Most Small Business owners in Orlando we’ve spoken to have asked “What Are Credit Card Processing Rates?”
Every credit card has a specific rate and transaction fee which is officially known as interchange. For example, a swiped visa consumer card has a rate of 1.51% + $0.10. This is just one example as visa has their logo on hundreds of different cards which range in rates from as low as 0.05% + $0.22 all the way up to 2.9% + $0.10.
Business owner merchants are required to pay their credit card processing company these non-negotiable interchange rates. It is strictly enforced that they pay these rates daily or monthly in order to maintain their credit card acceptance account often referred to as a merchant service account.
Business owners would rather accept cash however in 2016 it is not practical to only take cash payment. The reason is because consumers prefer using credit cards to purchase their goods and services. There are many advantages to using a credit card but one of the main reasons consumers choose to use card payment is for the rewards that they earn for every swipe.
What most people do not realize is that these credit card rates or interchange fees are paid by the business owner and then transfered to the cardholders in the form of rewards. A more indepth explanation on this process; The credit card processing industry, establishments involved, and fees collected – can be found by clicking here.
Why pay with cash when responsible credit card users can use a credit card that in return provides time leverage and monetary rewards? These rewards can be redeemed for a variety of options including cash back, paid airfare, hotel rewards, and shopping. It all just depends on the type of card and the terms and conditions.
Besides interchange rates – what other rates and fees are there?
There is one other set of non-negotiable rates. They are charged by the card associations Visa, MasterCard Card, Discover, and American Express.
These different associations collect a percentage and transaction fee every time their brand card is swiped. Although it’s a small percentage, it adds up quite nicely for these four associations as they are responsible for the majority of the billions of worldwide transactions each year.
Each brand charges slightly different however they are all within a few hundreds of a percent. Currently, Visa Brand collects: transaction amount MULTIPLIED by (0.13% + $0.0195).
Besides card association brands – what other rates and fees are there?
The last set of rates and fees are collected by the credit card processor which is often referred to as the Merchant Service Provider or Credit Card Processing Company. Here is an article explaining their role which is giving merchants the ability to accept credit card payments – Learn More.
Although these credit card processing companies are mandatory in order for a merchant to accept card payments, the rates and fees that they charge are actually negotiable. They charge a markup above the interchange and card association rates.
These companies have several responsiblities and will always charge a markup in order to make a profit. Successful credit card processing companies are built by processing the payments and providing service for hundreds and thousands of merchants. They can still be very successful entities by charging a fair markup versus a greedy merchant service company that relies on only a few highly profitable clients.
This particular segment of the merchant services industry is extremely saturated with competition. Because these processors markup rates are negotiable and merchants have unlimited options within the marketplace, they often code their rates making it extremely hard for a business owner to decipher the real cost.
Here is how we can help.
In order to truly identify your merchant services markup it will require a knowledgable and honest merchant specialist to generate a cost analysis. We are always more than happy to help you with this. There will be no pressure or obligation to join one of our programs.
To help you get a good idea of where you stand, here is a video where we go over several actual merchant statements and explain all the fees including interchange, card associations, and the credit card company markup. This quickly identify if you have a competitive deal or if you should search for other options.