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Credit card fees for merchants

The ability to accept credit cards is non-negotiable for a business. However, that means you’re going to have to deal with the ensuing credit card fees for merchants. Learn more about the different fees that you can expect to pay when processing credit card transactions – and whether there’s any way around them – with our helpful guide to credit card fees for business.

Understanding credit card fees for business

So, what are credit card fees for merchants? Simply put, they’re the costs that a business owner needs to pay to accept payment via credit card. They’re referred to as credit card processing fees or qualified merchant discount rates. Three different components are involved in these types of fees: interchange fees, assessment/service fees, and payment processor fees. Let’s look at these in a little more detail:

  • Interchange fees – When customers use credit cards to make payment, the acquiring bank (merchant account) pays a fee to the issuing bank (customer account). This is referred to as an interchange fee, a fee that’s used by the issuing bank to cover the cost of fraud, handling, and so forth. A couple of different factors can influence the size of your interchange fees, including the card used in the transaction, how the transaction was processed, the amount of the transaction, and the type of business that is accepting payment.

  • Assessment/service fees – Assessment fees are paid directly to card networks to process card transactions on their networks. These are a slightly different type of credit card fee to merchants, as they are charged based on monthly sales, rather than individual transactions. Furthermore, they’re not as expensive as interchange fees.

  • Payment processor fees – Then, there’s the payment processor fee, which is an amount paid to your credit card processor to use their product. The fee is charged per transaction.

In addition to the three main types of credit card fees for business that we’ve outlined above, there are a range of other fees and costs that you might be footing the bill for, including batch fees, hosting fees, wireless access fees, monthly minimum fees, chargeback fees, monthly support fees, and so on. In short, taking payment via credit card can quickly add up to be an expensive business.

How much are credit card fees for merchants?

The amount you can expect to pay in credit card fees for business varies depending on the specific card brand. According to Value Penguin, average credit card fees for merchants for each of the major brands is as follows, although it’s important to remember that these are estimates:

  • Mastercard: 1.55% - 2.6%

  • Visa: 1.43% - 2.4%

  • Discover: 1.56% - 2.3%

  • American Express: 2.5% - 3.5%

Avoiding credit card fees for business

Credit card fees to merchants can eat into your profits and while these small percentage amounts may not sound like much, over time they add up and represent a substantial sum of money that could have gone into improving your business’s cash flow situation. However, there are a couple of ways that you can sidestep credit card fees to merchants:

  • Reduce chargebacks – If your business experiences a significant number of chargebacks, the bank may view you as a risk and increase processing fees. As a result, it’s important to minimize the number of chargebacks incurred by your business. There are many ways of doing this, including better communication with your customers and offering proof of delivery.

  • Asking for a credit card fee waiver – Of course, you can also ask for a credit card fee waiver from the credit card network enforcing the fees. Whether or not you’re likely to receive a credit card fee waiver is another matter, but if you’re a major customer, they may be amenable to discussing potential options with you.

  • Set a minimum amount for card sales – Another potential option is introducing a minimum spend amount for customers making card purchases. If you do choose to explore this route, you need to consider whether the cost of credit card fees is worth the potential losses from business that you’re turning away.

  • Opting for Direct Debit – Finally, it may be a good idea to offer an entirely different payment method: Direct Debit. With a Direct Debit payments service like GoCardless, you can take payment from your customers automatically and on a recurring basis, allowing you to avoid credit card fees for merchants altogether.

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GoCardless (company registration number 07495895) is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017, registration number 597190, for the provision of payment services.