Credit Card Processing



Credit Card Processing is slowly replacing cash in more ways than we may realize.  While studies show that gross sales go up once a business begins accepting credit cards, the processing fees do cut into the profit margins of businesses. There is relief for merchants however, the majority of states now allow merchants to pass the credit card processing fees onto the customer.

We can help businesses increase their profit margins by reducing their credit card processing cost to ZERO in most states.

There is relief for merchants however, the majority of states now allow merchants to pass the credit card processing fees onto the customer as long as certain steps are followed that comply with the rules set by the major credit card brands, and WE HAVE THE SOLUTION. Please CONTACT US to see if your state allows passing on of credit card fees to the customer and we’ll handle the rest.

We use a process that fully complies with the card brands (Visa/MC/AMEX/DSCVR) contractual rules.  In order to be fully compliant, we register your business with the card brands, we provide signage/disclosures to place in your store or online payments page and we integrate software into your current system (credit card terminal or online payments page) to calculate the processing fees which provides an itemized receipt for your customer. This is a turnkey solution that automatically has you covered. To sign up or for more details contact us, we’re glad to help.

This website guide to credit card processing is meant to assist business of all types and sizes to better understand how processing works, what fees are charged and most importantly how they can use this information to save money on their monthly credit card processing costs and make an educated decision on what processing equipment and POS systems might be right for them.

Surcharging Customers Now Allowed in Most States

There isn’t much a merchant can do about Interchange rates, every merchant gets charged the same interchange fees based on the type of card the merchant is using to pay for a purchase. There is now something businesses in most states can do to pass the credit card processing costs onto their customers though.

Our program for zero cost credit card processing can eliminate the "processing costs" by passing them on pro rata to customers, but there will still be monthly fees to pay for PCI compliance, debit card processing, a statement fee and the monthly cost of terminals and software. We have a program in which those costs are less than $100 per month.

Savings Example:  Let's take a business that does $40,000 per month in credit card processing and is paying an effective rate of 2.80% overall. That means they are paying $1,120 in processing fees in a typical month. A merchant that uses our zero cost credit card processing program would eliminate the processing costs which get passed on to customers and is shown in an itemized receipt as required by law. The business would pay less than $100 per month in other fees for setting up and maintaining the account, saving over $1,000 per month which is over $12,000 per year. 

Interchange Fees

First of all it is important to understand what Interchange fees are, especially since these fees make up the majority of your monthly credit card processing fees.  

“Interchange fees” are the fees set by the major card brands such as Visa®, MasterCard®, Discover® Network Cards and other card brands that represent the various payment networks. They will periodically review and modify their interchange rates, programs and other pricing structures related to card processing and issue a "release" containing all of these changes which will be stated in the merchant’s monthly credit card processing statement. Interchange fees are paid by the merchant's bank to the cardholder's bank, also known as the issuing bank, to compensate that issuer for the value and benefits that merchants receive as a result of agreeing to accept credit card and other forms of electronic payments. Interchange fees are used by card issuing banks to cover costs and help them deliver value and services to merchants, as well as governments and consumers.

Processing Fees

“Processing fees” are the fees charged by the acquiring bank or merchant’s processing bank.  There can actually be three separate fees charged for processing the transaction, although some sales agents in the industry like myself only charge an authorization fee and discount fee on each sale.  Authorization fees on each sale should only be a few cents and discount fees should be stated as basis points, which are fractions of a percent. Example:  50 basis points equals .005 or one-half of a percent.

“Miscellaneous monthly fees” related to your credit card processing fall into several categories.  They could include a monthly statement fee, PCI compliance fee (unless charged yearly), debit card enablement fee, next day funding fee, and batch fees. Other monthly fees apply if the merchant issues and accepts gift cards or has a loyalty program.  Still other monthly fees, such as a software fee, apply if the merchant uses a point of sale (POS) system to help run his or her business. 

There is only one POS system we are aware of and which we sell that has no monthly software fee. This system is Poynt and it can be used at the counter or even for pay at the table service with a touch screen for customers to sign with their finger and enter a tip on the screen as well.  This is one of the first of its kind POS systems that by allowing for tip on the screen, saves business owners and wait staff a ton of time since it automatically does tip adjust.  Yes, you read that correctly, no more need to do manual tip adjust at the end of a busy night.

Understanding Credit Card Processing Statements

It is important for business owners, or their bookkeepers or accountants, to be able to look at their monthly credit card processing statement and separate out the what are the interchange fees, the processing fees and the fixed monthly fees. Monthly statement fees are usually the monthly statement fee, PCI compliance fee, debit enablement fee and next day funding fee. As we move more and more toward becoming a cashless society like other countries are doing, it becomes important for all businesses to understand their monthly statements and exactly what they are paying.

Interchange fees, as we described above, are the fees set by the major card brands that represent the various payment networks and there is a different interchange fee for every type of card which includes rewards cards, airline cards, travel cards, corporate cards, government cards, fleet cards, travel cards and debit cards. Last count there were about 200 different interchange rates assigned to the various types of cards.

Early Termination Fees and Multi-year lockup Agreements

Depending on which processor you use you may be faced with an early termination fee. Although the length of the lock-up and amount of the early termination fee are usually negotiable. Most merchants don’t like lock-ups, especially if they could have gotten the same pricing without the lockup or early termination fee. Best advice, check around and see if you can get the same pricing from an agent without the consequences of an early termination fee or just tell the agent you will not agree to switch processors unless the agent waives the early termination fee and lock-up. Small business credit card processing is not much different than larger businesses, although it is true that the larger processing volume a business does the more likely they will be able to get lower rates.

Card Association Fees

Card association fees are sometimes confused with interchange fees, but they are separate.  Card association fees are those fees charged by Visa®, MasterCard®, Discover®, American Express®, network cards and other card brands (“Card Brands”) directly to merchants through the merchants’ bank also known as the acquiring bank.  All businesses accepting credit cards must pay these fees.  Card association fees are paid directly to the Card Brands and are used to fund their business and operations. These fees include but are not necessarily limited to costs and expenses related to licensing, regulatory matters, patents and copyrights, national and international settlements, and authorization software and systems, the interchange network, product development, advertising and marketing, as well as risk assessment and management services of the Card Brands.  

Credit Card Processing and Small Business Loans

I wanted to mention a word about merchant cash advances that have gained quite a bit of popularity and surprisingly have become a booming business for finance companies. If you need capital for your business, but don’t quite qualify for a bank loan and don’t want to pay the high fees associated with a merchant cash advance we do have another small business loan option to help you with your funding needs. Interest rates will be higher than what a traditional bank would charge, but are no were near the 30% or more rates that a merchant cash advance company would charge. Still if you have an urgent need for capital due to equipment breaking down or an increase in business requiring more inventory, and you have no other option, then a small short-term merchant cash advance may be worth it in the long run.

Free Consultations as Always

Hopefully this information on credit card processing has shed some light on an otherwise confusing subject. I am always available to provide free advice and a cost comparison to help your business save money and run more efficiently.

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