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 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.
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.