![]() Notre Dame made a huge splash on the recruiting trail last week. Whether you’re expanding a brick-and-mortar business to accept payments online or starting a new venture from the ground up, it’s important to know how online payments, players, and pricing work before the first customer hits "check out." That way, you’ll be prepared with a plan that works best for you and your business.įor more information, including a full glossary of payment terms you should know, download the white paper “ How online payments really work. As an example, the fees you pay on a $100 sale could range from $2.50 to $3.50, depending how it has been classified.įor more details about these pricing models and potential fees, check out this article and download our infographic for a visual breakdown. However, because the processor defines the buckets any way it wants, it can be expensive. This makes it simpler for you (and them) to understand. In tiered pricing, the processor takes the 300 or so different interchange rates and lumps them into three buckets (or pricing tiers): qualified, mid-qualified, and nonqualified.Of course, remember that there are 300 or so different interchange fees, so the 1.8% can vary wildly! On a $100 sale, that works out to be a $3.90 fee. For example, 2.0% + $0.10 on top of a 1.8% interchange fee. With interchange plus pricing, your merchant service charges you a fixed fee on top of the interchange.On a $100 sale, the fee you pay works out to be $3.20. For example, you are charged a bundled rate of 2.9% of the transaction amount + $0.30 per transaction. All of the above fees are baked into this single rate. ![]() With flat-rate pricing, you pay a fixed percent for all transaction volume, no matter what the actual costs are.Usually, the first three fees (the percentages) are all added together and quoted as a single rate, while the transaction fee is quoted separately (e.g., 2.9% + $0.30).Ĭomplicating the picture, most pricing structures generally fall into one of three categories: Plus, it can charge fees for setup, monthly usage, and even account cancellation. A dollar amount for every transaction processed: The payment processor (who might also be your merchant bank) makes money by charging a fee, called an authorization fee, every time you process a transaction (whether it’s a sale, a decline, or a return – no matter).The amount here also varies by industry, amount of sale, monthly processing volume, etc. Yet another percent of the transaction amount: Your merchant bank takes a cut by charging you a percentage fee.Another percent of the transaction amount: The credit card association (Visa, MasterCard, etc.) also charges a fee, called an assessment.At last check, there were almost 300 different interchange fees! 1 This fee varies depending on a bunch of things, such as industry, sale amount, and type of card used. A percent of the transaction amount: The issuer gets paid by taking a percentage of each sale, called the interchange.We’ve learned about how payments come in, but what about the other side of the coin? What will it cost? As you might’ve guessed, everyone who touches the transaction wants to get paid, including the issuing bank, the credit card association (Visa, MasterCard, etc.), the merchant bank, and the payment processor.Īt its most basic, every time you process a sales transaction, you pay four fees: They also might keep a portion in your account that you can’t touch, just in case the customer returns things later (called a reserve in payments speak). Sometimes, your bank lets you access your money before it’s even sent to them. The settlement process can take a few days. Take a look at our infographic illustrating how the money gets to you.
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