Accepting credit cards helps businesses serve more customers. However, many owners do not fully understand the fees listed on their monthly merchant-processing statements.
Credit card processing fees can vary based on the type of card, the transaction method, the business industry, and the pricing arrangement offered by the provider.
Understanding these costs can help you evaluate your current account and identify questions to ask your processing company.
What Are Credit Card Processing Fees?
A processing fee is the cost associated with completing an electronic card transaction. Several organizations may participate in that process, including the customer’s bank, the card network, the merchant’s bank, and the payment processor.
Therefore, the total charge may contain several components rather than one single fee.
Your monthly statement may include:
- Transaction fees
- Percentage-based processing charges
- Authorization fees
- Monthly account fees
- PCI-related fees
- Equipment or software charges
- Chargeback fees
- Additional service fees
The exact names and amounts depend on the provider and account structure.
Interchange Fees
Interchange is one of the main components of card-processing costs. These rates are generally influenced by the card type and how the transaction is completed.
For example, rewards cards may cost more to process than some basic debit cards. A transaction completed in person may also be priced differently from a payment entered manually or submitted online.
The business category and transaction information can affect how a payment qualifies. Therefore, accurate account setup and proper transaction procedures are important.
Assessment and Card-Network Fees
Card networks may apply assessment or network-related fees to transactions processed through their systems.
These costs are separate from the processor’s markup. Nevertheless, they may appear together on a merchant statement, which can make the statement difficult to interpret.
A transparent provider should be able to explain which charges come from the card network and which charges are added by the processor.
Processor Markup
The processor markup is the amount the payment-processing company charges for its services. Depending on the pricing model, this may be a percentage, a per-transaction amount, a monthly charge, or a combination of fees.
The markup supports services such as:
- Transaction processing
- Account management
- Payment equipment
- Technical support
- Reporting tools
- Security assistance
- Software integrations
Business owners should evaluate both the price and the service they receive. A low advertised rate may not represent the complete cost of the account.
Why Processing Costs Can Change
Your effective processing cost may change from one month to another. Several factors can influence it.
Card type
Rewards, corporate, international, debit, and standard credit cards may have different costs.
Transaction method
In-person chip or contactless transactions may be priced differently from manually entered, online, or telephone payments.
Average transaction amount
A pricing structure with a per-transaction fee can affect businesses differently depending on their average sale.
Chargebacks
A chargeback occurs when a cardholder disputes a transaction. Frequent disputes can create additional costs and administrative work.
Business industry
Certain industries may have different processing requirements or risk considerations.
How to Review Your Merchant Statement
Start by comparing several months of statements rather than reviewing only one.
Look for:
- Total card sales
- Total processing costs
- Number of transactions
- Monthly service charges
- Equipment fees
- PCI-related charges
- Chargebacks
- New or unfamiliar fees
You can also calculate your effective rate by dividing total processing costs by total card sales. This figure does not explain every individual charge, but it provides a useful high-level comparison.
Be sure to compare similar months. A month with unusually high online sales or a different mix of card types may produce different results.
Questions to Ask Your Payment Processor
Your provider should be able to answer basic questions about your account.
Consider asking:
- Which pricing model am I using?
- What portion of my costs is processor markup?
- Are there monthly minimums?
- Am I paying for equipment I no longer use?
- Are there optional services on my statement?
- Is my account configured correctly for my industry?
- Are there ways to reduce manually entered transactions?
- How long is my current agreement?
Clear answers can help you make an informed decision.
Get a Clearer View of Your Processing Costs
Credit card processing fees do not have to remain confusing. Regular statement reviews can help businesses understand their costs, correct account issues, and avoid paying for unnecessary services.
USB Payment Processing works with Maryland and Mid-Atlantic businesses to provide customized payment solutions, competitive pricing, and local support.
Contact USB Payment Processing to request a review of your current merchant-processing statement.