Below are the three major components of credit card processing costs. They consist of assessments, markups or discount charges and interchange fees.
Assessments – these are charges the card brands collect for each transaction. Depending on the card brand, these fees typically range from 0.11% – 0.15%. They will also charge additional costs for international transactions. Assessments are non negotiable and should never vary from processor to processor. Certain credit card processing companies will try to increase assessments in order to gain even more of a profit on each transaction.
Interchange Fees – These are the fees the card issuing banks charge for each transaction. They should represent the largest expense a merchant pays. These fees are set by the card associations and are available to find online. These fees again are non negotiable from processor to processor. Some processors will add a surcharge on top of the true interchange fee increasing costs sometimes an additional 1.50%. There are more than 600 different interchange rates and these credit card processing companies understand it is almost impossible to be able to match each transaction up to know if you are paying the correct cost or if there is a surcharge.
Markups – These are the fees above interchange costs and assessments. Markups are what the credit card processing company is essentially making on the account. These can include transaction fees, monthly fees, discount rates and various other line items. If you are signing up for a new credit card processing company it is very important to fully understand all the different markups and exactly how much the processing company will be making on the account. These fees are negotiable and should be paid very close attention as they tend to increase on a 3 month basis.
Credit card processing companies tend to make the statements as confusing as possible. It is very important to fully understand where the bulk of the credit card processing fees are coming from. Ideally, the interchange fees should be the bulk of the costs and the markup should be as low as possible. Of course, a lot of credit card processing companies tend to claim they do not have control over certain fees even though a lot of times that is not the case.