For the typical merchant, accepting credit card payments is a must. American consumers used credit cards in 23% of transactions in Oct. 2018, according to the Federal Reserve Bank of San Francisco. Merchants that don’t accept cards are at a big disadvantage.
Taking credit card payments isn’t free, though. Each transaction includes multiple fees that cut into the merchant’s profits. To find out how much merchants pay, we analyzed the factors that determine these fees. We also took a look at how much the average credit card processing fees are.
Here’s what we found.
Summary of key findings
- To process credit card payments, merchants must pay interchange fees, assessment fees, and processing fees. These fees go to the card’s issuing bank, the card’s payment network, and the payment processor.
- Interchange fees cost between 1.15% + $0.05 and 3.15% + $0.10 of per transaction.
- Assessment fees cost between 0.10% and 0.15% per transaction.
- Processing fees vary widely depending on the payment processor. Most charge a percentage of the transaction, a flat-rate fee, or both.
Types of credit card processing fees and costs
To start, we need to clarify the different types of credit card processing fees and costs. There are two fees, known as base costs, that are charged by the payment network (e.g., Visa or Mastercard) on every transaction involving one of their cards:
- Interchange fees: The bank that issues the credit card receives the interchange fee. For example, if you have a Chase credit card on the Visa payment network, Chase receives the interchange fees on your transactions.
- Assessment fees: The payment network receives the assessment fee. In the example above, Visa would receive the assessment fee on every transaction where you used your Chase Visa card.
Those two fees are non-negotiable.
In addition, merchants must pay the company they use to process their credit card payments.
This company accepts the credit card payment, either through a physical card reader or an online payment gateway, and sends the transaction to the payment network. Depending on the payment processing company, costs for this service could include any of the following:
- A per-transaction fee.
- A monthly service fee.
- The price of the equipment used to process transactions.
Read More: https://www.fool.com/the-ascent/research/average-credit-card-processing-fees-costs-america/