Since there is more risk of fraud when the card is not present, businesses have to pay more towards credit card processing fees for online transactions compared to their counterparts where customers swipe their credit cards.Īlso the industry type matters. When John bought a book online the transaction was called “card not present”. “Card not present” is when the card numbers are keyed in either through a telephone or through a website. “Card present” is when the card holder physically swipes his card like John did when he bought coffee at Starbucks. One of the most important factors is whether the transaction type was “card present” or “card not present”. How much money a business pays in card processing fees also depends on many other factors. The next chapter has more information about how to go about finding the best credit card processor. This is what is negotiable when a business is looking for a merchant account. The remaining $0.07 is taken by the merchant account provider. In the USA, the interchange fee is usually around 1.77% + $0.10 per transaction.Ībout $0.18 of the $2.00 fee is taken by Visa or MasterCard. The “interchange fee” is always made up of a flat rate for each transaction plus a percentage of the transaction amount. However, the “interchange fee” is set by Visa or MasterCard and it is non-negotiable. It might seem like the “interchange fee” should be dictated by the credit card issuing bank. The fee taken by the credit card issuing bank is called an “interchange fee”. It could be as high as $1.75 of the $2.00 fee. The credit card issuing bank takes the biggest chunk of the fee. This $2.00 fee is also called “merchant discount”. What happens to the $2.00? That is divided between the bank that issued the credit card to John (Wells Fargo in this case), Visa and the merchant account ( Chase bank in this case). Depending on what kind of rate is negotiated between Starbucks and John’s merchant account (Chase Bank in this case), Starbucks might have to pay anywhere between 2% to 3% of the transaction amount. However, Starbucks will not get the whole $100.00. On the credit card statement, John will see a charge of $100.00. He swiped his credit card at Starbucks and paid $100. Let’s say that John bought coffee for the entire office and it cost him $100. Since a credit card processor has to make money on top of the interchange fee, it is highly unlikely that the fee being charged by this “credit card processor” is a mere 1.05%. The interchange fee imposed by Visa and MasterCard itself is more than 1.1% in most cases. For example let’s take a look at this advertisement: However, many of those are actually fraudulent. If you Google for “merchant account” or “credit card processor” you will find numerous businesses offering this service. In order to find the best credit card processor for your company, you need to understand all the components of the pricing structure.
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