The factors that influence the amount of fees merchants pay for accepting credit card payments include: Factors include:
1. Rate of Exchange
The interchange rate is the amount the credit card provider (such as Discover or Visa) charges to the receiving bank each time a customer uses a card. The interchange fee helps the issuing bank cover the handling costs, the risk associated with approving a sale, and any fraud that may happen.
2. Merchant Account Provider Fee
A merchant account is required for a business to accept credit card payments. A merchant account allows a business to accept credit card payments. The merchant account provider will deposit the payments into the merchant’s account regularly.
3. The Card Is Processed
Payment processing fees are also affected by the way the card is processed. Customers can swipe their cards in-store, make phone calls, or conduct online transactions. Each of these transactions carries a different level of risk.
What Types of Fees Are Included in Payment Processing Fees?
1. Flat Fees
Payment plans with flat-rate fees charge the same fee regardless of whether the transaction is made in-store, online, or via a physical store. Flat-rate fees can be charged either as a percent of the transaction or as a percent of the purchase, plus a fixed fee.
New businesses that do not have a large volume of transactions and are unable to negotiate with the processor a fee prefer flat-rate fees. The business also knows the fees it will be charged every time it processes a payment.
2. Interchange Plus Pricing
In an interchange plus pricing scheme, the payment processor charges a transaction fee and a percentage or fixed fee. A processor might charge 0.5% +15c per transaction in addition to the interchange fee. The flat-rate plan is easier to understand, but the interchange plus plan is more complex.
3. Tariffs
In a model of tiered pricing, the processor groups the interchange fees into three categories based on the risk level associated with the transaction. These categories are qualified rate, middle-qualified rate, and non-qualified rate. Below are the different tiers:
- Qualified Rate: A transaction must meet the requirements of the processor to qualify for the qualified rate. This category includes transactions swiped at a terminal using a standard credit card. These transactions carry the lowest rate and risk.
- Midqualified rate: Transactions that do not meet the payment processor’s requirements are downgraded into the non-qualified and mid-qualified tiers. The risk of Fraud is high for keyed-in orders, such as those made by phone or direct mail, where the credit card cannot be physically accessed. Businesses pay higher rates to cover this increased risk.
- Nonqualified rate Transactions that are not eligible for the qualified or mid-qualified levels fall under the category of non-qualified rates. This category includes e-commerce, reward card, and signature card transactions. The highest fees are charged by the non-qualified tier.
This post was written by a professional by Exzact Business Solutions. TRANSPARENT | AFFORDABLE | SIMPLE merchant services Tampa, Websites, and Social Media Done Right. Exzact Business Solutions are on a mission to educate local businesses to ensure smiles, savings, and solutions. Exzact clients save an average of 30% on their processing alone. No Contracts, Free Equipment, Local Support, No Rate Increases, and More. Exzact Business Solutions goal is to educate the local business community in order to ensure smiles, savings and solutions. Exzact Business Solutions is an Independent Sales Organization with strategic partnerships dedicated to cultivating reliable and trustworthy relationships in the Payment Card Industry, allowing to tailor products and services to the needs of each merchant. Contact EBS and see what a difference having the right advocate can make!
