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Average Credit Card Processing Fees For Small Businesses
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Visa and Mastercard will raise credit card fees for merchants in April 2022 for the first time in two years.
Marketers criticized the move to “swipe payments” by two major payment networks, which were delayed by the pandemic. Businesses say walk-through transaction fees that merchants pay for each credit or debit card transaction could exacerbate inflation and cut off customers.
Both payment networks raise fees for certain types of transactions and lower fees for certain types of transactions. Dealers say the price reduction is small and doesn’t offset the increased maintenance costs.
Credit card processing fees are a cost of doing business, as most merchants must accept credit card payments. To learn more about what these fees are and how they vary between credit card companies, we’ve put together all the latest data.
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Merchant credit card processing fees are approximately 1.3% to 3.5% for each credit card transaction. The exact amount depends on the payment network (Visa, Mastercard, Discover, American Express, etc.), credit card type, and the business’ Merchant Category Code (MCC).
Note that debit cards have different pricing models and tend to cost less from merchants. As such, you may only see a convenience fee for credit card purchases instead of debit card purchases.
Source: USA Visa Reimbursement Fees, Mastercard 2022–2023 U.S. Regional Transfer Programs and Taxes, Wells Fargo Payment Services Network, and Wells Fargo Fact Sheet of the Concept Matrix, issued April 23, 2022 Effective April 20, 2020 .
This list includes two types of fees paid by payment networks for each transaction. interchange fee and survey fee. Payment processing fees are not included as payment structures vary depending on your chosen credit card processor.
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Now let’s take a closer look at the fees charged for each credit card transaction.
The two fees mentioned above, the interchange fee and the survey fee, are non-negotiable credit card fees for merchants. These are often referred to as base costs or discount rates. Payment networks charge these fees for all transactions involving one of your cards. These payments are to:
Banks that issue credit cards receive a transaction fee. For example, if you have a Visa credit card issued by Chase, Chase will receive transaction fees from your transactions.
Payment networks receive test fees. In the example above, Visa receives a processing fee for each transaction using the Chase Visa card.
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It is paid to companies that accept credit card payments and transmit transactions to payment networks via physical card readers or online payment gateways. Depending on the company processing the payment, the cost of this service may include any of the following:
Discover and American Express do double duty as they issue credit cards and use payment networks. Their cards are not accepted by many companies such as Visa and Mastercard, but they save you transaction fees and checks so you can save big on each transaction.
Note: These are not the maximum and minimum transaction fees for each payment network. Removed some outliers (such as Discover’s 0.00% + $0.75 credit fee for used accounts) so that the table better reflects average fees.
Visa credit card processing fees are the lowest overall, but MasterCard and Discover are not far behind and are in the same fee range. For many merchants, processing fees are about the same whether a customer pays with his Visa, Mastercard, or Discover credit card.
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American Express has always been the highest paid payment network, which is one of the reasons it is not accepted by merchants. In 2018, American Express announced its biggest fee cut in 20 years. This makes it comparable to other credit card networks, but still costs more on average.
Each payment network has several factors that affect where the transaction fees fall within the range above. The most important ones are:
Payment networks update their transaction fees annually. This does not mean that the price will increase every year. As previously mentioned, American Express will reduce credit card processing fees in 2018.
Visa and Mastercard skipped fee changes for 2020 and 2021 due to the COVID-19 pandemic, but revised interchange fees in 2022.
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The changes are difficult to distinguish. Fees vary depending on the type of merchant involved in the transaction, the type of credit card used, and whether the card is present or the transaction is online. With so many merchant categories, multiple card types, and other variables that determine pricing, it can be difficult to fully determine the impact of changes in interchange fees on merchants.
One estimate found that 2022 Swipe fee changes from Mastercard and Visa will increase merchant fees by $475 million, even if fees in other categories are reduced.
While card networks appear to be the biggest beneficiaries of fee increases, it’s actually the banks. Remember that transaction fees are paid to the bank issuing the credit card. Banks that issue credit cards in partnership with Visa and Mastercard collect these additional fees.
American Express is also the highest paid payment network, but this time Mastercard has the lowest fees, especially for his 1,000+ transactions. That said, the difference in test fees between each payment network is negligible.
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Merchants must pay transaction and test fees imposed by payment networks, but have more flexibility with payment processors.
Not only are there many credit card processors available, all with their own pricing methods, but merchants may be able to negotiate these fees.
The following types of payment processing models are available: Exchange Plus, Flat Rate, Fee, Tier. Here’s how each model works and the fees you can pay with some popular payment processors:
The Exchange Plus model keeps all fees separate. Payment processors charge exactly what payment networks charge for transactions and add their own features. This model also requires a flat monthly fee.
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This model is called “Interchange Plus”, but it is also called a paid network test fee.
Let’s say your retailer chose his Helcim. For each transaction, Helcim deducts transaction fees, research fees, and his 0.30% of that fee plus $0.08.
This model is a popular choice because it works for all types of businesses and has a clear pricing structure. You’ll know exactly how much your card networks and credit card processors are charging for each sale.
The flat floor model is all about simplicity. We charge the same rate for all transactions, so you can easily estimate your payment processing costs. This model can be used without a monthly fee.
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However, that convenience comes at a price. Credit card fees can be very high with the flat rate model.
One of the key advantages that PayPal and Square offer over exchanges and competitors is the lack of monthly fees. If your business has very low marketing costs and cannot save enough credit card transaction fees to offset monthly transaction fees and processor fees, it may be more affordable.
In the subscription model, you sign up for a payment processor membership and pay a monthly fee. Then you pay a base fee for each transaction and a very small payment fee.
Given the similar pricing structure, you may be wondering what the difference is between the Exchange Plus model and the Subscription model. In this example, the difference is degrees. Subscription models charge a high monthly fee in exchange for much lower transaction fees.
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This model is suitable for high-volume businesses ($10,000 or more per month). We offer the lowest credit card processing fees, helping you justify your monthly payment processor fees.
In our integrated model, each transaction is linked to one of the payment processor levels, and each level has a fixed fee. Payment processors decide which transactions go to which stage, and this is often based on transaction fees included in the rate.
Common settings for this type of payment processing include the following levels: certified, intermediate, and non-certified. appropriate level
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