It's almost impossible to run a business today without taking credit cards. Over 12 million companies in the U.S. accept cards, and they process 103 billion transactions each year, totaling nearly $6 trillion.

To capture as much business as possible, merchants must accept Visa and Mastercard. While that acceptance is a necessary part of doing business, it's also very costly. 

Credit Card Processing Fees

Credit card processing fees are the fees that a business must pay every time it accepts a credit card payment. There are multiple fees associated with each transaction, and fees can vary depending on the type of credit card accepted. Fees from credit card transactions can eat into profits, making it hard for some merchants with a small profit margin to stay afloat. The average credit card processing fee ranges between 1.5% and 3.5%. 

Did you know that businesses pay $180 billion in card processing fees? Incredibly, $63 billion of that total is the result of errors and overcharging. 

How can that be? It's simple. Credit card processing fees are complicated and continually changing. Every year, in April and October, Visa and Mastercard change their rules and adjust their rates, and American Express often follows suit.

Types of Credit Card Fees

Interchange Fees

The interchange fee is a payment made directly to the bank that issued the card for the swiped transaction. 

Interchange fees may vary based on the type of card used, the amount of the transaction, and the business industry. For example, credit card companies may charge higher interchange fees for online purchases since fraud is a bigger problem with these types of transactions. 85% of the fees charged are interchange fees.

Payment Processor Fees 

Charging fees is how a processor makes money since it gets none of the interchange fees. These are the only fees that can be negotiable. These fees include:

• Discount fee – this is the profit/markup for the processor.
• Per item fee – static fee established by the processor for each processed transaction.
• Authorization fee – static fee established by the processor for every attempted transaction.
• Miscellaneous fees - can include monthly fees, equipment rental, statement fees, and hidden markups and/or gateway fees. 

The costs for credit card processing will depend on your chosen merchant services provider. The monthly fee may range from $9.95 to $20. The per-transaction fee can range from 0.18% plus $0.10 to $0.50% plus $0.10.

Assessment Fees

Assessment fees are fees paid directly to the credit card network (Visa, Mastercard, Discover, American Express, and the acquiring bank) so that the merchant can use certain types of credit cards. This fee is based on monthly sales, not per transaction. When combined with the interchange fee, merchants refer to the total as a swipe fee.

How to manage your merchant account – It's estimated that most merchants are being overcharged by 10-30%, but with some work, you can better understand how to control your credit card costs.

1.  Understand Your Billing Model

• Flat Rate – a fixed rate for all transactions. This billing type creates more predictable billing but not necessarily the least expensive.
• Tiered – fixed rates but divided into tiers, i.e. grouped by the type of card your customers are using so fees for some transactions are lower or higher. Most tiered accounts are more expensive.
• Interchange Plus – all fee types are broken out individually, with an additional processing markup. This is the most transparent billing model.
• Subscription – a merchant pays a monthly charge in addition to fees to keep transaction fees low.

2.  Know how to read your merchant statement and review it carefully every month.

3.  Compare and track any changes month over month to identify any fee increases.

4.  Carefully review the semi-annual updates from the card brands. (April and October)

5.  Keep tabs on your processor and communicate with them when you have questions.

Since 2005, Quikstone Capital Solutions has helped thousands of merchants with working capital for all their business needs - from purchasing new equipment, hiring additional staff, increasing inventory, and expanding or remodeling, Quikstone can get the money you need quickly and easily. There's a simple application, no collateral is required, and funds can be available to you in just 2-5 business days. Quikstone has an A+ rating from the Better Business Bureau, and 80% of our merchants are repeat customers – we're proud of that fact. Contact us today to learn how we can help your business grow. At Quikstone, we have one goal – to help you succeed.