Business Expenses / Merchant Services

Guide to Credit Card Processing Fees

Merchant Accounts

Guide to Credit Card Processing Fees

By Robert Nelson

Today accepting credit cards is a must for all businesses. But what are the processing fees and can I afford them?

In business accepting credit cards can be rewarding and expensive. The additional sales can be a boon but the processing fees can be expensive, and how they are calculated can be confusing.

It is estimated that 66% of all point-of-sales (POS) transactions today are done with credit, debit, or gift cards and only 27% of purchases are made with cash. It is estimate that cash sales will drop to only 23% by 2017. But almost 55% of the nation’s small businesses do not accept credit cards. Fewer people are carrying cash, add the growing popularity of mobile payment options like Apple Pay and the percentage of cash sales may drop even more.


A study by Intuit estimates that businesses that don’t accept credit cards miss out on approximately $7,000 in sales annually, while a 2013 survey by the Federal Reserve says the number of debit card payments between 2009 and 2012 increased more than any other payment type.

Many business owners see the processing fees associated with credit card payments as to costly or unnecessary for their business expense. But with these statistics in mind can you still afford not to accept credit card payment?

Whether your business plans to accept debit and credit cards in person, online or over the phone you will need to choose a Merchant Services Provider (MSP) to process your payments. These companies have many processing fees involved and if you are unfamiliar with them it could end up costing more.

It is important to be knowledgeable know what each of the processing fees are and how they are calculated so you will understand what the MSP’s representatives are talking about. There are many questions you will need to ask the MSP’s representative before you sign a contract.

Some questions you will you will need answered:

1. What payment types do you want to accept?

In retail you want to accept as many different card types as possible. You never want to turn away a customer because your not setup to accept their card. Consider they customers you have, you may want a system that will accept Credit/Debit and cards, Gift cards and maybe Electronic Benefits Transfer cards (EBT).

How much are the fees and cost?

Processing fees vary but can be as high as 5% on all earnings from your companies debit and credit card sale, according to the US Business Administration. Check to see what additional service each MSP,  a 24 hour customer service center with operators that can help solve problems as they arise can be worth a slightly higher rate.

You can ask your customers what type of credit cards they would like to see you accept by creating a survey online and ask the customers in your email contact list to take the survey and offer a small discount on their next purchase. This can help you determine what cards to accept and reduce your processing fees.

2. Processing fees and descriptions:

Interchange fees

This fee is charged for every transaction you process, and it is paid by the payment processor to the bank that issued the card. The rate you pay per transaction depends on several factors including the type of card accepted, the type of transaction and the size of the transaction. In store transactions will cost less in interchange fees  since the card is physically present at the point of purchase so there is less risk of fraud.

Monthly Statement fees

The processing company might charge may charge you monthly statement fee of about $10 to cover the expense of mailing you a statement. Accepting paperless statements, accessing it online directly from your account page or having it emailed to you may save you this cost and allow you access t the information sooner.

Application and Set up Fees

There may be fees charged just for applying for the MSP’s services, this cost can very for each company. The cost of renting or purchasing  and setting up the card processing equipment at your business may cost extra as well.

Monthly Minimum fee

There may be a minimum monthly amount in fees the processing company must collect, if you fall short of this minimum amount the processing company may charge you more to meet this minimum amount. If the monthly minimum is $50 and your total transaction fees are only $30 you could be charged an additional $20 to reach the minimum.

Monthly Gateway Fees

The gateway is the transmission path the transaction data takes when transmitted from your processing system to the credit card companies. This gateway is a special secure connection to the banks the card is drawn on. Some processors may charge you a monthly fee for providing a payment gateway. Monthly fees cost approximately very from one company to the next.

Early Termination Fees

If you choose to cancel your service with the MSP before your contract is complete some processors may charge you a fee for early cancellation of your contract. The fee can cost anywhere from a few hundred dollars to thousands depending on how much time was left on your contract. Be sure to ask the MSP’s representative about these fees before you sign.

3. Can their system process Mobile Payment?

Near Field Communication payment types have growing in popularity.  Apple Pay works with most credit and debit cards and now accounts for two out of three dollars processed through contactless payments. You may want to have the ability to accept these type of payments.

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