Every month you receive a statement from your Merchant Service Provider. Listed in that statement are the fees which you are charged for using the card payment processing system. Add to that the business banking fees on your bank account, and it can begin to get confusing. What are these fees for, and who is being paid what?
In this article, explain what the typical monthly fees are (excluding hardware rental), who benefits from them, and why.
Who Receives A Card Payment Fee?
Card payment processing is a fairly complex process. There are a lot of factors involved in logging what your customer has spent, which bank will be sending you the money, and maintaining the software and hardware infrastructure that communicates and records these transactions.
The four main parties that carry out this work are:
1. The cardholder's bank. (Issuing bank)
2. The Merchant Services provider. (Worldpay, Elavon, Paymentsense)
3. Your bank, (Acquiring bank)
4. The principle Card Scheme member (Visa, MasterCard etc.)
What Fees Will I pay For Merchant Services?
These are the fees you pay to the cardholders (issuing) bank. They will be paid by your (the acquiring) bank account whenever a customer uses a credit or debit card. These fees help to offset the cost of administration and handling, as well as to provide a fund to cover fraud loss. Administration can include the cost of running customer helplines and systems maintenance.
An interchange fee is usually a fixed amount + a percentage of the sale. There are a variety of factors that affect interchange fees. These include:
1. The type of card used-Debit and credit cards have different risk elements.
2. The security protocol-If your customer uses chip and pin for a transaction, it may attract a different fee than if they used contactless.
3. Your businesses card payment turnover-The more you turn over, the better rates your rates are likely to be.
4. The industry you are in-High risk industries, where fraud is prevalent, or businesses with high bankruptcy rates may well pay higher fees
Scheme fees are the cost paid directly to the card scheme principles such as Visa or MasterCard. Visa and MasterCard are licensed brands. (You can read more about that here)
For issuing banks to use a particular scheme, a small scheme fee is paid for each transaction. Scheme fees are paid by your merchant services provider. Scheme fees contribute to the total merchant services fee you see on your monthly merchant services statement.
Acquirers like World Pay, First Data and Barclaycard all need to cover the cost of handling your businesses account. This is the third aspect of Merchant Fees
Merchant Service (Acquiring) Charges (MSC)
This is the fee you pay to the merchant service provider. These fees include credit card transaction charges, one-time fees, and monthly fees.
As you can see, there are several costs attached each time you accept payment by card. If you are still unclear about your monthly fees or are interested in seeing if you can reduce what you currently pay, our friendly, knowledgable staff would love to help.
Drop us a line here to start a conversation
There is another fee which is often overlooked by businesses. This is the PCI DSS non-compliancy fee which the majority of small companies are unaware that they are paying. Are you PCI DSS compliant? Find out more here
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