Breaking Down the Costs of Credit Card Processing

For businesses that accept credit cards, the merchant account statement represents the sum of three basic types of charges: interchange, assessments and markups. Understanding the rates and fees that you are paying is one way to make sure you’re getting the best products and services for your credit card processing needs. At USB Payment Processing®, we’re all for that!

To lay the ground work, it’s important to understand how the charges are earmarked. Interchange fees are paid to card-issuing banks, assessments are paid to the card brands (Visa®, MasterCard®, American Express® and Discover®), and markups are any rate or fee beyond those two cost centers that are paid to your merchant account provider for handling your credit card processing needs.

Interchange comprises the largest portion (as much as 70 to 80 percent) of your credit card processing costs. It is a broad system of varying rates and fees that are set by the credit card brands, charged to merchant account providers and paid to the card-issuing banks.

Interchange is a fixed cost that applies to every payment card transaction you process. While interchange is included in the discount rate you pay your merchant account provider, it is totally outside their control and they do not receive any of the funds.

Interchange fees typically consist of a percentage and a flat transaction fee (i.e. 1.75% and $0.15). Percentages and transaction fees are set by type of card, type of transaction and other variables.

Assessments are a series of rates and transaction fees that the credit card brands charge to generate income. They account for a smaller portion of expense than interchange (2 to 3 percent) and are another fixed expense. Like interchange, this is a cost that is not controlled by your merchant account provider.

Some assessments apply to your gross processing volume, others are charged on certain types of transactions, authorization and settlement requests.

Markups include any rate or fee beyond interchange and assessments, including your provider’s processing charges and costs for hardware/software or electronic payment gateways.

Markups are the only non-fixed cost associated with credit card processing, making them the only costs open for negotiation with your merchant account provider. They will vary depending on the type of business you run, your processing volume and average ticket amount, and the method you use for credit card processing.

Working with an experienced and reputable merchant account provider like USB is one of the best ways to ensure that you get the best credit card processing solutions for your business needs. We’ve collaborated with hundreds of thousands of clients, most of them small business owners like you. We are committed to providing you with cutting-edge technology, secure processing and superior customer service and support that can help you grow your business. Talk to one of our representatives today!

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