If you are a business owner or are interested in knowing Credit Card processing fees, you have come to the right place. Our article will help you understand the different price levels for different services along with answering your burning question related to credit card processing fees.
The answer is ‘it depends on providers and pricing structures all over the world’. However, a rough estimate is around 1.5% to 3.5% per transaction. It can cost both small businesses and mega-companies a total of 1.5% to 3.5% of each transaction, ranging from $1.50 to $3.50. For multiple small businesses that can cost a hefty amount and can result in a very expensive procedure.
If you are wondering what you as a small business owner can do, we have something in stock for you. Our article will guide you all about the credit card processing fee procedure and how you can save your money on it.
All About Credit Card Processing Fees
To begin explaining the complete steps of credit card processing fees, we first need to understand what is Credit Card Processing Fee? The credit card processing fee involves a payment process on each transaction through the credit card. It is also known as merchant discount rate.
These payments then get split among the institutions such as banks or exchanges, enabling them in the first place. These transactions include some fees that one has to pay to complete their tasks. Some of the fees are,
1. Interchange
One of the largest portions of merchant discount rate that the institution keeps. Some of the prominent institutions keeping the interchange to themselves are the state banks and other banks linked to specific states or nations.
2. Assessment Fee
The assessment fee belongs to the network initiating credit cards. This can be seen throughout the credit card chains such as master cards or visa cards. Assessment fees are included worldwide and are not specific to any certain card chain or network.
3. Payment Processor Fee
This ratio goes to the processor that allows you to complete your transactions. It can either be a company that is managing all the reports and information of your card payments. You can find such companies across the globe and they have a prominent sum in the overall fee structures.
The payment will either be drafted by your payment processor through the bank account. You will receive this at the end of every month. The other procedure includes reducing the amount of every deposit that you make by the amount of the ratio of the fee.
Prominent Pricing Structures Offered by Payment Processors
Here are some of the other prominent structures that you can experience from a payment processor,
Flat-rate, Blended Pricing
This is a very prominent one and is seen multiple times by well-known financial institutions or companies. In this structure, the client has to pay a percentage of the transaction total along with a flat fee.
Blended Prices just like its name suggests, is a very known or familiar fee structure. It has predictable nature and turns out to be a bit more expensive than the rest of the pricing structures.
Tiered Pricing Structure
Just like its name shows, the tiered pricing structure is based on three main tiers. The first one is the qualified one that is centered on debit cards and cards without rewards programs for clients. The second one is mid-qualified which includes cards with certain rewards programs for specific clients. And last but not least non-qualified which includes corporate cards and cards with generous rewards programs for a premium client base.
On top of these, each tier has its rates ranging from highest to lowest. The lowest goes to qualified cards and the highest goes to non-qualified cards. Tiered pricing also represents a percentage plus a flat fee. This process is a bit flexible and less expensive than other structures.
Interchange-Plus Pricing Structure
The least expensive option for many who seek to go for cost-effective solutions. It offers a great amount of variability out of all the other pricing structures due to its fluctuation in rates that are manipulated by several other factors like Card networks, Type of cards, Card Procession Procedure, etc.
Membership-Based Pricing Structure
This is a very obvious one and relies on the membership element. It is one of the expensive options out there but offers a lot of diversity and perks which include no share for processors and offer them a bulk revenue on the membership fees. This can change from network to network or from processor to processor.
Steps to Lower Your Rates
We have listed some of the basic methods that you can apply to reduce your rates and allow your business to foster,
-
Keeping Chargeback Rate Low
You might have heard it before, but keeping your chargeback low will drastically reduce the rates for you. It is the percentage of transactions placed by the clients in a disputed way, such as people who have unauthorized cards and they utilize them, in other ways, there can be billing errors or disputes that are left unresolved or unsettled.
You can reduce your chargeback rates by using contactless cards or either go for chip card readers in order to minimize any liability that you can experience in case of any fraud, scam, or theft. It can either happen through return policies or good customer services.
-
Switch Your Processors
Yes, we know this might sound a bit hectic and a long procedure but there is always an option to choose from better to best in the financial sphere. If you want to make your small business thrive and foster try going and searching for better processors.
Before you search for a new one try to negotiate with the old processors and if things remain tough for your pocket try searching for a more cost-efficient option. You can also opt for a membership-based pricing structure to make things smooth for you and for your business.
