In every business transaction that involves a credit card, the processing charges eat into your total profits. We normally see the processing fees for most credit cards to be around 2% of every purchase – but the specific charges for each card are in the below list. Businesses have the potential to lower the charges of the transaction by purchasing using a wide range of payment processors. They may also end up getting competitive rates which can turn out to save them a huge amount of money in a span of time.
To be in a position to do business around, it’s vital to be well well-acquainted with the topic of credit cards fee charges. And to keep you in the know, we’ve put together this article on the processing fees of credit cards, so that all the merchants have a better understanding of when they are setting up the payment modes for their business.
Check out the below listing of the network and average credit card processing fees:
- MasterCard – 1.55% – 2.6%
- Visa – 1.43% – 2.4%
- Discover – 1.56% – 2.3%
- American Express -2.5% – 3.5%
Although those are the units we usually see, it’s just the estimated average. In the real sense, greater things happen with regards to processing fees for individual and business fees and will hugely vary depending on a wide range of factors.
Here is an outline and a description of the fees that play a key role.
The Discount Rate
The sale percentage that is used to pay the credit card fees is called the discount rate. This includes all the fees that are paid to the network through interchange fees, card issuers, and assessment fees. These parts offer an overview of the factors that can affect these fees.
Processing Fees for American Express
This card network is special in its own ways because it issues cards. Amex’s exceptional position makes them work in a bit different way when the credit card processing fees matter. This issuer is a bit pricier compared to what other common networks charge, particularly in handling processing returns.
Opting for credit card payments is attached with other extra additional fees and costs to consider. In most cases, you’ll need to pay every month’s fees to your issuer, and also pay the charges of card readers.
Credit Card Interchange fee
The huge amount of all the transaction fees will fall under the interchange fees that are mainly collected by the card issuers. These charges are usually given as a percentage with an additional fixed charge, and always no more than 0.25%. These fees differ widely depending on various factors like:
Network: Discover, American Express, Visa, and MasterCard are the major credit card networks available, and all their interchange charges slightly vary. As mentioned earlier, American Express seems a bit pricier than the networks we have mentioned. In addition, within the individual network variation is also visible. For instance, World MasterCard will come with different rates of interchange than World Elite MasterCard.
Type of the Card
The type of card also dictates the fees that will be charged on a transaction like whether it is a credit or a debit card. Also, for business cards, the charge tends to be higher than the personal cards.
The mode of processing the payment
If you either swipe the card via a reader or dial in instantly to the system, will dictate the fee you’ll be charged for a certain transaction. Aside from that, the networks of credit cards will also disfavor between mobile and online payments, as well as the card that is not an available transaction. Overall, the fees that are felt on swipe cards are a bit lower.
Category Code of the Merchant
The way that your business is categorized and every sale will also have an impact on the rate of interchange you’ll pay in each transaction.
Visa and MasterCard have their interchange rates publicly known, and as such the merchants can know what to expect, with respect to the business type they do. Unluckily, the Discover mode of acquiring information is a bit challenging because they don’t make things open. You can also get the interchange rates after you’ve partnered with the popular MSP, which will offer you a code for verification.
This is a smaller fee that is charged for a credit card as a processing fee, and you’re charged by the card network like Discover, MasterCard, Visa, etc. These fees will also be based on a wide range of factors, and they are different from one network to the other. Others will request rates that are a bit higher rates for debit vs credit use, whereas others will charge a bit higher rates for greater transaction volume. Further, some incidental chargers may come up from particular transactions being different, like foreign transactions that are being processed.
Markup Fees for Merchant Service Provider
The MSPs that are tasked to handle your payment will also have a transaction fee for the work they do. The fees are mostly charged based on the particular transaction being made, just like the assessment and interchange fees. MSPs are always fighting for your business, and with respect to the transaction volume that your business does, the median amount that is involved in a normal transaction, and other nuances, will be charged differently as per the transaction prices. In that regard, we advise that you take time to shop around and know the advantages you get from handling your businesses with a specific MSP. Even though others may charge fees that are a bit higher, the upkeep charges may be a bit higher.
Processing Fees of American Express
As we pointed out earlier, this credit card is the most expensive one among other cards. Their discount rates can go even as higher as 3.5% which is way too higher than their Visa and MasterCard. Even though it is very expensive, Amex has always kept its pricing simple, as such merchants remit the same higher processing fees.