How to interpret credit card processing fees and invoices

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Credit and debit card purchases make up a large percentage of sales for most businesses, so it is important for business owners to understand the fees charged by a card processing company. Unfortunately, these invoices can be confusing, leaving the reader unclear about what is charged and why.

For small or high-risk businesses, these invoices are often more complicated. It’s crucial for any business owner to understand payment processing invoices to fairly evaluate the fees assessed by card processing services, and that’s especially true for high-risk merchants. 

This is a guide to interpreting credit card processing fees and invoices. 

Processing fees

Your payment processing company makes money from fees. These businesses are known as merchant services providers (MSP). An MSP functions as a go-between for clients and credit card and debit card companies. 

The average processing fee is about 2% of each transaction. However, the amount charged varies depending on the processing company. For instance, American Express processing fees are as high as 3.5%. Business owners can sometimes negotiate processing fees to get a lower rate. 

Discount rate and interchange fee

The processing fee is the sum of several fees. These include a discount rate, which is the percentage of a transaction that goes toward processing fees. The interchange fees are the largest part of the processing fees and mostly go to the credit card companies. They are usually a percentage of the transaction plus a flat fee, which is usually 25 cents or less.

The interchange fee is determined by the following:

  • Network fees: These vary among companies such as Mastercard, Visa, American Express, etc.
  • Card type: Credit cards typically charge higher fees. Business credit cards and reward cards are the most expensive to process. 
  • Method of processing: Swiping a credit or debit card is less expensive for a business than an employee keying in the card numbers. In addition, online transactions and “card not present transactions” typically have a higher rate.
  • Merchant Category Code (MCC): Business and transaction categories affect the fees charged. For instance, a ground transportation service will pay less than a restaurant. Typically, the codes affect the fee total by a few tenths of a percent. However, high-risk businesses may be assessed a higher fee.

Assessment fee

The assessment fee is relatively small and is paid directly to the credit card companies. This fee may vary depending on if a credit card or debit card was used for the transaction. 

Some card issuers charge more for high transaction volume, while others charge more for foreign transactions. Study the terms and conditions to understand exactly how this fee affects your business. 

MSP fees

Merchant service providers charge a fee also. Typically, this is a flat fee and a percentage of each transaction. Reputable MSPs set their rates according to factors such as the number of transactions and the average amount per transaction. These companies will consider many factors before offering you a rate, which will be competitive because many companies are fighting for mainstream business. 

Unfortunately, some MSPs will not work with high-risk businesses, such as CBD shops or pawn shops. If an MSP does work with high-risk businesses, it may charge a higher fee. 

High-risk businesses do have options, however. FLEX Payment Solutions specializes in serving high-risk businesses and niche companies. 

FLEX as a solution

FLEX Payment Solutions offers custom solutions for your business. We don’t limit our services just to traditional companies. Our team specializes in card processing for all types of businesses, including those that other payment companies reject, including high-risk merchants like CBD stores, pawn shops, gun retailers and consumer financing operations. 

FLEX understands the challenges facing high-risk businesses and can help keep them in compliance with state and federal transaction regulations. In addition, the FLEX team prides itself on providing excellent customer service and security options. We offer businesses a suite of flexible processing solutions to maintain proper cash flow in modern times.  We have a network of specialized banking partners with alternative processing experience and powerful in-house technology, which fuel a program that is built to help new or well-established companies.

High-risk business owners should analyze payment processing invoices to ensure they’re receiving competitive rates. Then, contact FLEX to see how our team can provide alternative payment processing solutions.

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