Everything That You Should Know About Credit Card Processing Fees And Their Common Types
Today we want to talk with you about an equally important topic. This is about the credit card processing fees. Have you noticed how much you overpay when using your credit card? Even small debit card charges in a year can add up to a significant amount. Who gets these fees? Of course, the bank with which you opened an account and whose card you use. It’s time to find out what percentage of these commissions are, when you are required to pay and what type of card is most beneficial for you? We hope that we will help you understand this not simple, but important topic.
Card processing fees: what is the average percentage?
The payment system plays a major role in determining the exact amount. It can be Visa, Mastercard, American Express, and others. However, the percentage is most often not less than 1.3 but also not more than 3.4. Card transaction fees may be charged for both exchange and appraisal fees. However, they do not include payment processing fees because the payment processor you choose has a different fee structure. It may sound daunting at the moment but when we look at examples of transactions for which a fee is charged, things will become much clearer.
Card transaction charges: common types
In short, among the most common types:
Interchange Fee: The bank that issued the credit card is eligible to receive the exchange. For example, if you have a Chase Freedom Unlimited Card on the Visa payment network, Chase receives an exchange fee on all of your transactions.
Assessment Fee: The payment network receives appraisal fees. In the example above, Visa will receive a commission on every transaction in which you used your Chase Visa card.
Payment processing fee. The company that accepts the payment or sends it receives its commission since this is payment processing. Depending on the company, the costs of this service may include:
- Transaction fee;
- Monthly service fee;
- The price of the equipment that is used to process transactions.
Interchange fees in details
Credit and debit card charges for interchange services depend on several factors that must be considered.
- Each seller has his category for a reason. After all, the category is directly related to the amount of the commission. For example, a supermarket has different fees than a gas station or restaurant.
- There are different types of cards with their own set of benefits. For example, some cards offer a reward system for the purchase of goods of a certain category. For example, for paying a bill at a restaurant, you get 2% of the amount. Most often, these types of cards take a higher commission when exchanging.
- Credit card transaction fees also vary by processing method. The interchange fee may be depending on whether the card was read or if there was a contactless payment using PayPal. Transactions with the second method involve a higher risk, and interchange fees are often higher for such transactions.
Assessment Fee in details
This is a much smaller fraction of each transaction. The amount depends on the type of payment system, for example, Visa withdraws 0.14%, and MasterCard is only a couple of cents less. The American Express is considered the most expensive. It charges an Assessment fee of around 0.15%.
Credit debit card charges: favorable bank rates
The bank does not want to be your enemy and make you pay unaffordable amounts for services. You have probably heard the phrase that the client is always right, haven’t you? Therefore, you can take advantage of the bank’s advantageous offer or negotiate a new one, specially approved for you. Let’s take a look at some of the popular among these suggested methods of card payment charges.
This model helps not to mix all the fees into one big. This means that you will be charged the same fee as charged for the transaction, separately the assessment fee and the bank’s margin, which you have discussed in advance.
This model is popular because it allows you to better monitor the debiting of funds from your card. That is, to know the exact amount withdrawn by the payment system and the network. For example, you have chosen a certain system, and the card payment fees will consist of two separate payments.
If you chose this system, then you prefer a fixed amount for each transaction. This allows you not to guess what percentage you will pay for a particular purchase. Also, a Flat rate may surprise you with an exception to the rule. If you are a small trader, payments through PayPal will help reduce the percentage.
The same principle applies to this system when you subscribe to a service. You pay a certain monthly amount. And also a small percentage for each purchase is added to this payment and a lower processing fee for each payment is added. Most likely, this system reminded you of the principle of the previous one described. However, the main difference is that the amount of the monthly payment is higher but the rest of the fees are lower. Reduced credit card transaction charges can help you to save a significant amount within a month or even a year.
Credit card payment charges by this model consist of many levels. This means that each transaction belongs to a certain level and to which the payment processor determines. There are only three levels: qualified, mid-qualified, and unqualified. The lowest percentages are for the qualified, and the most expensive, respectively, for the unqualified level. This model is far from the worst choice. And if you prefer it to others, then be sure to consult with the experts. Perhaps, under your circumstances, this will be more acceptable than even an interchange-plus model. Charges on card payment depend not only on the bank but on your choice too.
You cannot buy payment processing equipment from a brick-and-mortar store. The bank presents this to you. Therefore, do not be surprised that the commission for the use of such equipment will add to your expenses. If you have installed a mobile reader, then many banks provide their installation for free, but in rare cases, they cost no more than $ 20-50. Terminals and more modern devices cost much more, ranging from $ 150 to $ 100. The debit card payment processing time should be no more than 24 hours. However, processing usually takes a few minutes.
Credit card payment fee: American Express
American Express is one of the most expensive systems. Since it has high rates of about 3.5%. However, why do sellers continue to use this system? Despite the higher cost, having a simple pricing model appeals to consumers. Sellers pay a high percentage, but no exceptions. It cannot be argued that sellers are satisfied with everything and do not try to change the conditions for more favorable ones. For example, how Amex handles returns. High hopes are pinned on the recent introduction of OptBlue, which will go into effect very soon.
Credit card processing fees: UK
If you are transacting in the UK or through UK equipment, or a UK credit card, the following information will be helpful to you. Since the rules are slightly different from what we described earlier.
- The Worldpay system known in England has a different percentage for debit and credit cards. In the first case, it is about 0.75, and in the second, no more than 2.75%. It is a global network and can cooperate with clients from all over the world.
- Global Payments is most often used by large entrepreneurs. And it provides a nice benefit, namely a 25p for each of the debit card transaction fees.
- iZettle is one of the most popular payment acceptance machines among retailers. Debit card charges in the UK are not more than 7,75%.
Credit or debit card transaction charges are important to know before you agree to a bank’s offer. We tried to explain the differences between the existing models. Which model is suitable for you, is only your choice. We advise you to consider the category of your business and analyze the number of purchases made with the help of a credit card payment. This will help you strike off the list of those models that will make you overpay unnecessary money. Maybe you have already used some system, share in the comments if it is true. Thank you for reading this article to the end. We hope that the article was clear and interesting. See you soon on the pages of our blog!
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