Processing fees and charges for credit card transactions

Processing fees and charges for credit card transactions

Of course, processing payments costs money, regardless of whether the merchant is a brick-and-mortar retailer or operates an eCommerce site. are not. Generally, that credit card transaction fee is structured in one of three ways:

Flat rate fee
Per-transaction fee
Evaluation fee for the amount of
money the merchant ultimately pays to facilitate the transaction is called the seller discount rate. Average merchant discount rates range from 2-3%, but they can be as high as 5% of a transaction, depending on the factors at play.

This merchant discount rate includes the following fees:

Exchange fees
This is a fee paid by the buying bank and the purchase processor to the issuing bank. The conversion fee is set and regulated by the credit card network. Visa and Mastercard update rates twice a year based on market fluctuations.

The conversion fee is usually split into two parts: a portion goes to the issuing bank, while a small part is retained by the card network. The rate at which the merchant pays is ultimately determined based on the following factors:

The physical presence (or absence) of the credit card
The processor or payment method used (in store, online online or mobile) Card
network
Card type (debit, rewards, gift card, etc.)
Merchant category
These questions will be reviewed, after which a flat fee will be applied. To illustrate, merchants may be required to pay a 2.5% per-swipe fee, plus an exchange fee of $0.10 per transaction.

Rates
and fees are determined by the credit card network in accordance with the overall transaction volume per month. The assessed amount may change periodically, depending on market factors.

When charged with exchange fees, reviews can account for 75% to 80% of the total card processing cost.

Marking
Marking fees are usually added by acquiring banks and processors. These add up to exchange and due diligence fees, and typically account for 15-30% of the total processing cost.

Ratings vary by processor and seller’s pricing model. Some sellers may not have to pay them, while others notice significant price increases.

Post-Transaction Costs: Fraud & Chargebacks
When a consumer doesn’t allow a fee (i.e. the charge is fraudulent) or they are not satisfied with a product or service, they can ask the bank to issue their charge. If the bank feels the consumer’s claim is valid, it will initiate a chargeback to reverse the payment.

Chargebacks are a common problem. As a result, processors and traders have to pay extra fees to compensate themselves for losses caused by excessive disputes.

Chargebacks are typically assessed by the buyer as a flat fee per chargeback (typically $20-100 per incident). Chargeback fees will increase over time. In fact, they can be so costly that they become unmanageable. When sellers receive too many disputes or chargebacks each month, they are responsible for losing their entire merchant account.

Rejecting a Credit Card Transaction
If a credit card is declined, the cardholder can be confused. It also loses the seller’s revenue, as the sale cannot continue.

When a rejection occurs, the POS terminal will provide the merchant with a rejection code to explain the reason the payment was declined. In general, however, the reasons lie in one or more of the following:

Wrong card number or expiration date
Insufficient funds
International transactions without prior approval
Technical problems
Too many concurrent purchases Exceeding
Transaction limit exceeded
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Merchants can contact the number on their POS terminal to contact the payment processor and discuss the issue. Cardholders can contact their bank or credit card network for assistance.

In any case, the drop is not always the result of something nefarious. However, it is a general rule to resolve the matter with the bank or processor as soon as it occurs to protect both parties from fraud.