News > Featured Blog: Credit Card Processing Fees for Small Businesses

Featured Blog: Credit Card Processing Fees for Small Businesses

Credit card processing fees add up quickly for businesses. There are several different fees associated with credit card processing that can end up on your bill including:

Interchange fees
Assessment fees
Acquirer fees
Hidden fees
Recurring payment fees

Before negotiating lower processing fees with your network, it’s important to understand which fees your business incurs on your bills.

Interchange Fees

Interchange fees are the largest portion of the merchant discount rate that goes to the bank that manages the credit card. These fees are paid to the card-issuing bank to cover transaction costs, fraud, debt costs, and risk in approving the transaction.

Interchange fees on percentage-based fees on transactions that show up on bills from your payment processor. Oftentimes, they show up on your bills as a single interchange fee. However, this number could be a bundled amount as there are numerous types of interchange fees that could impact this “single” number.

Assessment Fees

Assessment fees are collected on behalf of the card issuer to go towards the credit card company. Also known as Network Access and Brand Usage fees (NABU fees), these fees cover operating costs for the bank that issued the credit card. Each credit card company has their own assessment fees. So, the best way to determine how much this fee will be is to contact your credit card issuer. Unlike interchange fees, assessment fees are fees that go directly toward the credit card company brand.

Acquirer Fees

Acquirer fees cover costs associated with network processing. They can also cover charges associated with account servicing. A merchant acquirer is typically a credit card service provider that manages electronic funds that clients pay to a merchant account. For example, they manage transactions that your clients pay to your account for your services or products.

Hidden Fees

Sometimes, businesses notice “hidden fees” that show up on their bills. These are unexpected fees or fees they were not fully aware of that are associated with their contract with their credit card issuer. Hidden fees include:

“Non-qualified,” “non-qual,” “nqual” transactions: These charges may apply to credit cards that offer benefits beyond the basic credit cards (i.e. rewards, corporate, cash-back)
Padded assessments: In some instances, processors charge more than what the assessment fee costs
Annual fees: any annual charge of maintaining your businesses credit card account
Foreign transaction fees: charges for transactions coming from other countries
Balance transfer fees: charges for transferring a balance from one account to another
PCI compliance fees: Fees used to offset the cost of protection and security for your credit card data

Recurring Payments

Recurring transactions may have a different fee percentage than an in-person transaction. These fees are automatically charged at the intervals of the recurring transaction. Oftentimes, these fees are used for businesses that offer repeat services or subscription-based plans for customers/clients.

There are two types of recurring payments: fixed and variable. Fixed is a set amount that happens on a continuous billing cycle. Variable recurring payments change based on changing factors of providing services. For example, electricity usage can change month over month. So, this recurring payment would be considered variable, as the cost per month is based on your usage.

How Much Are Credit Card Processing Fees?

The average credit card processing fees are 1.5% to 3.5% per transaction. However, fees can widely vary. Because these fees are percentage-based, the dollar amount of the fees changes based on the cost of the sale. The types of fees charged by your business’ credit card can vary as well. For example, the percentage of an interchange fee may be 3.5%, while the percentage of your assessment fee is under 1%.

To compare your processing fees to the average percentage, you will first need to calculate your credit card processing fees. From there, you will have a greater understanding of how our team can help your business negotiate lower fees.

Credit Card Processing Fees Comparison

Before your business experiences high credit card fees, it’s important to take a look at all credit card processing fees for various credit card networks. You can then compare prices to determine where your business’ current credit card fees stand amongst other networks. This may also help you determine whether your business should accept credit as payment for certain products or services.

Here is a comparison of four major credit card networks’ processing fees:

Visa: 1.4% – 2.5%
Mastercard: 1.5% – 2.6%
American Express: 2.3% – 3.5%
Discover: 1.55% – 2.6%

The above processing fees are only averages for each credit card network. The actual percentage of your fees is reliant upon the plan that you have with the network upon signing your contract with them. Your business may still have the opportunity to negotiate lower credit card fees.

Negotiating the Lowest Credit Card Processing Fees

Working with Five Star Merchant Advocates allows you to negotiate lower processing fees without having to switch service providers. Our team can help you secure more favorable rates while providing you with a greater understanding of the fees that your credit cards incur. We can also assess your fees to determine the best areas to drive down costs.

If you are ready to lower your credit card processing fees, call us today at 1-800-735-5715.