Payment processing pricing FAQ (frequently asked questions)

We know pricing in payments is complex. We're here to help you understand how it works and give you the tools to get the right pricing from your payment processor. Hopefully we'll be your payment processor.

1. What is the difference between qualified and non-qualified rates?
2. Why is there a percentage plus a flat fee per transaction?
3. When does the international fee apply?
4. What is the difference between the monthly fee and the monthly minimum?
5. Why are American Express fees different from Visa, MasterCard, and Discover?
6. What is interchange plus pricing?
7. Why is it difficult to compare pricing among  payment processors?

 


1. What is the difference between qualified and non-qualified rates?

Qualified rates are for qualified transactions, which are generally referred to card present transactions. "Card present" really means that you physically saw the card.

The non-qualified rate applies transactions with most internationally-issued cards, corporate, and rewards credit cards. There are also specialized transactions like eCommerce and over the phone (AVS), that fall into non-qualified rates. Read more.

 

2. Why is there a percentage and a flat per transaction fee?

Banks charge flat fees for transactions along with the interchange rate. The percentage and flat fee depend on the type of card, type of business and how the transaction is processed. For processors, flat transactions fees particularly fund low dollar amount transactions because the percentage fee would be too low cost.

 

3. When does the international fee apply?

The international fee is charged for transactions from credit cards that are from out of your home country. These are sometimes called "cross-border fees" or "international acquirer service fees". This fee is an additional 0.5% to 1.25% of the transaction amount.

 

4. What is the difference between the monthly fee and the monthly minimum?

Clearly Payments does not have monthly fees, which are flat fees charged monthly, like $30 per month no matter whether you process anything. However, Clearly Payments does have monthly costs to our business and we need to cover those costs. The way we cover the cost is with a monthly minimum fee. Monthly minimum fee is how much is charged to you if your business does zero transactions to keep the account open. As you do transactions over the month, your percentage rate and transaction fees build up. Once you hit the monthly minimum in your fees, you will not be paying a monthly fee. This is why we believe monthly minimums are better for customers than monthly fees, which many processors charge.

Here's an example: if you process $1,000 in credit card sales over a month, and let's say your credit card fees totalled $22.20 for that period. If your monthly minimum is set to $25, you would be charged $2.80 ($25.00 - $22.20) for the month. That's much better than a flat rate of $25/mo. In general, monthly minimums are achieved with around $2000 in credit card sales.

 

5. Why are American Express fees different from Visa, MasterCard, and Discover?

American Express (AMEX) sets their own rates and based on region, industry and volume. AMEX also only reveals their rates directly to merchants via the phone. Businesses that have very little in credit card sales would pay around $8 monthly fee. Higher volume merchants will be charged a flat rate (i.e. 3%) or a rate and flat fee (i.e. 2.89% + $.15).

 

6. What is interchange plus pricing?

Interchange plus (aka "cost plus") pricing is a straightforward way to price. If you have cost plus pricing, it is more transparent because it is much more difficult to have hidden fees. In cost plus pricing, processors take all the bank fees, card brand fees etc, pass them straight through to the merchant, then add a mark up (i.e 20%) for their fees. So, if you were being charged 20% using interchange pricing, you would say, I am being charged "cost plus 20", which in general is a pretty good deal. You can check out all the interchange rates as they are published by Visa and MasterCard.

Clearly Payments primarily uses cost plus pricing. Some merchants prefer tiered pricing for personal preference. Overall, the best way to tell what you are being charged is to take all your fees and divide that by how much you processed in credit card sales. This is know as your effective rate.

 

7. Why is it difficult to compare pricing among  payment processors?

There are a couple reasons. First, there are several different ways processors price: flat rates, interchange plus, tiered. Here's a quick explanation of each:

  • Flat rate: you get a fixed percentage and fixed transaction fee for all transactions (i.e. 2.7% and $0.15 per transaction). This is the simplest to understand and predict.
  • Interchange plus (also called cost plus): you get a fixed markup on the wholesale costs (i.e. 0.3%, or 30 basis points, fee on all wholesale costs). This is the most transparent as long as there are not hidden fees.
  • Tiered: you get different rates for different types of cards and transaction methods. This is the most common and also complex to understand. If you know your stuff, you can used tiered to customize your rates to benefit your business.

The different pricing methods is one reason why it's difficult to compare. It's not always clear which one is being used. Secondly, many processors either don't explain or hide certain fees. Unfortunately this is quite common in the payment industry. That's way it is best to find a processor you trust.