Simple Business Solutions Blog

Galaxies are complex, gravitationally bound systems that consist of billions of stars, gas, dust and an important but mysterious component called dark matter. This strange substance is an enigma to even the most intelligent humanoids.

Just as dark matter is a puzzle to scientists, merchant services -- more specifically the components of credit card processing fees -- are a puzzle to business owners.

Now, somewhere in a galaxy far, far away, there might be an intelligent life form capable of clearly understanding the ins and outs of credit card processing fees, but for most of us on living on planet earth, this area is clouded by baffling credit card lingo and contractual fine print.

To better understand the components of merchant services, let’s take a ride through cyberspace along the Credit Card Processing Fee Highway.

Credit Card Processing Fees

Here is the journey of a $100.00 transaction, and the fees the merchant pays for the privilege of accepting credit cards.

$100.00 Purchase

The amount the customer pays to the merchant for the product or service.

Interchange Fees

The issuing bank deducts $1.75 in interchange fees. Interchange fees are the revenue that issuing banks earn on each credit card transaction made by customers that have been issued credit cards by that bank. Interchange fees vary based on:

1. The type of card (debit card, credit card, rewards card, business card, etc.)
2. The type of merchant (retail, grocery store, gas station, e Commerce, etc.)
3. The type of transaction (Was the card present? Was the card not present? etc.)

Negotiable? Unfortunately, no.

Credit Card Processor Fees

The credit card processor deducts $1.50 (this is only an approximation - your merchant account may cost more or less). These fees are the revenue the credit card processor earns for providing payment processing services to the merchant. You might be wondering exactly what credit card processors do, so here you go. They:

1. Provide access to credit card and payment processing networks
2. Collect money from customers and deliver those funds to merchants
3. Provide technical support for the merchant’s credit card terminal or POS system
4. Provide customer service for business issues relating to the merchant account
5. Engage in marketing, sales and underwriting to sign up new merchants for their services

Negotiable? Absolutely.

Dues, Fees, Assessments

Visa, Mastercard and Discover deduct roughly $0.13 from the transaction. These represent a portion of the revenue earned by Visa, Mastercard and Discover for the use of their brand names, brand images and payment processing networks.

Negotiable? Unfortunately, no.

Reality Hits Home

In our example, at the end of the day, only $96.62 is deposited into the merchant’s bank account. That means $3.38 of every $100.00 in sales is consumed by credit card processing fees. If our merchant were processing $50,000.00 per month in credit card sales, he/she would be paying $1,690 in merchant services fees each month. That’s more than $20,000 per year in expense!

Not Sure if You Have a Good Deal on Payment Processing?

Contact Simple Business Solutions today for a thorough review of your merchant services rates.

• By Phone: 530.262.6060
• By Email: tim@simplefirst.com

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