Join the Merchant Services Exposed CO-OP Today!
Join the Merchant Services Exposed CO-OP Today!
When a business accepts a credit/debit card for payment, 3 entities get paid:
#1. The Payment Network Pass-Through Fees - Nicknamed the fee from the brand logo on the card - Visa, Master Card, Discover and AMEX. Currently they get:
Visa has 36 different fee levels and the most common is called Assessments and that fee gets $0.14% of all the credit card sales volume. All US Visa credit card transactions are also charged $0.0195 per transaction. That equals about 16 cents per $100.00 sale. Visa gets $0.13% of the debit card volume and $0.0155 per debit card transaction. That equals about 14.55 cents per $100.00 sale. The other fees form Visa add additional costs to the merchant depending on which fees apply!
Mastercard has 26 different fee levels and the most common is called Assessments and that fee gets $0.1375% of the credit/debit card volume and $0.0195 per transactions for sales under $1,000.00. That equals about 16 cents per $100.00 sale. Mastercard gets $0.01% of credit card volume and $0.0195 per transaction for sales over $1,000.00. That equals about $1.49 for a $1,000.00 sale. The other fees from Mastercard add additional costs to the merchants depending on which fees apply!
Discover gets $0.13% of card volume and $0.0195 per transaction. That equals about 15 cents per $100.00 sale. Discover also gets $0.025 per authorized transaction submitted for settlement.
AMEX gets 0.15% of the card volume. That equals 15 cents on a $100.00 sale. AMEX gets $0.30% of all Card Not Present volume, which would be any non face to face transaction such as a phone order or online payment. That equals an additional 30 cents per $100.00 sale.
#2 - The Interchange Fee - From Wikipedia, the free encyclopedia:
Interchange fee is a term used in the payment card industry to describe a fee paid between banks for the acceptance of card-based transactions. Usually for sales/services transactions it is a fee that a merchant's bank (the "acquiring bank") pays a customer's bank (the "issuing bank"); and for cash transactions the interchange fee is paid from the issuer to acquirer, often called reverse interchange.
In a credit card or debit card transaction, the card-issuing bank in a payment transaction deducts the interchange fee from the amount it pays the acquiring bank that handles a credit or debit card transaction for a merchant. The acquiring bank then pays the merchant the amount of the transaction minus both the interchange fee and an additional, usually smaller, fee for the acquiring bank or independent sales organization (ISO), which is often referred to as a discount rate, an add-on rate, or passthru. For cash withdrawal transactions at ATMs, however, the fees are paid by the card-issuing bank to the acquiring bank (for the maintenance of the machine).
These fees are set by the credit card networks, and are the largest component of the various fees that most merchants pay for the privilege of accepting credit cards, representing 70% to 90% of these fees by some estimates, although larger merchants typically pay less as a percentage. Interchange fees have a complex pricing structure, which is based on the card brand, regions or jurisdictions, the type of credit or debit card, the type and size of the accepting merchant, and the type of transaction (e.g. online, in-store, phone order, whether the card is present for the transaction, etc.). Further complicating the rate schedules, interchange fees are typically a flat fee plus a percentage of the total purchase price (including taxes). In the United States, the fee averages approximately 2% of transaction value.
In recent years, interchange fees have become a controversial issue, the subject of regulatory and antitrust investigations. Many large merchants such as Wal-Mart have the ability to negotiate fee prices, and while some merchants prefer cash or PIN-based debit cards, most believe they cannot realistically refuse to accept the major card network–branded cards. This holds true even when their interchange-driven fees exceed their profit margins. The fees are also the subject of several ongoing lawsuits in the United States.
With over 400 cards in circulation, the interchange rates vary considerably from credit to debit, swiped face to face card present transaction, key entered card not present transaction such as a phone payment, online sales and reward cards.
#3 - The Processor - That is the name on your monthly merchant service statement showing the breakdown of the merchant fees . Most of the big issuing banks offer merchant services directly and also have independent sales organizations, called ISO's, representing and selling merchant services for them. The Processors and ISO's fees are unlicensed and unregulated and are all over the place. This is the hardest part to understand and what is fair and legit. Unless you understand every fee being presented and charged, use the All-In-Rate tracker to see where you are at. Then monitor it monthly to catch any changes!