Merchant Credit Card Transaction Fees

Merchant Credit Card Transaction Fees – Keeping track of all the moving parts involved in credit card processing can be challenging. There are so many different parties involved in any transaction and each of them must be paid.

For those of you who want to know more about earning bank fees and where they come from, you’ve come to the right place. Below I will explain everything you need to know about this topic.

Merchant Credit Card Transaction Fees

Let’s start with the basics. Before we get into the fees associated with an acquiring bank, it’s important to define exactly what an acquiring bank is.

Processing Fees & Interchange Optimization

The acquiring bank is your bank. It is usually referred to as the “customer” or “merchant bank”. Accepting banks process credit and debit card transactions on behalf of the merchant.

Accepting banks are licensed members of credit card networks, such as Visa and Mastercard. An acquirer helps authorize sales whenever a merchant processes a credit or debit card transaction based on cardholder information.

Information about the card owner at the time of sale is provided by the card network and the issuing bank (the bank that issued the card to the consumer).

You can see that the acquiring bank is just one of many different players involved in credit card processing.

A Complete Guide To Credit Card Processing For Businesses

Let’s say a customer pays for your goods or services using Mastercard. The bank that issued the card makes the card information available to the client.

After the accepting bank confirms that everything is in order and that the funds are sufficient, it approves the purchase and credits the amount of the sale to your account.

In some cases, payment processors may also be receiving banks. They may have direct contracts with companies to provide merchant payment processing services. However, not every payment processor is an accepting bank.

To better understand where the bank’s insurance fees come from, you need to recognize the patron’s role in payment processing.

Credit Card Merchant Fees In Canada

Accepting banks authorize credit and debit cards. They also liaise with issuing banks on behalf of the merchant. So whether you’re processing a debit card transaction or a credit card payment, you need a merchant acquirer.

In short, the acquiring bank can be seen as an intermediary between the cardholder’s financial institution and the merchant. The acquirer’s job is to ensure the transfer of funds.

The acquiring bank assumes a certain financial risk for its role in this process, whereby commissions of the acquiring bank are incurred.

Let’s look at a simple five-step process to better understand what the acquiring bank does for each credit card transaction:

How Payment Processing Works & Processing Fees

Again, the terms “accepting bank” and “payment processor” are not always used interchangeably. Although some acceptors are also payment processors, this is not always the case.

Why do receiving banks charge fees? As you have seen in the previous sections, the acquiring bank plays a key role in the transaction. Without the accepting bank, the merchants would not be able to get paid.

It is also important to understand that the acquiring bank has to work with sensitive cardholder data. This means they must follow strict security standards and payment processing procedures.

With all this in mind, the acquiring bank charges traders for risk coverage and other investments during the process.

New Visa Interchange Rates: What It Means For Your Small Business

When the issuing bank sends the funds to the receiving bank, the network card fees have already been deducted. So the merchant ends up paying interchange fees, plus the processor or taking the bank’s margin.

The payment service provider must also be compensated for its role. So each transaction fee is actually made up of interchange fees, valuation fees and more.

But believe it or not, the fees and rates imposed by the credit card processor and the acquiring bank are negotiable. Most merchants don’t realize this and end up overpaying for credit card processing.

Each acquiring bank is different. Sometimes you will pay a fixed fee, but usually the fee depends on the type of transaction, the amount of the transaction and the card used.

What Is A Merchant Account

For example, you will pay a different price for Visa cards compared to Amex cards. PIN debit transactions may not have the same assessment fee or network fee as an e-commerce credit transaction going through a payment gateway.

The best way to reduce your bank fees is to consult with experts who can negotiate this rate on your behalf. If you try to do it yourself, you probably won’t get the result you’re looking for.

Here at Merchant Cost Consulting, we can help you reduce your credit card processing costs. We will communicate with your acquiring bank on your behalf to negotiate lower rates.

Depending on your processing volume, this can save you tens of thousands of dollars per year. Contact us today for a risk-free audit and assessment.

What Are Credit Card Merchant Fees? The Different Types Explained

Keep checking our blog too. We are constantly updating this resource with information about bank fees, credit card fees, card networks, and many other useful insights related to credit card processing.

Prior to founding Merchant Cost Consulting, Colin worked in the payments industry for 3 years gaining extensive knowledge of the ins and outs of the industry. During this time Colin learned how deceptive the industry could be and wanted to do something about it. Before joining the payments industry in 2014, Colin played professional baseball for the Los Angeles Angels of Anaheim. Colin is from Waterford, CT, and graduated from Virginia Tech with a degree in business, where he was a member of the varsity baseball team.

Merchant Cost Consulting is a cost reduction company that helps businesses reduce merchant credit card processing fees without disrupting their day-to-day operations. If your business processes millions of dollars in debit card transactions each year, these fees can add up pretty quickly. That’s why it’s important to understand how much you’re charged for accepting debit cards.

Not every debit transaction is the same. You can save thousands of dollars on debit card processing fees by accepting these cards a certain way.

How Credit Or Debit Card Payment Processing Works

Most traders don’t realize this, but one of these methods is more expensive than the other. I wish I could give you a general answer as to what is most cost-effective for your organization, but that varies from company to company.

Note: Get a free audit and analysis to see how much you can save on credit card processing fees.

As the name implies, a PIN debit transaction is processed when the customer enters their personal identification number (PIN) to complete the sale. After the card is dipped or swiped, the user enters his secret digits in the PIN block.

In this way, customers confirm their identity. After entering the PIN, the user will no longer have to sign the account.

Surcharging And What It Means For Your Business

Debit PIN transaction information is sent from the merchant to the customer’s bank via the debit PIN network. These transactions are subject to fees imposed by debit PIN networks. This means that the debit network fee can vary depending on how much the debit network charges. I know the credit card processing industry doesn’t always make things easy for merchants to understand.

PIN debit transactions are known as online debit transactions. This is because the debit network manages the transaction routing information, unlike Visa or Mastercard.

Clients confirm the identity of their debit transaction by signing, you guessed it – providing a signature. After the card is dipped or swiped, the customer will sign the receipt. The signature is used in the same way it would be used for a credit card transaction.

Signature debit transactions are routed to the bank through the Visa or Mastercard network, unlike the PIN debit network.

Credit Card Processing Services & Software

Since the PIN network has no role in processing these transactions, a signature debit sale is often referred to as an offline debit transaction.

The applicable network will estimate its fees. Interbank fees charged by card associations do not apply here.

In many cases, merchants will have no idea which PIN network the transaction is being processed through. However, fees between different PIN networks tend to be similar.

Because of this pricing structure, small transactions tend to be more expensive to process. But large debit PIN transactions tend to be more profitable for merchants, although you won’t always know what debit PIN network fees are assessed before the transaction.

Where Do Your Credit Card Fees Go?

If customers sign debit receipts instead of entering a PIN, the sale is processed similar to a credit card transaction.

In addition, credit card associations have different interchange fees that apply to debit card transactions. These fees are usually less than the interchange fee associated with a traditional credit card transaction.

As you can see, the interchange fee varies by card type as well as the merchant’s fee program.

But that is not all. If you read our full guide to interchange fees and charges, you’ll see that the fees in the table above are significantly lower than comparable credit card transactions.

Merchant Discount Rate

For example, the lowest possible credit card interchange rates for a Visa merchant at a supermarket are 1.15% + $0.05 per transaction. They go as high as 2.10% + $0.10 per transaction.

Compare those rates with the table above. As a percentage, credit card interchange fees can be 40+ times higher than debit card fees.

This is mainly because

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