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Types of Credit Card Processing Fees

There are seemingly so many types of fees charged against a merchant for every credit card

processing transaction that you understandably will feel nickel and dimed after a while. Let’s

look at them in groups to understand how they fit together to create the charges you see on

your statement from your credit card processing company each month.

Credit card processing fees fall into three categories: flat fees, transaction fees or fees based

on volume.

  • Flat fees – these are applied consistently regardless of sales or transaction volume. Automatic monthly and annual charges are flat fees. In addition, you will see:

o Retrieval fee – when a customer or their bank requests a copy of the sales draft to

verify a transaction. This may occur because the customer doesn’t recognize a

charge, the product

o PCI compliance fee – refers to a Payment Card Industry compliance fee, charged

by some processors for compliance scanning and assistance, other processors

charge the fee but give you no compliance support and some processors don’t

charge the PCI compliance fee at all. It is part of the Payment Card Industry Data

Security Standard (PCI DSS), a set of guidelines businesses are expected to follow

to maintain cardholder data security. A processor providing you with compliance

support charges from $70 to $120 a year or roughly $6 to $10 a month. If you are

paying a PCI compliance fee to your service provider, be sure to ask what support

services you are receiving for the fee. Visa and MasterCard do not charge PCI

compliance fees but they will invoke a compliance fine if a merchant’s compliance is

breached or if a non-compliant merchant experiences a security breach.

o PCI non-compliance fee – Some processors use PCI non-compliance fees as an

expensive monthly reminder to convince businesses to become PCI compliant.

Know that Visa and MasterCard do not impose fees on businesses that are currently

PCI non-compliant. PCI non-compliance fees range from about $10 to $30 a

month whereas a Visa or MasterCard compliance fine is typically a large one-time

charge after a security breach has happened. Since we know Visa and MasterCard

do not charge compliance or non-compliance fees, this revenue is pure profit for

your processor.

  • Volume fees – these fees are calculated against your monthly sales volume. If you use interchange plus pricing, your volume fee is a fixed, flat rate, such as 0.25%. If you use tiered pricing, your volume fees fall into three tiers that match your qualified, mid- qualified and non-qualified rate. You may also be subject to more than a single set of tiers.

  • Transaction fees – this group of fees includes such flat fees as authorization fees, return fees, address verification (AVS? fees and gateway fees. Be aware that more than one transaction fee may apply to a single credit card transaction. These fees, as a whole, often add up to more expense to you than the vilified credit card processing rates.

o Authorization fee – this is charged each time your business authorizes a credit card

transaction. This fee alone contributes more to your overall transaction costs than

the discount rate, especially with interchange pricing.

As an example, let’s say your average credit card sale is $25 and your interchange plus

pricing is 0.25% plus a $0.15 authorization fee and you process $8,500 in a given


Discount rate portion - (.0025 x $25) = $0.06

Authorization fee + 0.15

Transaction total $0.21

Discount rate over the month – (.0025 x 8,500) = $21.25

Authorization fee – (8,500 ÷ 25 x $0.15) = $51.00

Monthly total $72.25

Understand the overall effect of your processor’s authorization fee on your complete

costs and be sure to realize that more than one transaction fee is often charged for

each sale transaction.

o Per item fee – these are charged every time your credit card processing equipment

contacts your processor to give or get information. This is in addition to the

authorization fee.

o Communication Fee – if your credit card processing equipment dials your

processor’s toll-free number to send or receive information, you are charged a

communication fee in addition to the authorization and per item fees.

o Return Item Fee – whenever you issue a refund on a previously authorized and

completed transaction, you are charged a return item fee, again, in addition to per

item and other transaction fees.

o AVS Fee – retail businesses typically request address verification if they are keying in

a transaction for a card-not-present transaction and all electronic commerce

businesses perform address verification for each transaction. When your business

accesses the address verification system, the AVS fee is added along with the

authorization or per item fee on the transaction.

o Gateway Fee – this fee is assessed every time an online business sends information

to its gateway service provider and this fee is charged in addition to per item and

authorization fees. You may incur this fee as well as the AVS fee although some

processors will only charge the gateway fee rather than the AVS fee for e-commerce


o Wireless Service Fee – this fee is charged whenever a business passes

information to its wireless service provider and, you guessed it, these fees are

in addition to authorization, AVS and per item fees.

Action – Before deciding on which of the credit card processing companies you want to

work with, and before selecting tiered pricing or interchange plus, you must consider the

fees that accompany all your options. Get a free, no obligation analysis and comparison of

processing rates for your business by contacting Sales Sense Payments at 585-704-6453


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