Every card payment carries three layers of cost. Only one of them is truly fixed. Knowing which is which is the key to paying less.
1. Interchange
Paid to the bank that issued your customer's card, at rates published by the card networks. Rates vary by card type and how the card is accepted. You cannot negotiate interchange, but how you process transactions can affect which rates apply.
2. Network fees
Assessments charged by Visa, Mastercard and the other networks. Like interchange, these are passed through and are the same for every processor.
3. Processor markup
Everything else is your processor's margin, and it is negotiable. It can appear as a percentage, a per-transaction fee, monthly fees or all three.
Pricing models
- Interchange-plus: actual interchange and network fees, plus a stated markup. The most transparent.
- Tiered: transactions grouped into "qualified," "mid-qualified" and "non-qualified" buckets. Hard to audit and often more expensive.
- Flat rate: one rate for everything. Simple, but it can cost more as volume grows.
Fees worth questioning
- PCI non-compliance fees, which are often avoidable by completing an annual questionnaire
- Monthly statement, batch, account and annual fees
- Monthly minimums
- Equipment leases, which can cost far more than buying a terminal
- Early termination and liquidated damages clauses in the contract
Start by asking your processor for an interchange-plus breakdown. If the markup is not clearly stated, that is the first conversation to have.