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Accepting credit cards is critical to the success of your business. But it comes at a cost – it can run you over the head if you’re not careful.
Compare Credit Card Processing Fees
How much are credit card processing fees? Average credit card processing fees are 1.5% – 2.9% for in-person transactions and 3.5% for online transactions (due to higher fraud risk).
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It goes without saying that being able to accept cards is essential for any small business. Unfortunately, processing fees are a necessary expense of doing business these days.
Read on to learn what business owners need to know about credit card processing fees, including some smart tips to keep them down.
Average credit card processing fees are 1.5% – 3.5%. Here’s an overview of the 4 major credit card networks:
The rates above represent the general range between networks. Your specific processing fee will vary depending on how you accept cards, credit or debit card, and more.
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Average credit card processing fees are 1.5%-2.9% for in-person payments and 3.5% for online transactions. So for a $100 sale, your fee could range from $1.50 to $3.50 depending on the type of payment. However, keep in mind that this depends on your payment processor. Total operating cost includes monthly fees and other additional charges.
Assessment fees are charged by the card networks (Visa, MasterCard, Discover) to cover operational costs. These are fixed non-negotiable fees.
These fees aren’t as high as exchange fees, but they still take a small percentage. Current assessment costs
Credit card processors charge their own markup on interchange fees. This is the commission you earn for each purchase.
Infographic: Learn About Credit Card Processing Fees & Rates
Fees depend on the credit card processing company. This is a fee you should compare when shopping for a supplier.
Often the markup is negotiable. Especially large companies can get a discount.
For example, the processor may charge 0.20% + $0.10 per transaction. For a $100 transaction, this will cost you $0.30.
The lower the average ticket price, the more you will pay in handling fees. One hundred $5 transactions cost more than five $100 transactions.
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For example, if the payment processor charges 2% and $0.15 per transaction, you will pay $0.15 for the minimum transaction. Compare that to five times what you pay for $100 transactions and you’ll see the difference.
All these fees are paid through your processor. Everyone can have their own way of charging. Next, learn about the different pricing structures you’ll encounter.
Credit card processing providers have four main pricing models. We will discuss below, and we will also talk about what kind of business they are suitable for.
0.2% + $0.10 processing deposit above standard exchange rates. This price is easy to compare with other suppliers.
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The Interchange-Plus pricing model works for most businesses. It can provide the lowest cost.
Let’s say the non-negotiable exchange fee is 1.65% + $0.10, and the merchant markup is 0.2% + $0.10 for each transaction. On a $100 sale, it will cost you $1.75 + $0.30, for a total of $2.05.
In this model, the same fixed costs are charged for all transactions. All cards – Visa, MasterCard, Discover and Amex – get the same processing speed. This structure is mostly used by third party payment service providers.
Exchange and markup charges are combined. This is the simplest price and the most predictable. You can anticipate what each transaction will cost.
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The downside is that the transaction costs can be very high. This option is best for very small business owners with small card amounts or low volume (up to $5,000 per card transaction per month).
At 2.6% + $0.10 flat, a $100 sale will cost you $2.70. This is more than the variable-plus price.
However, for a $10 purchase, the proprietary fee transaction costs $0.36, and the Interchange-Plus fee costs $0.38.
In this model, you pay a monthly fee to use the service. On top of that, you can pay a small flat fee per transaction. The idea is that membership fees cover most of the setup costs.
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This pricing model is best for businesses with high sales volume ($10,000 or more in monthly transactions). The processor storage is very low, so your savings will justify the membership cost.
The concept is simple. Instead of literally hundreds of different exchange rates, you only get 3 flat rates depending on the type of card used.
But the problem is that most of the transactions fall under the middle and unqualified levels, which are very high. In general, your processing costs will be very expensive, so we do not recommend this model.
Are exchange rates negotiable? Credit card issuers set interchange fees twice a year. You cannot negotiate. What is negotiable are the markup prices charged by the merchant service provider.
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Here’s a quick comparison of credit card processing rates charged by top payment processing services.
It is difficult to understand what these numbers mean in real terms. So see what you can expect to pay with different companies.
Of course, don’t just compare processing costs per transaction. It is also important to consider monthly payments and other accounting fees, which we will go into next.
Payment processors charge your business a processing fee when you use their services. These are accumulated for every card transaction made in person or online. This fee consists of three parts. The token goes to the processor and the exchange goes to the issuing bank. The card network will bear the cost of evaluation.
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In addition to the processing fees for each transaction, your merchant account provider may charge other account fees for using the service. These can be:
These are the two most popular price models. Wondering if you should choose a flat rate or exchange rate provider? Home » Blog » Credit Card Processing » A Visual Guide to Credit Card Processing Fees and Charges [Info]
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Credit card processing fees are difficult to understand, but we don’t think they should be, so we set out with the goal of creating an easy-to-digest and visually appealing infographic on the subject. You can judge him. 😉
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Amad has been working in the world of e-commerce and online shopping since 2002. He started as an eBay seller and then slowly graduated to building and marketing his own websites and doing the same by consulting others. He founded Merchant Maverick out of frustration with the misinformation and scams he encountered when trying to create merchant accounts for his and his clients’ businesses. He is the person behind most of the seller account reviews and listed items. Have questions about credit card processing? Talk to him.
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Whether you want to save money on processing or get approved for a merchant account, PaymentCloud can help. Start with PaymentCloud Editor’s Note: This post was originally published on June 18, 2019 and has been revised and updated for accuracy and completeness.
Too often we talk to small business owners who overestimate the importance of finding the best credit card processing deal. Fractions of a cent may not seem like the deal you sign with a merchant service provider, but those pennies add up. Quick. For companies with high sales volume, they increase quickly. And
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