Otherwise, you are likely to lose no more than a dozen or so pounds off of these fees. If you have thousands of customers over the course of a year, they might add up to something significant. You are unlikely to notice these fees except in the grand scale of things. In fact, it is barely more than 1/10th of a single percentage point. 15% means that it is less than a whole 1%. It is important to distinguish the difference between a decimal of a percentage from a percentage. Discover charges the same fee, Visa charges. 13% to the businesses where its customers use their cards. For example, Mastercard charges a service fee of. The most common size of this kind of fee is a decimal point of a percentage. As mentioned before, that means that it is determined by the network which processes payments for the card a customer uses. This is the fee paid to the card network. We will start with assessment and service fees, as they are the fees that most people are intuitively familiar with. The three fees charged by those different sources are assessment fees (also known as “service fees”), interchange fees, and markups. Once you have a grasp on that, then you can start thinking about what fees they are charging you, why, and how much they are charging you with each fee. Knowing the sources of the different credit card fees is important to understanding what those fees are and why they are being charged. In certain regions, a card network might even be different from the card issuer. You can have a customer use a Visa card, meaning that Visa charges card issuer fees, while your payment processor is provided by Mastercard. They can also all be charged by a different company. One thing that is important to understand about all three of these fees is that they can all be charged by the same company. This is another convenience fee (be prepared to hear that phrase a lot), but while the processor fee is charging its fees based on the use of their machine, a card issuer will charge its fees based on the use of the card involved in the purchase. While a card network charges the customer a fee for the amount of money they are spending and the risk involved with it, the card issuer charges a similar fee to you. For that reason, even contactless pay, online payments, virtual terminals, and other credit payments charge these fees to you. You might have heard of these things described as “point-of-sale” machines.Ī payment processor company will charge you, the business owner, a fee that essentially exists as the cost of the convenience provided by these point-of-sale machines. These machines are the equipment you buy to allow credit cards to be swiped. The Payment Processorįees from the payment processor come from the actual machines you use to process credit card payments. But you only need to worry about that if you’re selling yachts. They might even expect discounts that respond to this fee. This fee is usually tiny, but if you operate a larger business, customers will notice it. That might sound strange, but most tiny fees like this in the world are the result of liability insurance. Card networks take fees to compensate themselves for the liability of having card holders. That means that, at least ostensibly, the person buying goods and services from you has an account of credit or debit with this card network. This is the group that owns the credit card that the customer is using. The three groups involved are the card network, the payment processor, and the card issuer. In fact, every group involved in the process of using a credit card to extract payment will get their own value out of it. However, that does not mean they only happen within the credit card machine. We call them “credit card machine costs” because they happen when you use a credit card machine.
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