, knowing that additional fees are often part of the standard contract and that they can be negotiated is important. These fees can add up and if you are not careful, you could wind up paying considerably more than necessary for your credit card processing. Additional fees to look for include terminal leasing fees, statement fees, minimum monthly processing fees, flat monthly fees, contract cancellation fees, payment gateway fees, chargeback fees and service fees.
Are credit card fees worth it? For almost all merchants, the answer is, absolutely. Limiting payment to cash may reduce cost of sales fractionally, but you will likely be driving away potential customers who avoid carrying cash or who, out of habit or preference, almost always pay with credit cards.
We will help you sort through the complexities of fees when you are evaluating offers. In all cases, we work with best-of-class banks and payment processors that keep fee structures simple and are fully transparent in presenting them.