Keyed-in transactions such as phone and direct mail orders where the credit card is not physically available face a high risk of fraud, and therefore, businesses pay a higher rate to cover the increased risk. Mid-qualified rate: Transactions that do not meet all the requirements of payment processors are downgraded to the mid-qualified or non-qualified tiers.For example, transactions swiped in-person at a physical terminal with a standard credit card fall in this category, and carry the lowest risk and the lowest rates. Qualified rate: For a transaction to be placed in the qualified rate tier, it must meet all the processor’s requirements for processing.The categories include qualified rate, mid-qualified rate, and non-qualified rates. In a tiered pricing model, the processor takes the different interchange fees and groups them into three categories, depending on the level of risk associated with the transaction. Interchange plus plans are more complicated to understand than flat-rate plans, and it makes the bank statement more difficult to understand. For example, a processor may charge 0.5% + 15c per transaction above the interchange fee. With an interchange plus pricing strategy, the payment processor charges an interchange fee plus a fixed fee or percentage per transaction. Also, the business is aware of the fees they will incur every time they process a payment. Flat-rate fees are charged as a percentage of the transaction amount or as a percentage of the purchase plus an additional fixed fee.įlat-rate fees are preferred by new businesses that do not handle large volumes of transactions that allow them to negotiate a fee with the payment processor. Flat feesįlat-rate fees are payment plans where the payment processor charges the fee for all transactions, regardless of the type of card, brand, or whether it’s an in-store or physical purchase. Types of Fees Included in Payment Processing Fees 1. Online transactions and over-the-phone transactions carry a higher risk since fraudsters may use stolen or lost cards to make purchases, and therefore, attract processing fees. Payments made by swiping a card at the cashier are less risky, and therefore, are charged lower fees. ![]() Customers can make in-store transactions by swiping their card, over-the-phone transactions, online transactions, etc., and they all carry different levels of risk. The amount of payment processing fees will also depend on how the card is processed. In addition to the per-transaction fee, it may also charge a monthly maintenance fee and an additional fee for transactions that are disputed by customers. The merchant account provider charges a small fee on top of the interchange fee depending on the volume of transactions and type of business. A merchant account lets a company accept credit card payments, and the merchant account provider deposits the payments in the merchant’s bank account at regular intervals. Merchant account provider feeįor a business to process credit card payments, it must interlink the credit card network to a merchant account. The interchange rate is also affected by the type of card, the risk level of the merchant’s business, as well as how the merchant accepts the payment (swipe, online, or typing into a terminal). The interchange fees are set by each network, and they vary depending on the issuer. The purpose of the interchange fee is to help the issuing bank cover handling costs and the risk of approving the sale, as well as any fraudulent transactions that may occur. Interchange rateĪn interchange rate refers to the amount that the credit card issuer (such as Discover, Visa, and Mastercard) charges the receiving bank every time a customer pays using a credit card. The amount of fees that merchants pay to accept credit card payments depend on various factors. ![]() ![]() High-risk transactions such as e-commerce transactions and over-the-phone transactions come with higher processing fees than low-risk transactions such as physical swiping at a payment terminal.įactors that Affect Payment Processing Fees.The amount of payment processing fees depends on the pricing model preferred by the payment processor, as well as the level of risk of the transaction. ![]()
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