Most merchants must allow their customers to pay with credit cards to maintain a healthy cash flow. It may seem obvious to accept credit cards, but choosing a payment processor can be confusing, especially with so many different credit card processing charges to consider. It would be best if you chose a provider of processing services that accepts multiple payment methods (Visa, Mastercard, Discover, American Express, PayPal, etc.). Keep your customer’s information safe. When choosing a provider to process credit cards, it is important that you also know the fees charged by the company. This will help you get the best deal.
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The credit card fee can be affected by several factors. These include the required and negotiable prices through payment processors, card networks, and card issuers. It is important to keep track of the monthly fees in order to decide which forms your business can accept. How much will the credit card processing costs cost you? How do you compare the various prices? We’ll take you through the basic prices of credit cards and give some tips.
You’ll need a Merchant Account for your business. The type of account you choose will depend on whether it is for retail, mobile, or ecommerce.
How credit card fees work
The fees for accepting credit card transactions can vary from one business to another depending on the industry, location, and type of card.
You should be aware that there are fees associated with accepting cards from the payment processor, card network, and card issuer. The Acquirer Processing fee, Fixed Acquirer Network Charge, Kilobyte Access charge, and Network Access and brand usage charge are also mandatory fees.
The average cost to process credit card payments for small businesses is currently between 2.87% and 4.35%. Your rates could be higher than the average if you pay additional fees, whether they are required by your payment processor or added on.
What is the credit card processing fee?
You are charged for three services when you work with credit cards: the payment processor, the card network, and the card issuer.
Payment processors are financial institutions, such as Chase, that complete credit card transactions. The majority of merchants use a third-party company to facilitate this process on behalf of a financial institution like Leaders Merchant Services.
Read our Merchant One review or our square review to learn more about specific payment processors.
Best credit card processors also provide equipment for both brick-and-mortar and online transactions. These equipment include credit card terminals and point-of-sale (POS) systems. You can also access software payment systems, such as virtual terminals (Apple Pay and Google Pay), mobile payment, shopping carts for e-commerce, payment gateways, and contactless payment through RFID.
Payment processors charge an amount based on a percentage plus a flat rate for each transaction made with a credit card or debit card.
American Express, Discover Mastercard, and Visa are all card networks. They facilitate transactions between card issuers and merchants. Card networks also partner with card issuers to provide credit and debit cards.
The card networks determine the acceptance of credit and debit cards. Credit cards used to be accepted in a variety of places. However, the major networks have now standardized their acceptance rates. All four major networks are now accepted at more than 10 million U.S. locations.
The card networks are responsible for all rewards or perks associated with credit cards or debit cards.
Card issuers make money by charging a flat rate plus a percentage to the business owner for each transaction (similar to payment processors). The card issuer has the final say in whether or not a card transaction will be approved.
How much do credit card processing fees cost?
The average processing fee for credit cards is between 1.3% and 3.5%. The amount of fees charged by a company will vary depending on the payment method you select (Mastercard, Discover, American Express, or Visa), as well as the Merchant Category Code (MCC) code and type of credit card.
Debit card transactions are usually cheaper for businesses than credit card transactions. Debit cards usually have their fee structure, which may be separate from credit card fees.
The table below lists interchange and assessment charges but does not include processing fees, as these vary greatly by card type, credit card provider, and MCC.
Payment processing fees
You can accept credit cards through a variety of payment processors. You will need payment processors to accept physical cards and online payment gateways to accept credit card payments through a virtual cart.
The payment processing company determines your payment processing fee. You may be charged in one of the following ways.
American Express and Discover have their payment networks. They can then collect interchange and assessment fees. American Express and Discover earn more per transaction than Visa or Mastercard.
Major credit card providers pay assessment fees. Visa, for example, receives an assessment fee from every Capital One Visa transaction.
This table shows the average assessment fee for credit cards by major networks, which is around or at 0.14%.
Every transaction is subject to an interchange fee, which is paid by the bank that issued your credit card. Capital One Visa would be the recipient of the interchange fee in the case where Capital One Visa is the credit card.
Each network determines Interchange Fees, and they change every year between April and October. As you can see from the table below, the average interchange fee for credit cards is between 1.5% and 3.3%.
Card type: Credit or debit
You will pay higher interchange fees for credit card transactions because they are more risky than debit cards that have a PIN. Debit cards with a signature requirement are processed as credit cards. Credit cards that also double as rewards cards (travel, money back, etc.), however, will be treated the same way. Interchange rates can be higher for cards that require a signature.