We’ve been in the payment processing business for many years and processed millions of transactions. These are the most important questions that merchants have in pricing for payment processing.
The fees charged to a merchant for accepting credit cards is generally around 2.4%, so this means $2.40 for every $100 charged. This goes to several companies. Most goes to the bank that provided the credit card to the consumer. The rest goes to the card brand (i.e. Visa, MasterCard, etc) and the payment processor.
Banks charge flat fees for transactions along with the interchange rate (the percentage). The percentage and flat fee depend on the type of card, type of business and how the transaction is processed. Flat transaction fees exist to ensure there is a charge with low dollar amount transactions. For example, 2% of a $0.50 credit card transaction would not cover the general costs involved to process that transaction.
Monthly fees are the flat amount a merchant pays to keep the merchant account open. This is generally around $10 per month. Some processors charge up to $50 per month.
A monthly minimum fee similar to a monthly fee. It ensures there is activity in the merchant account. Merchants pay a minimum amount per month, even if they do no transactions. However, if the merchant does do a certain level of transaction the monthly fee disappears. In general, monthly minimum fees are much better than monthly fees.
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.
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