When you accept credit cards as a form of payment, you’re likely to incur some processing fees. But what are these fees, and how can you avoid them?
In this guide, we’ll give you a detailed overview of credit card processing fees, including what they are, how they’re calculated, and how you can save money on them.
What Are Credit Card Processing Fees?
Credit card processing fees are the charges you incur when you accept credit cards as a form of payment. These fees can be charged by your credit card processor, your bank, or both.
There are two main types of credit card processing fees: interchange fees and assessment fees.
Interchange fees are the fees charged by the card issuer (usually a bank) for processing a credit card transaction. These fees are set by the card networks (Visa, Mastercard, etc.) and are typically a percentage of the total transaction amount, plus a fixed fee.
Assessment fees are the fees charged by the card networks (Visa, Mastercard, etc.) for the privilege of accepting their cards. These fees are also a percentage of the total transaction amount, plus a fixed fee.
In addition to interchange and assessment fees, you may also incur other fees, such as gateway fees, statement fees, and PCI compliance fees.
How Are Credit Card Processing Fees Calculated?
Credit card processing fees are typically a combination of a percentage of the total transaction amount (the interchange rate) and a fixed fee (the assessment fee).
The exact fees you’ll pay will depend on your credit card processor, your bank, and the type of card being used. For example, American Express typically charges higher processing fees than Visa or Mastercard.
To get an idea of how much you might pay in credit card processing fees, let’s look at an example:
Total transaction amount: $100
Interchange rate: 1.5% + $0.10
Assessment fee: 0.11% + $0.10
Total credit card processing fees: $2.31
In this example, the total credit card processing fees would be $2.31. This is made up of the interchange fee of 1.5% ($1.50) plus the fixed fee of $0.10, and the assessment fee of 0.11% ($0.11) plus the fixed fee of $0.10.
How Can I Save Money on Credit Card Processing Fees?
There are a few ways you can save money on credit card processing fees:
- Shop around for a credit card processor with low fees.
- Use a credit card with low interchange rates.
- Use a credit card with no annual fee.
- Pay your credit card balance in full each month to avoid interest charges.
- Avoid making cash advances, which typically have higher fees than regular credit card transactions.
- Avoid making late payments, which can result in additional fees.
- Keep your credit card processing account in good standing to avoid having your fees increased.
- Stay up-to-date on the latest credit card processing fee changes and make adjustments to your pricing accordingly.
- Consider using a flat-rate pricing model, which can simplify your pricing and help you save money on credit card processing fees.
- Use a mobile credit card processor, which typically charges lower fees than traditional processors.
Credit card processing fees can be a significant cost for businesses that accept credit cards as a form of payment. However, there are a few ways you can save money on these fees.