Essential Facts About Credit Card Payment Processing
Discover key insights into credit card processing fees, including different pricing models, their advantages, and potential pitfalls. Learn how to choose the best processor for your needs to minimize costs and understand fee structures effectively.
Using a credit card provides convenience and credit access, but it also comes with associated processing costs. When selecting a payment processor, aim for providers offering the most competitive rates tailored to your transaction volume and chosen billing structure. Be cautious of deals promising lower interchange and assessment fees since these are typically standardized and non-negotiable across providers.
Payment processors follow strict fee regulations, but their billing approaches differ. The main methods are interchange plus and tiered pricing systems.
Interchange plus, also called pass-through pricing, allows processors to charge a fixed percentage regardless of card type or transaction. It offers benefits like interchange refunds on refunds and potential reductions when lawmakers lower interchange rates.
Tiered or bundled pricing categorizes transactions into qualified, mid-qualified, and non-qualified tiers, sometimes based on the card used. However, transparency issues can arise, as some processors do not clearly disclose the tier classification for each sale, potentially leading to higher costs due to uneven fee distributions among tiers.
Credit card processing fees generally fall into three categories: volume-based fees, per-transaction charges, and flat-rate fees. Understanding these can help you optimize your payment setup.
