A BIN fee is a fee that a credit card processor or ISO pays to their member bank to access its BIN. A BIN is a bank identification number.
Companies that offer merchant services pay BIN fees. Examples of businesses that pay these fees include credit card processors, also known as merchant account providers, and ISOs (Independent Sales Organizations). These companies work with sponsor banks, also called member banks or acquiring banks, to provide services.
In exchange for their services, sponsor banks charge BIN fees.
It’s less common for merchants to pay a BIN fee. While some credit card processors pass the fees to their merchants, it’s relatively unusual to see a BIN fee on a merchant statement.
When processors do charge this fee, it can be in the form of a flat fee or a percentage of monthly processing volume. Sometimes the fee is bundled with other charges. It’s usually charged monthly, as opposed to quarterly or yearly.
If you’re a business owner, you can ask your merchant account provider if they’re charging you a BIN fee.
To understand BIN fees, it helps to understand the relationship between credit card processors and sponsor banks.
Let’s use ABC Merchant Services for our example. ABC offers services including credit and debit card processing for small businesses. To provide these services, ABC works with a sponsor bank, which we’ll call XYZ Bank.
Sponsor banks are responsible for the financial risks involved in credit card processing. These risks include chargebacks, refunds, and data breaches. Sponsor banks also fund merchants for their credit card transactions and bill cardholders’ banks.
These responsibilities are why credit card processors need to work with banks to provide a full range of services. Some acquiring banks offer processing services themselves, but most are independent third parties who work with processors.
Here’s where BIN fees come in. Credit card processors pay them to access their sponsor bank’s BIN or BINs. In our example, ABC Merchant Services pays a fee to XYZ Bank each month to use their BIN. They’re also paying for all of the services that XYZ Bank provides. This relationship is beneficial for both parties and ABC’s merchants.
When ABC Merchant Services boards new merchant accounts, these accounts have a relationship with both ABC and XYZ Bank. ABC assigns each merchant an account number, and the first few digits of this number correspond to XYZ Bank’s BIN.
Merchants who process with ABC Merchant Services might not be aware of XYZ Bank. They’ll work directly with ABC for boarding, monthly statements, help with transactions, and more. But XYZ Bank is working behind the scenes.
ABC might or might not choose to pass their BIN fee to their merchants. If they have merchants whose business model is riskier, they might charge this fee to help mitigate their own risk. If so, they can either list it on the statement as a BIN fee or bundle it with other fees.« Back to Glossary Index
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