Accepting credit cards

Accepting Credit Cards: How Much Does It Cost?

Understanding the fees associated with accepting credit cards can seem confusing and overwhelming. However, the facts are pretty straightforward once you break them down. As a nationally recognized industry leader in credit card processing, International Bancard wants to help you learn about credit card processing fees. Not all credit card processing fees are negotiable, which is why it is important to understand what each fee is and how they work.

There are a few parties involved in between the cardholder and the merchant when it comes to the cost of accepting credit cards. These include:

  • Issuing banks: The banks that issue credit cards to consumers and businesses
  • The card associations: These are the companies that make credit cards, comprised of Visa, Mastercard, American Express and Discover
  • Payment processors: These are institutions, like International Bancard, that act as the intermediary between merchants and the credit card associations

Now that you know each of the parties involved, it’s time to look at the fees you will be expected to pay. Every time you accept a credit card, you are incurring three costs: Interchange, Assessments and Processing Fees.

Interchange: Interchange fees are assessed by the issuing banks, while the Card Associations determine the Interchange fees that are paid to the banks. Interchange rates are primarily based on industry, card type and transaction type. These fees are published rates and can be found on the Card Association websites. No payment processor can give you a lower rate or better deal on this fee. This is the same fee regardless of your payment processor.

Assessments: Assessments are fees paid to the Card Associations. Like Interchange fees, Assessment fees are the same for all payment processors. International Bancard has simplified these fees and assessments for your benefit, which can be found here.

Processing Fees: Processing fees are what the payment processor charges the merchant in order to perform the authorization, settlement and reporting of transactions. Additional processor services include merchant account underwriting, client care, technical support and risk monitoring.

Also on Why Your Business Should Accept EMV Chip Cards

Remember, as a small business, you do not have control over Interchange. Those are fees determined by Visa, MasterCard, Discover and American Express. However, you do have control over the processing fees that your merchant provider charges you. For example: you have control over the authorization/transaction fees, annual fee, regulatory fee and data breach fee, all of which are shown by our sample statement below:

International Bancard

As a merchant, you will receive a monthly merchant statement. This statement, as shown above, helps you to reconcile your fees each month. This sample is based on accepting six transactions in one month: two Visa cards, two MasterCards, one Discover and one American Express. This will help you understand where the fees are shown and what they mean. The fee types are color coordinated:

  • Red are fees from International Bancard, i.e. the “processing fees”
  • Green are the Interchange fees from the issuing banks
  • Grey are the assessment fees from the Card Associations

In this sample statement, your business accepted six transactions for a total of $3,850 in revenue. Thus, the total fees amounted to $80.30. (The Effective rate, total fees divided by total sales volume, is 2.09 percent in this scenario).

Credit card fees are not easy to understand, nor are they easy to reconcile because the type of payment cards that your cardholders present impact the cost of acceptance. It is extremely important to partner with a merchant services provider that you trust, so rest assured there are no hidden fees.

Content provided by International Bancard

Previous Article
Remote employees

4 Tips for Working With Remote Employees

Next Article
Build a Career Plan

5 Things Entrepreneurs Need to Build a Career Plan [Book & Audio Excerpt]

Related Posts
Read More

Entrepreneurs: How to Focus Ruthlessly and Win in 2022

New and aspiring entrepreneurs often fall victim to impatience and imperfection. When something’s not working perfectly to their standards (or worse, fails), they take it personally and don’t know how to move on to better iterations after the setback. But that’s what startup life is all about. To win, you have to learn how to...
Read More

How to Motivate Your Team Using Milestone Charts

When planning and tackling a project, there are a variety of ways to help your team stay on track. You can keep a list, create a Kanban board, or use other organization resources. Another popular method is to focus on reaching your project milestones. Milestones are important steps that need to be completed to finish...
Read More

4 Ways Business Owners Unknowingly Drain Their Monthly Budget

As an entrepreneur, you likely have a set monthly budget that consists of all of the overhead costs needed to keep your enterprise running smoothly. For example, your budget may include payroll for employees and freelancers, payments for Internet service and cloud-based project management software, rent for an office space, etc. It is paramount that...
venture capital
Read More

Startups and Venture Capital: What Do They Spend Their First Round On?

There are more startups than ever before post-pandemic. As the e-commerce industry continues to boom and work from home remains a trend amongst the corporate sector, more entrepreneurs are using their funds to create new digital startups in a number of niches. However, from staffing to manufacturing, starting a business does not come without its...