03 May Understanding The Fees On Your Processing Statement
Ever look at your processing statement and wonder what all those fees are?
You’re probably curious why they are on your statement, to begin with, and if you can avoid paying them.
Well, there’s a lot of different types of fees and services that you will be charged for having a merchant account. Some are valid and you can’t avoid them no matter who you process through. However, not all of the fees you see on your statement are not legit and are only there to line the processor’s pockets.
We’ve compiled a list of the most common types of fees you will see on your statement, valid and not valid. So pull up your credit card processing statement, and let’s take a look at what you’re being charged.
Interchange and Assessments Fees
The issuing banks and credit card association will always have firm costs that a merchant will have to pay, these are called Interchange. Occasionally, they will change these rates, but by and large, they make up the majority of the cost on your statement.
Typically, Interchange is a fee and then plus another flat price point. For example, Visa Business is 2.200 % + .10, while Visa Keyed Retail is 1.800 % + 10.
These are completely non-negotiable and you will always have these costs no matter what processor you go through.
Assessment fees are also tacked on as a part of your total transaction monthly volume. Usually, they are somewhere around .11% per transaction. This amount goes directly to the card association like Visa, MasterCard, and American Express.
While it’s easy to get confused with the PCI Compliance fee, this is a penalty charged when you’re not registered as PCI Compliant and are viewed as not keeping your customers’ credit card information.
The fee is usually between $19-$25 every month. The easiest way to fix this is to contact your processor and ask how your business can be PCI Compliant.
Incidental Fee/Chargeback Fee
The Chargeback is also unavoidable. If a customer instigates a Chargeback your business is charged usually a $75 fee. It comes directly from the cardholders bank, and you will not be able to refund. The Chargeback fee is in addition to the funds involved in the dispute being withdrawn.
Payment Gateway Fee
Gateway Fees essentially are the same as a monthly terminal fee, as you’re paying for the service of using a payment gateway to run your transactions through. They also tend to have processing costs per transaction on top of a monthly flat fee.
Traditionally you’ll only see a Payment Gateway Fee if you’re an E-Commerce store who runs transactions through your site.
Early Termination Fee
Some processes insist that you sign a contract and have to use them for a set time frame (usually a year). Breaking the contract normally results in a high fee, and its used as a way to trap a merchant into staying with that processor.
In our personal opinion, early termination fees are the worst. We don’t charge them, and a processor who imposes them is holding their merchants hostage. They also tend to slowly raise your rates, knowing you can’t easily get out of a contract without paying a fine.
IRS Report Fee
You’ll usually see this small fee ($2-$5) from your processor for reporting your transactions to the IRS (specifically your 1099-K). It’s fairly small and pretty much every processor will charge an IRS fee in some amount or another, be it monthly or annually.
Be wary of extra costs
We may not have covered every type of fee you’ll see on your statement. Some processors call them different things or have specific fees they charge their customers.
If something feels off, and you’re not really sure you’re being charged a fair rate for your payment processing, contact us. We can give you a free rate review and let you know if you’re getting overcharged on your processing fees.