September 22, 2016

Understanding retail credit card processing fees


You already know credit card processing fees can add up – and be confusing too. However, like death and taxes are to life, credit card fees are to retail: inevitable.

Inevitable doesn’t mean ignorable, however. One of the worst things you can do for your operation’s financial health is to pay these fees without understanding them, an oversight that can lead to overpayment and missed dispute opportunities.

Want to understand what really makes up the monthly and annual fees you owe toward credit card processing? Merchant Maverick recently published a comprehensive guide to processing fees, outlining the parties involved, where they fit into a transaction and a breakdown of each of the types of fees.  

For example, do you know the difference between transactional fees, flat fees and incidental fees? Did you know that between the three, you have the potential to be hit with:

  • Interchange reimbursement fees
  • Terminal fees
  • Payment gateway fees
  • Payment Card Industry (PCI) fees
  • Annual fees
  • Early termination fees
  • Monthly fees
  • Monthly minimum fees
  • Statement fees
  • Internal Revenue Service (IRS) fees
  • Online reporting fees
  • Network fees
  • Address Verification Service (AVS) fees
  • Voice Authorization (VAF) fees
  • Retrieval request fees
  • Chargeback fees
  • Batch fees
  • Non-Sufficient Funds (NSF) fees

Even if the intricacies of these fees are a little vexing, you probably at least know they’re coming. When you accept credit cards, you know you’re accepting the associated costs as a necessary evil.

But do you have a handle on the costs associated with accepting cash? Cash remains a significant factor in retail payment – according to a Federal Reserve Cash Payment Office survey, a full 40 percent of participant spending was in cash. A 2014 Economists Incorporated paper, Retailer Payment Systems: Relative Merits of Cash and Payment Cards, showed that in some verticals, the cost of cash is higher than the cost of accepting credit – even with all the fees outlined above taken into account.

Of course, reducing the cost of accepting cash is a lot easier than reducing the cost of accepting credit cards – much of the cost of cash is caused by operational inefficiencies. Learn more about the costs of accepting credit cards from Merchant Maverick’s The Complete Guide to Credit Card Processing Rates & Fees and learn more about the costs of accepting cash from the eBook The Hidden Costs of Accepting Cash: A Guide for Retailers.