If you are new to using a credit card processing service, you may find your credit card processing statement difficult to understand. If you’re confused about the difference between interchange fees and processing rates, read on to learn all you need to know to understand your processing statement in full.
Credit Card Interchange Fees
One of the main items on your credit card processing statement will be the interchange fees that you pay to the issuers of credit cards. These fees are charged by credit card companies and are the same no matter which credit card processor you use. They vary based on the type of card you accept and the industry you’re in.
Credit Card Processing Rates
On top of credit card interchange fees, you have to pay processing fees to your credit card processing service. Different processing companies change different levels of fees, so it may be worth shopping around to find the best processing rates on the market.
Pricing Models for Credit Card Processing
Credit card processing companies use a number of different pricing models to charge their clients for processing credit card payments. One of the most common pricing models is tiered or bundled pricing. If you can see the terms qualified, mid-qualified, or non-qualified listed somewhere on your credit card processing statement, it is likely that your processing company is using this pricing model. Under this model, credit card processing companies charge different levels of fees for different types of transactions. This can be expensive as there’s no way to predict what type of card your customers will use –you can’t control your fees.
Another common pricing model is pass-through or interchange plus pricing, which provides a discount rate for all card brands shown on your statement. Flat rate pricing, in which the fees charged are the same for all card types, is a similar pricing model that has recently been gaining in popularity. If your credit card processing company uses flat rate pricing, your statement will look a lot simpler as it won’t include a breakdown of interchange and markup fees. This pricing model can help some businesses to save money.
Knowing the basic categories of charges will allow you to speak knowledgeably to your credit card processor and help ensure you’re getting the best value for you money.