Comparing Card Processing Rates As a Merchant: Getting the Best Deal

card processing rates

If you’re a merchant that accepts credit cards, you undoubtedly know exactly what your card processing rate is. You know it’s called a merchant discount rate, and it’s some percentage of the total bill, maybe a flat fee per transaction is also attached. If you did a little research, you would even know exactly how much you pay each month toward this merchant discount fee.

But do you know where that money goes? Or what, exactly, you’re paying for? Probably not, and you’re not alone. Credit card transaction fees are made up of  different elements, so they can seem, at best, confusing.

To help you better understand this fee, we break down the merchant discount rate into two key pieces: interchange fees and what we will generally call “everything else.” Getting to know these pieces will help you to compare rates among processing companies and to know where you can haggle for a better rate.

Interchange Fees

You’ve probably heard this term knocked around quite a bit. It is often used as a synonym for credit card rates in general. In reality, it is only one piece of those fees, albeit the biggest piece.

The interchange fee is the money that your merchant bank pays to the cardholder’s bank to help cover the risk of nonpayment or fraud and the operational costs related to moving funds to your bank. It helps to pay for things such as transaction monitoring and the technology it takes to make a payment happen instantly.

Everything Else

The money from this piece of the merchant discount fee is divvied out to the other entities that play a role in processing a credit card transaction, including the processing company and the acquiring bank (i.e. your merchant bank). While a portion of this money covers operational costs, there is also a portion of this fee that covers mark-ups for the processor.

Tip for a better deal: This mark-up portion is where you have the possibility of negotiating a lower rate. Keep in mind too that card processing companies may offer different rates for different services. Make sure you don’t pay a higher rate for a service you don’t need.

Tip for a better deal: The fees will change based on the transaction type (for example, card present vs. card not present), the type of card used, and the type of business you are in (the riskier your business is for chargebacks, for example, the higher the rate). The lowest processing rate you can get is called the qualified rate, and there are varying requirements to get it. Talk with the card processor about what those requirements are and then strive to meet them with every transaction.

No Time to Compare Rates? No Worries.

So now you have a better grasp on that merchant discount rate, but who has the time to do all the research needed to get the best deal? Don’t worry. Community Merchants USA, in partnership with FeeSeeker.com, has an online tool that will send you rates from various processors. All you do is fill out some information regarding your business, and this site will come back with a list of processors and their rates. The best part – it’s free. You’re saving money already.

Credit Card Photo via Shutterstock

Editor’s Correction: the above article was corrected to clarify the distinction between processing fees and other fees.

3 Comments ▼

Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses, and also serves as CEO of TweakYourBiz.com.

3 Reactions

  1. My company deals with credit cards and I have never thought about comparing rates. First, it is because I don’t have enough time. Next, it is because it is just too messy for me to deal with. But I do see your point of comparing to get the best deal. You got to appreciate every bit of money that you can save.

  2. Martin Lindeskog

    Anita: Thanks for the overview of the different credit card fees. When do you think that the credit card companies will reduce their fees due to the competition and alternative payment solutions?

    Does Community Merchants USA compare international markets?

  3. Hi Martin, I’m a independent sales office for 8 different processors.There are 2 parts to this. The banks that issue the cards fees paid by the processor are set and non negotiable. What is negotiable are the fees above this which cover the processors cost and profit. For the most part time and competition have whittled that profit down very low. The bulk of rates go to the bank standing behind the curtain. I offer a flat rate over these bank fees. Completely transparent because statement reveals the bank cost.

    Roger Whitfield

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