Understanding Credit Card Processing Charges
This article explains the different types of credit card processing fees including flat rates, incidental charges, transactional costs, and volume-based expenses. It helps merchants understand the cost structure involved in accepting credit card payments, covering various fees like terminal, gateway, compliance, and transaction charges, with insights into pricing models like interchange plus and tiered pricing.
Credit cards provide significant benefits to individuals and businesses by offering convenient access to credit. However, processing these transactions incurs costs, which are charged by payment processors through various fees. It's important for merchants to understand the different types of charges involved in credit card processing.
Fees are generally categorized into flat fees, incidental charges, transaction-based fees, and volume-dependent costs.
Flat fees include:
Terminal fees for point-of-sale swipe terminals
Online processing fees for e-commerce platforms
PCI compliance fees to ensure adherence to industry standards
Annual membership fees for cardholders
Monthly service charges to maintain account support
Statement printing fees for physical monthly statements
Fixed network fees mandated by card networks
Incidental charges cover additional services such as:
Address verification fees for online transactions
Voice authorization charges for manual verification calls
Batch processing fees for transaction groups
Chargeback or retrieval request fees
Non-sufficient funds (NSF) fees when accounts lack sufficient balance
Transaction fees include interchange fees and assessment charges, which are influenced by the transaction type and card network.
Volume-based fees depend on the total sales amount processed. Under interchange-plus pricing, fees are a fixed percentage, whereas tiered pricing categorizes transactions into qualified, mid-qualified, and non-qualified tiers, affecting costs accordingly.
