When it comes to understanding rates & fees to accept credit cards, I can tell you that most business owners are in the dark. No one has ever taken the time to explain what the different charges and deductions mean. There’s nothing more frustrating than a random withdrawal from your account when you are not expecting it.

It’s the same today as it was when I started in the industry back in 2011. In fact, next to PCI compliance, it’s probably the most frustrating topic I hear about.

This post is to offer a general overview and explanation of some common terms you will see on a statement. Let’s start with the basic types of pricing.

Interchange Pricing

With this method a merchant is charged the exact amount of the wholesale cost, plus a fixed markup. Example: All interchange (amount the card issuing bank charges), dues, and assessments (card brand fees) plus 50 basis points and .10 cents per transaction. If you have never heard of a basis point allow me to explain. One hundred basis points = one percent, so 50 BP is a half percent.

Interchange Plus is often presented as a clear and transparent way to provide service. But have you ever seen a statement? There is nothing clear about it. And do you have time to actually check the wholesale rates? They are published online and updated regularly.

I have also seen statements where the interchange is padded, meaning the true wholesale cost is not being passed through. Interchange fees are usually grouped together on a statement based on the type of card. The amount your processor marks up the service is commonly listed as processing fees.

Tiered Pricing

With Tiered pricing, the merchant is charged a transaction fee ranging from .05 cents – .25 cents and a fixed discount based on the type of card being used.

Check cards (signature debit) and regular credit cards have the lowest discount rate and are often referred to as qualified.

Rewards cards have a higher rate and are considered mid-qualified.

Card not present and some rewards or corporate cards have the highest rate and are considered non-qualified.

Flat Rate Pricing

With flat rate pricing  a merchant is charged a fixed discount and transaction fee. Square is commonly known for it’s flat rate of .10 cents per transaction and 2.60% discount if the card is present, and .15 cents per transaction and a 3.50% discount for card not present.

General Fees

Each processing company has their own general fees such as:

Statement / Account on File Fee : a monthly fee charged to have the account open.
PCI Compliance Fee: a monthly fee that goes towards the cost of PCI compliance.
Non-PCI Compliance Fee: a fee charged if a merchant does not complete their PCI compliance requirements.
Gateway Fee: a fee for connecting to an online gateway or third party app.
Made Up Fee: I hate to say it, but it happens. Some type of junk fee that sounds official.
Annual Fee: a fee charged once per year some for various reasons.
Reporting Fee: a fee charged for reporting processing volume to the IRS.

These are just a few examples since each processor has their own general fees.

Card Brand Fees

These fees are imposed by the card brands and usually passed through to the merchant at cost. The fees listed below are an example.

Visa Fees

Credit Assessments 0.13% of credit card volume and $0.0195/transaction. For a $100 credit sale, Visa takes about 15 cents.
FANF Fixed Acquirer Network Fee – Visa charges this flat fee based on how much volume you process per month.
International Acquirer Fee This fee applies under identical circumstances as above – there is an additional 0.45% surcharge from Visa.
Zero Floor Limit Fee This $0.20/transaction fee is assessed when a settled transaction can’t be linked to a proper authorization.
Misuse of Authorization Fee This $0.09/transaction fee applies to all authorized transactions that do not have a matching settled sale.
Settlement Network Access Fee This $0.0025/transaction fee is charged for all US-based settled transactions.

MasterCard Fees

Credit/Debit Assessments 0.12% of card volume and $0.0195/transaction for sales under $1,000. For a $100 sale, MasterCard takes about 14 cents.
Digital Enablement Fee This fee is 0.01% of volume, and applies on Card-Not-Present sales for commercial cards, consumer credit cards, and signature debit cards.
Cross Border Assessment Fee (Foreign) Any card you accept from outside the US that is settled in non-US dollars will be subject to a 1.00% international surcharge from MasterCard.
AVS Fee (Card-Present) MasterCard assesses a $0.005/transaction fee for using Address Verification Services in a Card-Present environment.
Card Validation Code Fee There is a $0.0025/transaction fee for all transactions that are submitted with the Card Validation Code (also known as Card Code Verification or CCV).
Acquirer License Fee This 0.0045% fee is assessed on all processing volume.
Account Status Inquiry Fee This rarely applied fee of $0.025/transaction applies when cardholder information (AVS, CCV) is verified without authorizing the sale.

Discover Card Fees

Credit/Debit Assessments 0.105% of card volume and $0.0185/transaction for all sales. For a $100 sale, Discover takes about 12 cents.
International Service Fee This 0.55% fee applies to any cards you accept from outside the US, just like the International Processing Fee.
Amex Fees

American Express

Credit/Debit Assessments 0.15% of card volume is paid directly to American Express. On a $100 sale, this works out to 15 cents.
International Assessment This 0.40% fee applies to any cards you accept from outside the US.

As you can see, there are many different things that a merchant can be charged for. Most business owners who I meet simply do not have time to study their statement, and end up overpaying for services.

If you would like a complimentary statement review, please send your two most recent statements to info@scottgibbens.com