In many cases, interchange fees are calculated as a percentage of the total transaction, with a fixed amount added on top.Īs with assessment fees, interchange fees differ between issuers. Interchange fees are the largest part of the discount rate, and they go toward credit card issuers, such as banks and other financial entities. They may charge higher rates for high-volume transactions, for example, or they might offer lower assessment fees for debit cards versus credit cards. Networks vary in how they calculate assessment fees. The assessment fee is a relatively small part of the discount rate, and it is paid directly to Visa, Discover, MasterCard, or one of the other credit card networks. In the sections which follow, we’ll discuss the structure of each of these fees for credit card processing and what they mean for your business. If you’re charged $30 to process a $1,000 transaction, $30 is the discount rate.ĭiscount rates have three primary components: The discount rate is a broad term for the total fraction of a sale that goes toward a processing fee. The financial side of your business will run more smoothly if you understand these parts, how they interact, and who is responsible for each one. If you research ‘fees for credit card processing,’ you’ll discover that they aren’t singular values, they’re made up of several different parts. What Are The Three Credit Card Processing Fees? Rather than hiring engineers to build a processing system for your legal practice, you can use theirs, in exchange for a fee. Processing fees for credit cards are what credit card networks charge in exchange for making this infrastructure available to merchants. The technical infrastructure that Visa, Mastercard, and other credit card networks use to process credit card transactions has to be built, maintained, and upgraded-all of which costs money. If there are costs to using credit cards, it shouldn’t come as a surprise that there are costs to accepting them as well. Besides the time involved, a hard credit check can also cause a temporary decrease in your credit score.Īll of this is part of paying for the convenience credit cards offer. To get a credit card, you usually have to submit an application, which can involve filling out paperwork, going through a hard credit check, and more. Getting and using a credit card isn’t free. Why do Providers Charge a Processing Fee for Credit Cards? If your total profit on a given transaction is $40, then a credit card processing fee could eat up nearly all of it.īecause credit cards are ubiquitous and there are subtleties to accepting credit card payments, it’s pivotal to understand credit card processing fees and how they work before choosing a processor. The overall impact depends on your margins. A $1,000 transaction, therefore, could have fees ranging from $15 up to $35. In most cases, credit card processing fees will run between 1.5% to 3.5% of the total value of a transaction. This is in exchange for having the payment securely processed by a credit card network. If you’re running a legal practice, there’s a good chance that most of your clients, if not all of them, will expect to be able to pay for your services with a credit card.Īnd this means you need to understand the intricacies of working with credit cards.Ĭredit card processing fees, also known as credit card transaction fees, are charges that are paid by merchants whenever they accept a credit card payment. It’s pretty rare these days to shop at a place where credit cards aren’t accepted. This is just as true for merchants as it is for consumers. They’re used for everything from making large, one-off purchases like jet skis to more banal, weekly expenses like groceries. Credit cards have become a staple of modern life.
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