Roughly 80 percent of American shoppers cite plastic as their preferred payment method. The simple act of hanging credit card logos on your store window or embedding them on your website can help attract more traffic. It’s clear that accepting credit cards can be a great way to boost sales. However, credit card acceptance carries a number of merchant fees. Paid entirely by you (the retailer), these charges are designed to cover payment processing costs such as:
- Call center expenses
- Rewards and benefits
- Administrative overhead
- Payment data security
Below are just some of the types of merchant fees you can expect to pay once you begin accepting credit cards within your business.
1. Wholesale Credit Card Fees
Also known as “interchange” or “base” rates, wholesale fees are non-negotiable charges established by the card-issuing banks and credit card associations. Think of these as the “wholesale” price that all merchants pay — no matter what.
2. Markup Credit Card Fees
Also known as the “retail” rate, markup fees are what payment processors charge to cover many of the risks associated with credit card acceptance — including fraud, chargebacks and data breaches.
Although markup fees are somewhat negotiable, the exact amount depends on the payment processor and your perceived risk as a merchant:
- Qualified merchants pay the lowest rates.
- Mid-qualified merchants pay slightly higher fees.
- Non-qualified merchants pay the highest markup charges.
Additional Credit Card Merchant Fees?
The wholesale and markup represent the two largest credit card fee categories. Yet, depending on the nature of your business, you may have to pay some or all of the following expenses:
These are monthly and/or annual charges that you pay, regardless of transactional volume. Think of recurring fees as membership dues. Fortunately, it’s possible to negotiate these charges. In fact, many payment processors don’t use recurring fees.
PCI Compliance Fee
All merchants accepting credit or debit cards must adhere to the PCI security standards. Some payment processors charge a PCI fee to keep your account compliant, while other processors only charge this fee if you are not compliant.
POS Terminal Fees
If you operate a brick-and-mortar store and lease your credit card reader, there will be monthly charges for this service. Many merchants avoid this expense by buying their own POS terminals outright.
Payment Gateway Fees
If you sell products and services online, you’ll need a payment gateway to securely accept credit cards. Most processors charge a small fee for this service. Though it’s possible to shop around.
Early Termination Fees
You only have to pay this charge if you prematurely end your payment processing agreement with a given vendor. Some providers offer shorter contracts or pay-as-you-go packages that help you avoid early termination charges.
Paper Statement Fees
Paper-based billing is already bad for the environment, but this fee makes it bad for your pocketbook, as well. If your payment provider has electronic invoicing, you should take advantage of this option. Doing so is cheaper and greener.
A Final Word About Credit Card Merchant Fees
The true list of potential merchant fees is extensive. In addition to the charges listed above, there are minimum monthly charges, and even IRS reporting fees.
Although most merchants do everything they can to keep costs down, some credit card fees are worth the extra price. For example, add-ons including data security, fraud protection and customer support can help create a smoother shopping experience for your users. This can lead to more sales and higher profits.
As you begin looking for credit card solutions, it’s better to focus on the value you receive — and not on the money you pay.