There are various fees involves in credit card processing, and they can be quite complicated

if you do not understand them. Accepting credit card payments in your business is great for

your customers and drumming up more business. You have to pay for credit card

processing if you are going to accept credit cards in your business transactions. The

following are some of the things you need to know to get familiar with these costs.


Pricing Models


Pricing models refer to the different ways that a credit card processing can charge you for

processing transactions. There are three main pricing models:


  1.  Interchange plus pricing model: It is the simplest to understand pricing model forcredit card transactions. All the wholesale fees and markups will be itemized andclearly listed on your monthly statement. It’s a great pricing model because you cansee the clear difference between the wholesale and markups
  2.  Tiered pricing model: Many businesses often work with the tiered plan. The pricingmodel will put the credit card transactions in three categories: qualified, mid-qualified and un-qualified. The processing fees increase from qualified to non-qualified transactions. Therefore, if the person swipes the card in person with batchsettlement on the same day, you will pay lower processing fees.
  3.  Subscription/ membership pricing model: This is the latest pricing system thatseems to be catching on with most businesses. It is quite similar to the interchangeplus pricing model, however, you do not have to pay a percentage mark up, only atransaction free. This kind of pricing for processing cards can save a lot of money with the same level of transparency.


Break down of each fee


There are two main types of fees charged by credit card processor.


1. Transaction fees are the fees assessed for every transaction that you run. The

Interchange reimbursement fees are the transactional fees charged for the

transaction by the bank or credit card company. They represent the largest expense

that you will pay per sale. The fee is a combination of a percentage of the transaction

and a flat per transaction fee.


2. Flat fees are negotiable and greatly vary by name and application. Terminal fees are

charged to businesses that have physical stores where customers swipe their cards

directly. Businesses that operate online do not have to pay terminal fees, the instead

pay the payment gateway fees. Payment Card Industry fees are paid for compliance

or not compliance to holding PCI standards. Annual fees are charged every year for

the service provider. In case you cancel your contract with the credit card process,

you may have to pay early termination fees. You can also pay monthly fees for call

center costs. Statement fees if you want to get a credit card statement for your

transactions, although you can lower credit card processing fee by using your

electronic bill statement instead. Merchant account providers may also charge an

IRS reporting fee for reporting transaction information to the IRS. In addition, you

may have to pay network fees, which are non-negotiable.