If you’re an entrepreneur, then you know that credit card processing for small business owners comes at a price. When you’re new to accepting card payments, you may be surprised at the number of fees that are associated with accepting card transactions.
Are you curious to learn what you’re paying and what the fees are for? Well, this guide has the answers. Take a look at the information below to understand more about the average credit card processing fees.
The Average Credit Card Processing Fees for Merchants
Each time a customer pays with their credit card, your business is expected to pay a fee to accept the credit payment. The fees you charged depend on a number of factors, such as:
Interchange Fees
An interchange Fee, also known as a swipe fee, is paid by companies directly to the credit card provider. This charge is sometimes more expensive for online purchases due to the increased risk of fraud.
When a credit card isn’t used in person, that leads to issues that may cost the car issuer. Interchange fees also depend on the type of card being used and the amount of money charged in the transaction.
Assessment Fee
Assessment fees are paid to the credit card networks for the purchase to take place. These fees are paid according to monthly sales rather than individual transactions. This is one of those charges that contribute to your overall business expenses.
Payment Processor Fee
The payment processor might also charge an extra fee to facilitate the payment. These fees can be divided into small increments that happen over time. They may also include monthly or annual account fees, as well as withdrawal fees and statement fees.
Plus you might have to pay equipment rental fees as well.
Who Determines Credit Card Processing Fees?
Contrary to popular belief, the average credit card processing fees aren’t determined solely by the credit card company.
There are other parties involved that determine the average credit card processing fees for merchants. Those three entities include:
Banks: The financial institution that distributes the card like Bank of America or Capital One contributes to processing fees.
The payment processor: There’s usually an outside company that is responsible for securing and processing the credit card transactions
The credit card network: Credit card networks, such as Visa and MasterCard, partner with banks
All of these parties work interchangeably with one another, and they all impact t your credit card processing fees.
Additional Fees to Watch Out For
The average credit card processing fees aren’t just the main charges that you can expect. It includes charges that you might not expect.
Some card processors might charge a fee if a customer disputes a transaction. You may also owe money for non-sufficient funds or chargebacks. These types of situations are common, so fees related to these circumstances add up quickly.
Therefore, it’s in your best interest to thoroughly shop around for processors when you’re starting your business. You want to make sure that you’re saving money and that your business is profiting.
With that said, if you’re looking for a reliable payment processor, take a look at Wind River Financial.
Pricing Models for Credit Card Processing Fees
You may be wondering how the price for fees are determined. Well, most merchants have the option to choose which pricing model best fits their business needs.
Here’s how each pricing model works:
Tiered Pricing
Tiered pricing includes different prices for transactions in various tiers. For instance, certain qualified transactions could be charged at a lower rate, while others have a more expensive percentage fee.
This type of pricing model usually is best for business owners who prefer to process the bulk of their transactions in the lowest tier.
Flat Rate Processing
Flat rate processing is the type of pricing that functions on a flat rate. With this pricing model the credit card processor charges a fixed percentage for every transaction, plus a small percentage transaction fee. The small fee is generally $0.20 to $0.30 per transaction.
This option is best for merchants who prefer to know exactly how much they’ll have to pay for credit card processing. There is no guesswork.
Interchange Plus Pricing
Businesses that choose the interchange play pricing model pay the interchange rate for every transaction, plus add-on fees. With this model, you might have to pay the interchange rate on top of additional percentages in a small fee per transaction.
The best way to decide on pricing models and payment processors is to determine your business needs. The good news is, if one model doesn’t work, you can try another.
Not to mention, there are different processing companies to choose from. So, you also have the flexibility to switch processors if need be.
Understanding the Average Credit Card Processing Fee
Now that you know more about the average credit card processing fees, you can make better business decisions. While you may not find a no fee credit processing provider, there are some alternatives out there that can help you cut costs.
Therefore, it’s smart to shop around for the lowest credit card processing fees. That way, you’ll save money, while also providing a convenient payment option for customers.
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