Transaction Fee

A transaction fee is a per-item fee that is charged to the merchant by the acquirer for transaction activity such as sales, credits, returns, batch closures and more. A common transaction fee for keyed transactions, for example, is close to 30 cents. If a merchant makes one hundred sales every month, then, of course, the total of all transaction fees will be 30 dollars.

Every time a merchant processes a credit card payment through their small business website or at their here-and-now retail location, merchants are charged the transaction fee. According to the company’s merchant account provider and the payment card issuer guidelines, transaction fees differ.

Even though the particulars are different, there are a few rules as to how such fees are generally determined. By making a few calculations beforehand, a merchant can estimate the fees to be deducted from bottom line earnings. Of course, with such understanding, a merchant can adjust both goods and services pricing to guarantee continued profitability.

When a merchant accepts credit card payments for sales or services through their establishment, a payment processor takes from one to five percent. The majority of this money goes to the payment card issuing company. There are those merchant account providers who will add their own fees to this charge, which is the reason that the base rate varies noticeably among service providers. If a merchant has sub-par credit, the merchant account fee will be within a higher range, of course.

Many intermediary merchant processors will make you pay as much as 15 percent of every payment card transaction. Such accounts are configured for small businesses that can’t normally qualify for merchant accounts. Because an intermediary takes a substantial risk by providing a merchant such an account, the percentage, of course, will be much greater.

Various percentage rates are charged by payment card issuers. MasterCard and Visa typically charge in the one to two percent range, whereas American Express and Discover usually charge a higher rate.

Merchants should think about all of this, not just at the time of setting prices for their services and goods, but also at the time of deciding what credit cards they will ultimately accept from their customers. Since MasterCard and Visa are the most widely used cards today, it would obviously benefit a merchant to accept at least one of them. The acceptance of, say, Discover and American Express will likely depend on the kind of clientele that a merchant regularly sees, as well as the rates that are charged.

A transaction fee is charged on all purchases processed by means of a merchant account provider, and is usually from 25 to 50 cents for each transaction. Such fees go right to a merchant account provider. This will usually be determined once the primary percentage is deducted or prior to when this takes place. Merchants should look over their merchant account agreement carefully to determine at what point in the process this fee is charged.

Before a company selects a merchant account provider, its management must be certain that they are aware of the various charges that will require mandatory payment. There can be setup fees, penalties, gateway fees and different kinds of charges that will be automatically deducted from its account each month, in addition to aforementioned transaction fees.