Merchant Fees

Merchant fees are defined as the charges associated with credit card processing.
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Merchant Fees

When a business has a merchant account to process their credit card transactions they must pay a percentage for each of those transactions. These charges are a combination of the processor and the credit card companies.

Both parties want to make their profit off each credit card transaction.

There is the credit card fee, which generally runs from between 1.3% - 3.5%. On top of these fees, the processing company adds their fees.

The credit card fee is also known as the interchange fee. This makes sense when we reference interchange-plus plans.

When it comes to interchange fees, different credit cards charge different fees. Historically, Discover and Amex have been more expensive than Visa and Mastercard.

These rates are established by credit card companies and have little to do with the processing companies.

However, the processing companies offer different plans to their customers and they can tweak the rates to suit their needs.

There are three main types of plans: interchange-plus, tiered, and flat rate.

The interchange-plus plan takes the given fee from the credit card company, adds their flat fee and/or a percentage to that rate, and slaps it on each transaction.

Tier plans break each charge down into qualified, mid-qualified, and non-qualified. The percentage changes for each tier as does the processor’s charge. Transactions are placed into categories that are defined by each tier.

Flat-rate plans generally take the highest interchange rate and use it for all transactions. While this may save a merchant in the processor fee, it generally is more expensive.

In addition to these main fees, there are many other merchant fees. They generally break down into three categories: transaction fees, merchant account fees, and miscellaneous.

Transaction fees, as the name implies, pertain to the actual transaction and tend to be percentages based upon each of those transactions.

Merchant account fees cover the maintenance of the account. They have nothing to do with transactions, instead of focusing on service fees the processor charges to maintain the account.

Miscellaneous fees cover everything else, including chargebacks and fees needing special stipulations to trigger.

Many fees can be negotiated. This can be hard for a business representing itself, but a merchant account broker knows how to work with processing companies to get the best deals for their clients.

However, having a merchant account means there will be some level of fees charged. This is a part of the business and paying those fees ensures profit from credit card transactions.

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