New merchants are often overwhelmed after they receive their first bill from a credit card processing company. The long list of mysterious charges will leave you exploited and powerless. However, a little information in understanding your law will go a long way to help you. Go through http://www.easyfinance.com/blog/understand-credit-card-processing-fees/ for more!
In this blog, I have tried to break down credit card processing fees to give you a greater understanding of what you are paying for.
Credit Card Processing Entities
You can breakdown the processing entities into three parts:
This fee is for the bank or the credit card issuer, and it makes for the vast majority of the entire processing expense. These charges are pre-determined by an issuer, and in no way can be negotiated. They depend on the following factors:
- Credit Card network; Visa, Amex, etc.
- Card type: both credit and debit cards have different charges. Moreover, some credit cards can have upcharges like business and reward cards.
- The method of payment processing also impact the expenses of the transaction; it depends on the chargeback risk factor. Swiping a card has a different rate than entering the card information. Some issuers also distinguish between the online payments and the card-not-present payments.
- The merchant category code, or MCC, which marks the classification of your business industry is based on a couple of risk factors. Industries of high risk like adult products, gaming, and CBD have significantly elevated rates when compared with other sectors.
Some card issuers make their fees details available publicly. This is even more helpful when you are trying to figure out the validity of the bill. Some issuers don’t make this information available publicly; usually, this indicates higher than usual price.
Issuers charge this price, which is why it is not negotiable. These rares are under the discretion of the company, but they depend on a couple of factors like card type, type of transaction, the volume of sales. International operations have high rates.
Processing Fees: Now this is the only negotiable part of your entire bill, and it hoes to the credit card processing company. However, before you attempt to negotiate the prices, you must know how much of your bill contributes to their profit margin.
Types of charges
All the three entities of the bill fall under the following categories:
Transactional: A small fee you pay during each transaction. This is the rate that is advertised to you before you sign up. However, they make up only for a small portion of the actual fee.
Scheduled: This is the regular fee that does not depend on the transaction volume. These charges include fixed acquirer network fee, Merchant location fee, Annual fee, among others.
Incidental: These charges depend on the behaviour of the account and can be avoided. Some ancillary fees include account closure fee, application fee, chargeback fee, among others.