Processing fees are a standard business practice, but it can be challenging to understand their reasoning. Some people believe processing fees are too high and should be eliminated. Others feel that they're necessary for the bank to cover their costs. Have you ever wondered why credit card companies charge a processing fee? It seems like an extra cost that doesn't benefit the cardholder. But, like most things in life, there is a method to the madness. Here are the eight keys to making sense of our fees.
What Is a Credit Card Processing Fee
A credit card processing fee is a charge added to each transaction processed through your merchant account. If you have a business that sells goods or services, this might sound familiar. In the case of online transactions, it's automatically included in the total price if you don't opt-out. It covers things like equipment and software for accepting payments from customers, third-party fees associated with the payment process, and why it exists in the first place.
What Do You Mean By Transaction?
A transaction is anything that involves you receiving money for something. This could be a sale of goods or services at your storefront location, online sales through an eCommerce website like Amazon or eBay, phone transactions, or even checks. There are many different ways to process payments. Each has its associated fees because credit card companies have to pay their employees to handle these individual tasks.
The 8 Secrets to Understanding Credit Card Fees
It's essential to understand why you're paying a fee in the first place, so here are the top ten secrets to understanding credit card fees.
There you have it. Eight reasons why the processing fee is necessary for credit card companies (and banks) to cover the costs associated with providing this service. Keep in mind that not all fees are bad, and in some cases, they're worth it. Just be sure to read the fine print before signing up for a new credit card.
FAQs About Credit Card Processing Fees
Here are some of the most frequently asked questions about credit card processing fees:
Is there a processing fee for debit cards?
Typically, no. Since merchants and banks don't need to cover the costs associated with lending money out for credit card transactions, debit card fees are typically much lower than their counterparts.
What about using a credit card abroad?
In most cases, you can expect to pay anything from an additional three percent to five percent on top of whatever transaction amount is being charged by the overseas bank or retailer for processing foreign currency payments. But why does it cost so much? This is because most credit cards are issued in the United States. That means that they have to pay a conversion fee for every foreign transaction before charging your card.
Is there an extra charge when I purchase something online?
Not always. In some cases, you can expect your bank or retailer to add their processing fees on top of whatever amount is being charged by the credit card company. However, this isn't always the case. Many companies have now eliminated these fees to remain competitive and attract more customers.
Is there a limit to how much I can spend?
Yes. Most banks will waive their annual processing fee if you meet a specific spending requirement within a given year. But if you don't meet this threshold, they'll usually charge anywhere to continue using their service.
How can I avoid paying a processing fee?
There is no definitive answer to this question. However, you can avoid paying a processing fee by using your debit card instead of your credit card, shopping at retailers that don't charge an extra fee for card payments or looking into a credit card that doesn't have an annual fee.
The most apparent reason why credit card companies charge fees is that they need to turn a profit and the processing fee helps them do just that. Other causes include helping cover costs associated with chargebacks or providing this service in general.
Each of these keys provides a different perspective on the fees we charge and why they are essential. The most crucial key is to understand how credit card processing works so that you can decide if our rates make sense for your business.
We hope this blog post has given you a better understanding of our credit card processing fees and how we work to make sense of them. If you have any questions about the charges imposed by BNG Payments, please don't hesitate to reach out. We are happy to help.