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Credit card processing pricing

It can be difficult to sort out exactly what you’re paying for your business credit card processing and the end result can be very confusing for anyone to figure out. So my objective here is to try to describe plainly what the components of credit card processing prices are.

There are three distinct parties in the credit card transaction: the merchant, the processor and the banks issuing the cards (Visa, MasterCard, Discover). Credit card transaction processing, also called non-cash payment processing, is basically composed of two types of fees: base fees and markups. Markups are also referred to as a merchant discount.

Base fees

These fees include interchange fees (paid to banks that issue Visa, MC and Discover cards) and assessments.


Interchange fees are identical for all processors, from the smallest to the very largest. The banks issuing the cards fix the rates they charge you when you accept their credit cards, depending on:

(a) How you’re processing (swiping, keying, e-commerce) transactions

(b) Type of card (reward, consumer, business)

(c) Your merchant category code, plus

(d) Several other variables that are part of the interchange fee formula

Most interchange fees include two components, a percentage and a transaction fee. It’s customary to see interchange fees expressed as, for example, 1.51% plus $0.10 or 1.51% and .10c swipe.


The major credit card brands make their money with an assessment on every transaction you process. Just as with interchange fees, assessments are identical for all merchants and processors; no processor can get you a lower rate on assessments: they are fixed. Period.

The assessments for each card brand are changed periodically and it is worthwhile to be aware of these changes. The only pure assessment from each card is the percentage charge they apply to business volume. Other fees included in the assessments – such as network access, foreign handling and others – are variable because of the nature of individual transactions and only kick in when they qualify.

Markups (merchant discount)

The markup component is the only part of the processing fees where you

have an ability to negotiate your credit card processing costs. With that

said, not everything included in the markups component is negotiable or

it may be negotiable only to a point. That’s why it’s essential to

understand the components of these fees.

Markups are significantly different between processors based on the

amount, the pricing model and the types of fees they charge. That’s why it

can be difficult to accurately compare credit card processing among

processing vendors on the open market. Each will tell you they have the

best rates and run through example scenarios that favor their formula.

Types of markup fees

As explained above, interchange fees and assessments are identical for all processors. What gets important here is how the processor passes these costs on to its merchants (you). The most basic pricing models are:

  • Interchange plus (also called pass through) – the processor earns a fixed percentage regardless of the interchange criteria. This fixes the markup regardless of the type(s) of cards you accept or how you process it (swipe, keyed, e-commerce).Interchange plus provides for interchange credits on refunds. When you issue a refund, you should receive a partial credit of the original interchange fee you paid. This feature is not available on bundled pricing and you should monitor your processor to make sure you get your interchange credits on refunded transactions if you are using interchange plus.

  • Bundled (tiered or bucket) – in this pricing model, the processor categorizes interchange fees into three pricing tiers referred to as qualified, mid-qualified and non-qualified. While three tiers are most often used, there can also be separate tiers for different types of cards. For example, one type of tiered pricing where credit and debit cards each have their own set of three tiers is becoming much more common. Within the bundled pricing model, the credit card processes uses an interchange qualification matrix to determine which interchange fees are directed to each of the three tiers. The biggest complaint merchants have about tiered pricing is that there isn’t always a way on your statement to determine into which tier individual interchange fees are routed. Tiered pricing can allow a processor to adjust the fees you pay without having to disclose the change to you. They can do this by routing more interchange fees to the less advantageous (to you)) mid- and non-qualified pricing tiers. Because there is no consistency or regulations regarding interchange qualification, it makes it impossible for you to compare tiered pricing among different processors.

Action – What credit card processing fees are you being charged? For a free comparison and analysis, please contact Sales Sense Payments at 585-704-6453 today.

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