What Are the Credit Card Processing Fees and Costs in the USA?
In today’s world, the use of electronic payment methods is on the rise. This includes credit card payments for online or in-store purchases.
However, one aspect of this industry that seems to be increasingly under scrutiny and discussion is whether or not we can trust these fees and costs being generated by financial intermediaries and if they are worth it to society as a whole. There are no easy answers but instead, myriad variables that contributors to this discussion must take into account, such as the scale at which we operate, the impact on sovereign state obligations, social inequalities in access, etc.
A credit card processing company in Atlanta can help with this issue by taking care of all your processing needs and letting you focus on what you do best: making sales. This way, consumers all over the world know that there is someone to contact if they have any questions about how to make a purchase on their card or if they need help using it anywhere in the world.
The first thing to understand about credit card processing fees and costs is that different credit card companies charge different fees. Unfortunately, there is no set industry standard for the costs associated with processing a credit card transaction. For example, one company might charge 1.5% per swipe while another might charge 3%. Therefore, it’s important to understand what the processing fee will be before you start accepting credit cards at your business or service location.
In addition to understanding the costs of processing transactions, it’s also important that you know what type of machine you’re going to need and how much money it will cost because, without one of these machines, your business or service location won’t be able to accept payments by credit cards at all.
Before we dive into what are the credit card processing fees and costs, let us understand the types of credit card processing fees and costs.
Various types of credit card processing fees and costs
Interchange fees: The interchange fee is paid to the bank that issued the credit card. For example, if you have a Chase Visa credit card, Chase receives interchange fees on your transactions.
Assessment fees: The assessment fee is paid to the payment network. In the preceding example, Visa would receive the assessment fee for each transaction in which you used your Chase Visa card.
Fees for payment processing: This is paid to the company that accepts credit card payments and transmits them to the payment network, either via a physical card reader or an online payment gateway. Costs for this service may include any of the following, depending on the payment processing company:
- A fee per transaction.
- A monthly service charge.
- The cost of the transaction processing equipment
Structures of pricing
Payment processors, in addition to the credit card network, charge fees. Processors typically charge fees according to one of the pricing structures described below.
Pricing that is fixed
Flat rate pricing means that the processor charges a flat fee that includes the interchange fee, the card brand fee, and its margin fee. This has the advantage of being predictable every month, which can make estimating your business costs easier. Because interchange fees vary depending on a variety of factors, a potential disadvantage of flat-rate pricing is a similar interchange fee, even though some variables could have reduced it.
With tiered pricing, the rate structure is categorized into types — typically, a lower-priced tier known as “qualified” and higher-priced tiers known as “mid” or “non-qualified.” The low qualified rate is often what draws merchants to this type of pricing; however, it only applies to a few transactions, with the majority ending up in higher tiers. The most common pricing structure in the United States is tiered pricing. Companies should be aware of the potential drawbacks. One disadvantage is that your lower qualified rate may only apply to certain types of cards or transactions.
Exchange plus pricing
The processor will consider the lowest applicable interchange fee and charge you a fixed one over and above the interchange-plus pricing. The benefit is that you will receive the lowest interchange fees possible while always knowing what the fixed fee will be.
Pricing for memberships or subscriptions
Membership or subscription pricing imposes a monthly fee as well as a one-time charge for each transaction. In this pricing structure, the processor does not charge a fixed percentage fee, so the overall charges can be lower. However, while the charges may be lower, whether they are lower or not is highly dependent on factors such as the number of transactions and business volume.
Credit Card Processing fees and costs in the USA
Typical Costs from Major Credit Card Companies
|Credit Card||Average Interchange Fees||Average Assessment Fees|
|Visa||1.15% + $0.05 to 2.40% + $0.10||0.14%|
|Mastercard||1.15% + $0.05 to 2.50% + $0.10||0.1375% (transactions under $1,000); 0.01% (transactions $1,000 or more)|
|Discover||1.35% + $0.05 to 2.40% + $0.10||0.13%|
|American Express||1.43% + $0.10 to 3.30% + $0.10||0.15%|
Credit Card Processing Costs on Average
The fees for credit card processing will vary depending on the merchant services provider you select. In an interchange-plus scenario, interchange and assessment fees are charged in addition to a flat monthly per-transaction fee. The monthly fee could range between $9.95 and $20. The transaction fee can range between 0.18% plus $0.10 and $0.50% plus $0.10.
As credit cards become increasingly prevalent, the typical merchant has no choice but to pay a processing fee to the card issuer and payment processor. You can price your products appropriately and ensure you’re making enough money on each sale by understanding how much you’ll pay on each transaction.
Being a cash-only firm might cost you a lot of customers if your industry is like that of the majority of others. Don’t, however, pay excessive credit card processing fees and costs. By browsing around, you can get the most affordable options that meet your needs for merchant services.