payment processing fees: what should merchants expect to pay?

PAYMENT PROCESSING FEESWhat Merchants Should Expect to Pay

A credit card payment solution provider will typically charge merchants the following costs: ● Interchange fees● Annual/Monthly Maintenance Fee● Statement Fee● Merchant Account/Customer Service Fees● Authorization Fee● Transaction Fee● Setup fee● Chargeback Fee● Discount fee

OVERVIEW

(Note: Mobile payment providers may have different fee structures

INTERCHANGE FEES

Every time a customer purchases something with a credit card, an interchange fee is paid by the merchant's bank to the card-issuing bank.

This is the price for having a credit card logo on your website. Interchange fees are the largest component of merchant account expenses.

INTERCHANGE FEES

The interchange fee can vary depending on a variety of factors, such as:•The type of business•The card brand•The type of card•Size of transaction•Whether the card is present or not

Most interchange fees are normally a percentage of the item price plus a flat fee. The average ranges between 1-3% of the total transaction value.

ANNUAL/MONTHLY MAINTENANCE FEE

The annual and/or monthly fee is charged by some providers to cover the costs of maintaining the merchant's account.● Annual fee could range anywhere from $79–$399● Monthly Fee: Minimum fee charged each month for maintenance. If

the merchant has a processing volume that exceeds the minimum monthly fee amount, then this usually does not need to be paid.

STATEMENT FEEThis is a monthly fee associated with the statement sent to the merchant at the end of each processing cycle.

The statement shows how much processing was done by the merchant during the month and what fees were incurred as a result.

The statement fee is often not directly linked to "paper" statements but rather general overhead.

MERCHANT ACCOUNT FEES

This is charged by some providers to pay for the cost of customer service.It is also referred to as a: ● Merchant support fee● Customer support fee● Service fee

AUTHORIZATION FEE

This fee is charged each time a transaction is sent to the card-issuing bank to be authorized. The fee applies whether or not the request is approved.

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TRANSACTION FEE

This fee is calculated every time a merchant experiences a successful transaction.

Typically, the transaction fee for CNP environments runs between between 20-35 cents.

For card-present transactions, it is between 15-25 cents.

SETUP FEE

A one-time fee charged by the payment service provider for preparing your business for accepting payments:● Opening the merchant account● Technical integration● Preparing a dedicated server● Checking compliance documents

CHARGEBACK FEE

● A chargeback will cost the merchant the chargeback fee (typically $15–$30), plus the cost of the transaction and the original order value

● Both Visa & MasterCard require all merchants to maintain a maximum 1% chargeback ratio to continue accepting payments

● If this is exceeded, the merchant's acquiring bank is fined anywhere between $5,000-$25,000, which is passed on to the merchant

DISCOUNT FEEThis fee is charged per each transaction and is a percentage of the order value amount. For example:$100 order x 3% discount fee = $3 paid to the payment processor

This fee usually runs between 1%-5%, depending on the merchant’s industry.

Typically, merchants receive a lower discount fee if the processing volume is higher -> more than $1M USD per month, for example.

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