Authorization Fee

Authorization fees generally cost a few cents to ten cents or so on average per transaction.
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Authorization Fees: What You Need to Know

What Happens During a Sale?

In a process that is intimately familiar to any business owner, there is a series of tasks that must be completed in order for a sale to be finalized:

  • Ring up the purchase
  • Insert, swipe, or tap card, please
  • Processing the transaction
  • The transaction is accepted
  • Transaction complete
  • The customer removes their card
  • Thanks for shopping with us

In a matter of seconds everything wraps up.

The transaction is complete. Money has changed hands, but do we take the time to think about what actually happens when the credit card is swiped?

It doesn’t matter the size of the business or what you’re selling. If you use credit cards, you go through this routine on a regular basis.

Behind the Curtain

Every time a credit card is used by our customers a complicated process begins moves pretty quickly. In fact, the longest part of the process is usually ringing up the cost of merchandise or services.

Once the charges are in the system, the register tallies and presents the options for payment.

In the time it takes customers to submit their credit card, insert, retrieve, and return it to their wallet, our system has communicated with the credit card servers and the transaction has either been approved or denied.

Money changes hands at the speed of data.

Business Cost

There is a cost to use credit cards. Credit card companies are also businesses, and they need to be paid for their services.

Every time a customer swipes their card, there is a small charge that has to be accounted for.

Amid the host of tiny transaction fees that will follow the path of a credit card transaction, the authorization fee is the first. Usually it is in the ballpark of pennies per transaction, but can change depending on the negotiated rates across the board.

The authorization fee is the first half of every transaction that runs through the payment processing company.

One thing to keep in mind is that you will pay an authorization fee or a transfer fee, but you shouldn’t be required to pay both.

Authorization Fee

As we said above, authorization fees generally cost a few cents to ten cents or so on average per transaction. While this isn’t a large fee in comparison to the general cost items being purchased, it should be budgeted for.

Ten cents on a hundred dollar item is negligible, but on a twenty-five-cent piece of candy at a grocery store, it can eat all your profits.

This is why we see minimum credit card purchases at some of our stores.

As business owners, it’s our responsibility to balance the convenience that credit cards afford our customers against the cost per transaction.

In modern economics, that may lead to slightly higher prices for our customers, but it affords them the ease and safety of using their credit cards in most locations.

In Summary

Authorization fees are the first part of every transaction. There are several different fees associated with every credit card use, but the authorization fee is one of the most universal.

Balancing and budgeting are a part of every successful business, and business owners should be sure to account for these fees.

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