How Do Credit Card Processing Fees Work?
💳 A typical transaction includes the customer's bank, the credit card brand, the card network, the processor, and the merchant (you). The largest fee, the interchange fee, comes from the customer’s bank, while the card brand charges an assessment fee, and the network charges an authorization fee. The processor charges the discount rate, which is the only fee a merchant can negotiate.
To lower processing fees, merchants can choose between pricing plans: interchange-plus, flat rate, and tiered pricing. Tiered pricing is less transparent and should be avoided. Merchants can negotiate lower rates based on their plan and ensure secure transactions, which can reduce interchange fees. Four ways to secure transactions include adding detailed info like addresses, using secure gateways, capturing pre-authorizations promptly, and avoiding over-capturing beyond the pre-authorization amount.
0:00 - Credit Card Processing Fees
0:36 - Entities Involved in Credit Card Processing
1:08 - Credit Card Fees - Each Entity
1:51 - How to Lower Processing Fees
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➡️ Can Businesses Charge a Fee for Paying with a Credit Card?
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