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
month.
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
transactions.
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
today.