Where do my credit card fees come from?
The credit card fees associated to your merchant account come from various sources and together represent the effective rate you pay to process credit card through your business. The sources of your credit card fees can be grouped into the following categories.
- Interchange Fees
- Dues and Assessments
- Processor Markup
- Processor Service Fees
- Junk Fees
Interchange fees represent the true fixed cost of processing a credit card transaction. The definition of Interchange is: the network of interconnected financial institutions set up by the major associations (Visa, Master Card, etc) to facilitate the use of a plastic card to make payment. (More information on Interchange) These fees are fixed by the associations and can’t be negotiated.
Dues and Assessments
These fees are also fixed by the major associations, non-negotiable and applied to your merchant account every month. Currently Visa and Discover have dues and assessment of 0.0925% and Master Card has dues and assessments of 0.095%.
The processor markup represents the beginning of negotiable credit card fees. The processor’s markup is discretionary and represents the cost the processor is charging for the services they are providing. The markup can be bundled with Interchange or separated out depending on the pricing structure that is offered. (More information on credit card pricing structures)
Processor Service Fees
The service fees charged by your processor are also negotiable and represent the additional costs you will be charged by the processor. These fees include but are not limited to; monthly statement fee, monthly minimum fee, per transaction fee, batch fee, PIN debit fee, address verification fee, annual fee, account access fee, PCI verification fee, termination fee, chargeback fee, set up fee, application fee, reprogram fee, etc
Junk fees represent the credit card fees that are bogus. It is a common practice among some credit card processing companies to advertise very low rates and fees to attract businesses to sign up. Once the business signs up the processor slaps on enough junk fees to make up for the below market advertised rate. What makes this practice even more deplorable is that the fees are described very carefully as to make them sound legitimate. For example: Interchange BIN location, Interchange recalculation, Association access, etc.
With any merchant account it’s important to understand that you have a lot of negotiation opportunity and by simply knowing what to ask you can save your business a great deal of money when it comes to credit card fees.
For a review of your current fees or to set up a new account please contact our friendly staff at (800)917-8026.