There are three determinations of the fees for accepting credit cards: the interchange cost, the brand fees and the processor’s surcharge.
1. The interchange cost
This is the rate and transaction fee set by the bank associations to collect “interest” on the money “loaned” to the cardholder for 30 days until his credit card payment is due. The bank that issued the card to the customer, who is handling the risk of loaning the money to the customer, receives the interchange rate and transaction fee. This fee comprises the dominant amount of the total fees collected from the merchant. These rates range from .05% and $.22 for a debit card to 3.4% plus $.10 for some American Express cards. There are over 100 different rates in between depending on the risk associated with a particular transaction.
2. Brand Fees
Brand fees are a non-negotiable cost. In addition to interchange, there are the Visa, MasterCard, American Express and Discover brand fees which are passed through on the merchant statement. These fees amount to approximately .15% to perhaps .20% of the transaction amount. These fees have names like assessments, acquirer fees, network fees, location fees, transmission fees, and nabu fees.
3. The Processor’s Surcharge
The processor’s surcharge is on top of the interchange fees and brand fees. The processor services the merchant, monitors fraud, transfers money from the card to the merchant’s bank account, and provides customer service such as troubleshooting equipment hiccups, questions about transaction deposits, questions about fees, or service requests such as address changes or bank account changes. The processor surcharge fees are the only fees that can be negotiated with the processor via the credit card processing salesperson.