What Your Credit Card Processor Doesn't Want You To Know


It goes without saying that we live in a cashless society.  Between ApplePay, GooglePay, PayPal, and Credit Card Readers that connect to a smart phone, you do not need cash when you buy something.  

In a January 2019 article by the Wall Street Journal, credit cards captured the majority share of consumer dollars. In 2017, credit card payments and electronic payments accounted for 76.5% of consumer payments by dollars spent, while cash accounted for 15.5%, and checks accounted for 7.5%.  

That said, not accepting credit cards or electronic payment can mean a reduction in customers and a loss in revenue.  However accepting credit cards are not without fees. 

There is a common misconception that credit card processing fees are generally high.  However that is not the case. Credit card processing fees are determined by the Credit Card Issuer, the Credit Card Company (i.e. Visa MasterCard), and the Processor (i.e. the company processing your transactions).

Credit Card Companies like American Express, Discover, Mastercard, and Visa charge a fee know as the Interchange Rate.  This rate varies with each card.  Thus a card that offers Airline Points might have a higher interchange rate than a card that doesn’t offer points or rewards.  The Interchange Rate that you pay, is largely dependent on the type of credit cards your customers are using.

Another factor in determining credit card processing fees is the Processor. The processor can charge a fee based on the type of industry you are in, whether you swipe a card or you are just entering the number, and the total amount of transactions per month.  Retail stores that swipe, tend to have lower fees than service type businesses that just enter a customers number in a credit card terminal.

Thus the credit card processing fee you pay can be boiled down to your Interchange Rate, Plus a markup by the Processor.  How high this markup is, depends on whether you are dealing with a direct processor or an indirect processor.  The ABC Credit card processor is not a direct processor; thus they would have to find a company to process their credit card transactions.  Now the direct and the indirect processor need to get paid; so your rate will be higher as you have what is common known as a middle man fee. Indirect processors may also charge you additional fees that you may not be aware of.

Some indirect processors charge a statement fee.  It’s not as uncommon as you might think. Many processors will charge their customers if they want to receive a paper statement in the mail – and the fee can sometimes be $10 or more per month.  Other fees may include batch fees and customer service fees.  These are all considered junk fees and you can lower these fees by using a direct processor.

So what is the Easiest Way to Determine Average Credit Card Processing Fees?  The best way is to look at your credit card statement. Each processor sends you a monthly statement with the fees and the type of credit cards that were used that month. 

To have a credit card professional review your fees to see if they can be lowered, fill out the form below.