Why Credit Card Processing Fees Are So Expensive (And How to Eliminate the Cost)
If you own a business that accepts credit cards, you’re more than likely used to paying high credit card processing fees every month. It’s an unfortunate expense, but it’s necessary if you’re going to accept the most common payment methods.
Have you ever wondered why these fees are so expensive? Here are some answers.
You Pay the Provider’s Overhead
By paying credit card processing fees, you’re helping your provider run their business. These fees help pay for their large staff including the many call center representatives they employ. You’re also helping to cover all of the costs associated with the credit card company’s administrative overhead. You’re provider may have fronted your POS terminal for your business through a merchant account. Unfortunately, you’ll still end up paying off that expense through higher monthly processing fees.
Credit card companies also offer rewards and benefits to attract and retain their users. These programs are great for the consumer, but expensive for you as a business owner. The credit card processing fees you pay help to fund these rewards programs.
You Offset Default Risks
When you get a quote to open a credit card processing account, you’ll probably get a lower estimate on processing fees than what you actually end up paying. This is because the provider will quote you with the lowest risk amount. Merchants who routinely process riskier transaction are known as “non-qualified merchants.” Merchants with few risky transactions are considered “qualified merchants,” and those in the middle are “mid-qualified.” Low risk transactions are those that have least likelihood for fraud, default, or chargebacks. But some of your transactions will likely be higher risk transactions, which will cost the processor more money, and thus end up costing you higher monthly credit card processing fees.
What the Types of Fees Are
The two biggest types of fees you’ll end up paying your provider are wholesale credit card fees and mark-up credit card fees. Every business has to pay wholesale credit card fees simply for accepting credit cards. These fees offset rewards like miles, points, and cashback offered to customers by the credit card company.
Payment processors charge markup credit card fees to cover the risks of fraud, chargebacks, and data breaches. By accepting credit cards, you run the risk of any of these happening. You can negotiate a little on the price you will pay for these fees. They get determined by how risky your transactions are. If you’re a non-qualified merchant, you will be paying the most for markup credit card fees.
These are not the only types of fees you’ll have to pay, but they are the most expensive. You may also have to pay a PCI compliance fee, paper statement fee, and others.
How a Cash Discount Program Can Eliminate Credit Card Processing Fees
Are you sick of all these expenses? Wholesale Payments Direct can help! Through our cash discount surcharge program, we can eliminate those high credit card processing fees that are cutting into your profit margin. If you have questions about implementing a cash discount surcharge program at your business, contact us today!