The Cost of Credit Card Processing


So you want to open a merchant account to start accepting credit card payments for your business or you already accept credit card payments and are trying to figure out the fees and charges you pay for your merchant services account, then you will want to continue reading.

Credit card processing and merchant services can be extremely confusing and frustrating to even the most sophisticated business owner/operator.  You may ask, why is it so confusing and frustrating?  Well, the answer is that the credit card processing industry is extremely fragmented with thousands of credit card processors, merchant service providers and sales agents labeling themselves very differently from one another, but all ultimately providing the same service to your business, which is processing credit card payment transactions. 

Besides the confusing business descriptions, the fees that are charged are often even more confusing.  If you have recently reviewed a merchant credit card processing statement, you have most likely seen some of the following items: setup fees, cancellation fees, application fees, site inspection fees, re-programming fees, customer service fees, credit check fees, PCI compliance fees, batch fees, statement fees, etc.  Those are only a small sampling of the hundreds of different line items and fees you can often find on a typical merchant statement.  Sadly, the majority of those items are often “made-up” items and fees that directly profit the credit card processing and/or merchant service providers and have absolutely nothing to do with the actual cost of processing a credit card transaction for your business.  To make matters even worse, often these fees are written in industry terminology often leading to more confusion and leaving you without any idea what fees are actually necessary to process a credit card transaction.

Well, you might then ask how do I figure out what the real costs are that I should be paying to accept credit card payments from my customers?  The answer is “Interchange”.  Interchange is the actual wholesale (at-cost) rates that banks (issuing and acquiring) and the card brands (Visa, MasterCard, American Express and Discover) charge a business to process credit card payments. Everything else is pure profit to credit card processors and/or merchant service providers.  So where do you find the Interchange rates?  Most of the card brands such as Visa and MasterCard publish the Interchange rates on their public websites for the world to see. 

So about right now you are probably thinking how does my business pay wholesale rates without all the high markups, tiered pricing, and all of those other “made-up” fees, that are harder to figure out than your tax return?  The first step is to make sure your business is on an “Interchange Plus” pricing plan for your credit card processing.  Often times business owners think they are paying Interchange (wholesale) rates when they switch to an “Interchange Plus” plan, but they are really paying Interchange rates “Plus”, with the “Plus” portion still layered with large percentage mark-ups and ancillary fees (those pesky “made-up” fees). 

There are a few merchant service providers, and we mean only a few, that can literally be counted on one hand, who offer businesses complete transparency and “true” Interchange pricing. Those merchant service providers are similar to Paymently in that they offer businesses the “true” Interchange (wholesale) rates for a small fixed monthly fee and flat per transaction fee.  This type of pricing structure often saves businesses 40-50% off of their credit card processing costs and can amount to thousands of dollars per year depending upon the size of the business.  Hopefully this article has been helpful. Please follow-us on social media or subscribe to our blog for future articles.