Any time you begin accepting credit cards within your business, you can expect to pay certain fees. These charges can sometimes become complicated. Though the more you understand how card processing fees work, the better positioned you are to negotiate better rates or dispute unnecessary charges.

The following is a breakdown of the most common credit card processing fees in the industry:

1. Wholesale Fees

Also known as base or interchange fees, these wholesale rates are non-negotiable and determined by the credit card associations and issuing banks. They remain consistent across the industry, so you can’t really shop around.

2. Markup Fees

This is the "retail" rate that you pay directly to the credit card processor. It's basically the wholesale fee plus that processor's base profit. Markup fees vary wildly within the industry — so it pays to research for the best rates.

Keep in mind that some processors deliberately make their pricing models complicated in order to hide this markup. However, if you know the wholesale rates for MasterCard or Visa, for example, you can get an accurate idea of what the true margins are.

3. Terminal Fees

If you operate a brick-and-mortar store and lease your credit card terminals, you can expect to pay an ongoing usage fee. This is why many merchants prefer buying their credit card readers outright. If you haven't switched to EMV credit card processing already, this is the perfect time to do so.

4. Payment Gateway Fees

These are similar to terminal fees, but they apply to the e-commerce world. Some processors offer this service for free, so be sure to browse first before making any commitments.

5. Annual Fees

You may be required to pay a flat annual fee — regardless of your transactional volume. This charge isn’t standard across the industry, and many providers will negotiate with you.

6. Monthly Fees

Some providers charge a flat monthly rate for "account management" or some other related service. This money is usually used to cover call-center costs. It's hard to negotiate this, but you can always look for lower monthly fees.

7. PCI Compliance Fees

This charge is one of the most interesting:
 

  • Some providers charge a special fee to "keep" your account PCI-compliant. You're basically paying a premium for protection, however you’re still ultimately responsible for following the security standards to remain compliant.

  • Other providers charge this fee if you "fail" to remain compliant. You’re basically paying a penalty.

  • Others will wave this fee completely and do everything they can to keep your account in good standing.

8. Minimum Fees

Your provider may charge a penalty if your merchant account doesn't process a certain number (or dollar amount) of sales every year. This is usually negotiable. Plus, since many providers offer tiered services, you can select whichever account level most closely reflects your sales volume.

9. Early Termination Fees

If you sign a contract and cancel the agreement, you can expect to pay a penalty. Yet sometimes you're better off jumping ship and paying the fee if the service isn't worth it.

10. Paper Statement Fees

If you receive your merchant account statements in the mail, you're probably paying a premium for this service. By switching to online statements, you can save on materials and postage.

11. IRS Reporting Fees

Your provider will automatically report all income directly to the IRS (1099-K). This is usually not negotiable.

Cost Conscious vs. Value Conscious

No one enjoys paying fees, and it makes a lot of sense to reduce these expenses as much as possible. However, depending on your business, there may be times when paying a premium is worth it. For example, investing in PCI-compliance may be

 



Before adopting a "no frills" approach to credit card processing, you should talk with your provider and design a package that maximizes the benefits and minimizes the costs.


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