Credit card transaction processing fees seem simple on the surface, but the overall fees are actually made up of many smaller fees, sometimes numbering in the dozens. In the interest of transparency and regulatory compliance, payment processors break down all of those fees on their merchants’ monthly statements. That’s good for both the processor and the merchant, but without context, many merchants find the huge number of line items confusing.
Not all potential fees apply to all merchants, but there are some common ones that the vast majority of merchants encounter in their monthly statements, and those are the ones we get the most questions about. The following is a quick breakdown of those common fees and what they represent.
Common Fees Merchants See on Statements:
The discount rate is the percentage fee charged on transactions. For instance, in a fee structure of 2.9% plus $0.30 per transaction (PayPal’s standard fee), 2.9% represents the discount rate. Discount rates vary based on transaction type and will be higher for card-not-present transactions than for swipes. Additionally, with processors that use the lower interchange-plus fee structure, like BAMS, the discount fee will vary with card type, as different brands and types of cards carry different interchange rates.
The transaction fee is the flat fee charged on each transaction. In the example of 2.9% plus $0.30 per transaction, the flat $0.30 represents the transaction fee. Transaction fees are charged on all transactions, including failed ones. They vary greatly from provider to provider, so it’s important for merchants to understand how this portion of the fee impacts their profits and to seek out a payment processor that offers reasonable ones.
Statement fees are charged to merchants by the card companies to cover the cost of printing and mailing out account statements. These fees are highly variable, and can sometimes be avoided altogether by switching to online-only statement delivery. However, in most cases, these fees will range anywhere from $5 to $15 per month at the high end.
The batch fee is a fee that is charged when a merchant settles their transactions with the credit card company. These fees are very low and only apply when batches are sent out, likely meaning once or twice a day at most, and potentially less depending on transaction volume.
PCI Non-Validation Fee:
This is a fee that merchants should aim to avoid at all costs, as it only occurs (on a monthly basis) when a merchant fails to meet PCI compliance by not returning a validation certificate. To avoid this fee, merchants need only complete their yearly self-assessment questionnaire or perform a quarterly system scan. PCI compliance is incredibly important for both data protection and reputation reasons, so there is no real excuse for ever having to pay this fee.
IRS Reporting Fee:
This fee covers the submission of a 1099-K form to the Internal Revenue Service. The 1099-K form records the total amount a merchant brings in from credit card sales, and payment processors are legally required to submit 1099-K forms annually for all merchants that do over $20,000 in card sales in a year. Merchants that do less than $20,000 in credit card sales do not require a 1099-K form, and as such, will not see this fee on their statements.
Understanding all of these fees is important, but so is minimizing them! BAMS offers the lowest fees for low-risk merchants, and our interchange-plus model provides some of the lowest average transaction fees overall. Our five-step price comparison is designed to carefully analyze your company’s current situation and find all the areas in which we can bring down your fees and boost your profitability. Contact us today to find out more about how BAMS can help!