The Ins and Outs of Your Credit Card Processing Bill

The Ins and Outs of Your Credit Card Processing Bill

When businesses open merchant accounts for credit card processing, there are many ins and outs to be learned. Aside from learning how to operate their POS system, they must also learn about the fees associated with the bill. While it may seem overwhelming, it is in fact relatively simple to understand by asking a company representative for explanations to various terms.

Start Up Fee

Also known as an annual fee, this covers the administrative costs associated with the merchant account. Generally, these range between $25-$50 and cover the costs of starting the account as well as the hardware and software used for payment processing. While many companies charge annual fees to merchants, others charge no annual fees in an effort to attract new businesses.

Discount Rate

While sounding like a business is receiving a discount on its services, this fee is actually the percentage of the transactions as charged by the bank. Since virtually all credit card processors have their own rates, shopping around for the lowest per transaction rate is crucial to most businesses.

Transaction Fee

One of the most important fees on any credit card processing bill, the transaction fee is the amount taken for each transaction. Usually these can be shown as a fixed fee of 10-25 cents per transaction on the bill, and like many other fees businesses should look around for the best rates when examining merchant accounts. For businesses that process a high volume of transactions each month, the fee usually goes down as their monthly purchasing volume increases.

Termination Fee

All contracts for merchant accounts have clauses that allow for a business to end the relationship. However, when doing so a termination fee is almost always charged. A standard within the industry, termination fees can be calculated as either a flat fee or an amount based on how many months are left on the contract. As with other aspects of these agreements, businesses should shop around for the best deal. As more businesses have started to balk at these fees, some processing companies now charge no fees for early cancellations and don’t require businesses to sign contracts.

While understanding credit card processing bills may take some time, eventually the terms associated with them will become as familiar as those on any other statement. By shopping around for the best deal, there will be few if any surprises when the next bill arrives.

Why Debit Cards and Credit Cards Have Different Processing Rates

When accepting payments via debit and credit cards, one will notice that providers often charge different rates. The reason for this is not always known to the average entrepreneur. However, there are a few reasons why this is the case. With this in mind, here are three reasons why debit cards and credit cards have different processing rates.

Fraud: First and foremost, when accepting payments in multiple forms, it’s likely that a business owner will deal with plenty of fraud. Think about it, the minute a person steals a credit card, he or she is likely to run to a store or online retailer. Then, they are likely to use it to buy goods or services. On the other hand, with a debit card, one must use a pin, which is harder to steal. For this reason, credit card processing is often more expensive a merchant account providers need to worry about fraud with credit cards.

Technology: Without a doubt, when looking at the technology to accept payments via credit and debit cards, one will be in amazement. While true, because of ant-fraud measures, among other things, credit card process is costlier to the business owner. Then, when this happens, many store owners will pass the cost onto local consumers. Either way, with merchant accounts, one will pay a higher fee when dealing with credit cards.

The market speaks: Finally, most business owners prefer to take credit cards for a variety of reasons. Not only do credit card buyers spend more money, they are likely to come into the store or head online. On the other hand, people use debit cards out of convenience, when they are not carrying any substantial amount of cash. For this reason, stores will often get charged a higher rate to take credit cards. Remember, in the free market system, a credit card payment processing company can charge high rates if consumers demand the services. On the other hand, debit cards are used for low-end transactions, which don’t bring in as much revenue. The net effect is, people are not willing to pay high fees to accept debit.

When looking at merchant accounts, it’s obvious that it’s more expensive to accept credit cards. Though, the reasons are simple and make sense to a person who doesn’t mind delving a little deeper into this important subject. In the end, it’s wise to accept both payment forms.

Why Some Credit Cards Cost You More to Process Than Others

Credit card processing statements are difficult to understand due to the number of different rate categories listed on the statement. In fact, different merchant account fees charged by a credit card processor for merchant accounts can make it difficult for business owners to understand what they are paying to accept credit cards. Though it may seem like every transaction should be charged the same amount, there are a number of reasons for the costs of credit card transactions to vary from one transaction to another. In order to choose which processing plan is best and save the most money, business owners need to understand the basics of processing charges including why some credit card transactions cost more than others to process.

Interchange Fees

Interchange fees are charges that the banks charge for credit card processing. Banks typically charge both a flat fee and a percentage of the transaction. For example a bank may charge 10 cents per transaction and 1% of the total transaction. Each type of card (Visa, MasterCard, etc.) sets their own rates and the rates will actually vary on the same card depending on a number of factors. For example, a credit card issuer may charge different rates for the purchases of different types of products and for different types of cards. All of these different factors mean that one type of card may charge a business a larger amount for a transaction than another.

Markup Fees

Every credit card processor charges a markup above the interchange fee. This markup is used to pay the costs of the transaction for the processor as well as to create a profit for the processor. In general, the markup fee is based on a percentage of the interchange fee, but the fee can be calculated in different ways. When the fee is based on the interchange fee, the markup fee will vary from one card transaction to another along with the different interchange fees charged by the card issuer.

If the differences between the fees charged for different credit cards are not enough to confuse those trying to understand the fees on merchant accounts, the fee structure for debit cards also varies. Debit card fees are typically slightly less than the fee charged for credit card transactions. However, the fee that a business will be charged for a debit card transaction will vary depending on factors such as whether or not the charge was a PIN based transaction.

Understanding Credit Card Processing Fees

When you apply for a merchant account for your business, it is important to know the fees that are involved with credit card processing. Getting approved for a merchant account is not always easy, but once you are approved, the bank or merchant processor will require an initial fee. This one-time fee is also known as an application or setup fee. This initial fee is required to get started with your account.

Once you pay the initial fee, another fee for software and equipment may be necessary. Most merchant accounts will charge fees for setup, fees for transactions, monthly fees, discount fees, and there may be other fees associated with merchant accounts. All merchant accounts are not setup the same, so it is important to shop around for a credit card processing company that will fit your business needs.

The monthly fee is charged as an ongoing cost for keeping the merchant account active. Some banks or merchant processors may also call this fee a statement fee, report fee, account fee, or some other name. Many merchant accounts will charge a few monthly fees. The cost may range from $10-$30 every month.

Another fee is the transaction fee. Most merchant accounts charge per transaction. This costs can be between 20 cents to 50 cents. This costs will vary depending on the merchant account. Another fee connected with each transaction is called the discount fee. The discount fee is a percentage of the amount of the transaction and the type of credit card used.

When you are shopping around for merchant accounts, make sure to carefully read all of the fine print. The fee schedule may not be clear, and you need to pay close attention to the fees before you enter into a partnership with a bank or merchant processor.
A merchant account is essential for the success of your business.

Customers primarily used credit or debit cards to pay for all goods and services, so it is important that you have the ability to process credit and debit cards. There are many merchant account vendors around, so take your time and be wise when you choose one. The best rates go to those businesses that have a clean record, so this is very important. Those with a clean record or good credit will most likely pay the lowest fees.

Why Are Credit Card Fees So High?

Many entrepreneurs understand quickly that credit card acceptance fees are not cheap. In fact, over time, many come to hate this charge as they realize it is hard to make a profit. However, there are a few reasons why it is not free or cheap to accept credit cards. With that in mind, here are three reasons why credit card fees are so high.

Fraud:

Unfortunately, a lot of people commit fraud and use other people’s credit cards. Sadly, most people get away with it, and credit card processing companies must pass on the cost. Remember, since most people have merchant accounts, they will pay for fraud with increased fees and costs. Luckily, most companies try to minimize this, and it helps keep the costs down for the average consumer. Of course, as companies get smarter, so do the criminals. This game is likely to continue for the foreseeable future and consumers will lose out since merchant providers will, inevitably, pass this cost on to their customers.

Staff:

When working with a credit card processing firm, a customer will understand immediately that he or she has plenty of people to work with. This is advantageous as a client can get his or her questions answered with ease. However, this comes at a cost as merchant accounts providers have to pass on the expense to customers who demand a lot of services. Without a doubt, credit card processing companies have large staffs that can help clients run their companies and make sure that no serious errors occur in the process.

Equipment:

Most people, when they whip out a credit card, do not take notice at much going on with the transaction. However, if a consumer did, he or she would realize that it takes a lot of equipment and software to run the card. In fact, some companies provide a POS system and other expensive and up-to-date equipment. Without a doubt, this can easily cost hundreds of dollars a month, and a small business owner often gets a break from the merchant account provider. However, in the end, a business will pay this expense in higher monthly or transaction fees.

There are multiple reasons why it is not cheap to accept credit cards. When understanding this, a company owner will not have a problem justifying this cost. In the end, it is worth it as it is nearly impossible to succeed without accepting plastic.

Passing Credit Card Fees On To Your Customers

For several years, businesses that have been processing credit cards have been charged a fee for each transaction that took place. The fee would be a percentage amount of the total purchase plus a standard fee based on the type of credit card that was being used by the customer. The fees also varied by the merchant accounts the businesses have. The fees that used to be charged to the business are now being passed on to the customers in some areas.

There are several states that are allowing businesses to decide if they would like to pass the credit card fees on to their customers. This way they can profit even more from each of the transactions they process. The fees that will be charged to the customer is only going to be for major credit cards that are ran through as a credit. The business is required to notify their customer that the fee will be charged and show up on their statement.

If the customer does not want to pay for the fee, they will need to either pay with a debit card and enter their pin number or pay with cash or a check. Some cards, such as pre-paid cards, will not be charged a fee when they are ran as a credit. When a pre-paid card is used, the business will still have to cover the credit card processing fees for that transaction.

The states that do not offer the option to pass the fee on to the customers include: Florida, Connecticut, Oklahoma, California, Colorado, Texas, Kansas, Massachusetts, New York, and Maine. All of the other states will give businesses the choice to charge their customer the credit card processing fee or not.

Businesses will need to make the decision for their store regarding the fees in order to set up their merchant accounts properly. The processing fees may seem small, but they can add up quickly over-time. The business will be able to save more money over a period of time and earn more profits for their business when they pass the fees to their customers. Businesses will still be able to run reports from their merchant accounts on the fees they are charged from the pre-paid and debit cards. The reports will be able to show the businesses an average of what types of cards their customers are using on a daily basis.

Why Many Credit Card Processing Companies Have the Same Fees

Credit card usage is at a record high. Customers love the opportunity to use the cards that they have grown so accustomed to. This means that businesses that allow them to do so are the ones most likely to earn the business of those customers. The businesses that do not provide this kind of service can expect to struggle. The world has simply moved on from paper money onto credit cards in a lot of cases.

Many of the credit card issuers are known to advertise the same fees for credit card processing as one another. If they are all saying they charge the same amount of credit card processing, what is going on with that? The answer is that it has to do with the laws and regulations that are involved in this industry.

People often do not realize it but the credit card industry is heavily regulated. They have to follow certain practices that are deemed by the government in order to be in compliance with the law. These laws are created to help protect the consumer as well as the businesses that are processing the credit card payments made by customers. The people who have written these laws into place are doing their best to make sure that the credit card industry does not take advantage of customers.

The credit card companies are left to charge the same fees as one another because it is the maximum that they are allowed to charge per transaction. These regulations have been making the amount that they are allowed to charge fall more and more each day. This means that the credit card industry has had to apply what they can get from the merchant accounts.

The merchant accounts are the ones that have to take the hit for the usage of the card. This means that there are some businesses will do what they can to pass on the costs to customers. Many businesses these days have a minimum amount of merchandise that must be purchased in order to use the credit card. That means that customers may have to endure some of these fees as well if the company decides to impose such restrictions. However, it is important to note that this is entirely up to the individual business.

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