The act of processing credit cards goes beyond simply collecting card information and batching at the end of the day. Various fees are involved in each card processing transaction that need to be broken down and accounted for. Some are variable and some are fixed. Fixed costs sometimes are a small amount when looked at on a day-to-day basis, but they do add up to the overall cost of card processing. Gateway fees are a fixed monthly cost, but are also a recurring payment during account setup. The upfront fees affect the merchant one time and are not considered to affect the monthly cost of credit card processing. However, do not simply toss the cost out the window, as the amount needs to be recovered during the period the merchant account “pays for itself.”
The gateway itself is a specific point in virtual credit card processing. An online portal processes a card, also known as the shopping cart. When the customer hits submit on their cart, the information transfers securely to the gateway where it is verification occurs before being sent on to the processor. The gateway fee is another layer of cost that comes with processing cards.
The actual cost of the gateway fee varies from provider to provider, but the cost is supplied up front to avoid surprises. For an example, a monthly gateway fee runs $10. The gateway provider is going to charge the fee regardless if cards are processed or not. There is no waiver in the situation that the account is idle. However, the fee covers more than verifying and routing card information; it also includes online payment cancellations and transaction reports. Since the gateway fee is a fixed amount, breaking it down into a monthly cost is simple. The overall cost is nominal, but it does play a role in nibbling away at profits that are derived from credit card processing.
The handling of all of the fees for card processing also affects the bottom line of the business. Some merchant service providers bundle everything into one package as a convenience. This means that the total cost of transaction fees, total percentage of purchases and the gateway fee come in one package. Nothing has changed in terms of the gateway fee, but it has the potential to skew accounting averages if attention is not paid to the breakdown of the bundle.
The overall affect of gateway fees on card processing is minimal. When broken down to a daily cost, it amounts to very small change and may be seen as negligible. However, gateway fees and others subtly add up to the overall cost of card processing.