Credit Card Processing Fees

Each time a credit card is swiped to make a purchase, two sets of fees are charged: an interchange fee and a merchant fee. An interchange fee is charged by credit card companies and split between the lenders. It is a percentage of the transaction that can vary depending on the issuer.

The other cost is a credit card processing fee. This is charged by the merchant’s bank and is also usually a percentage per transaction, although it can sometimes be a fixed amount per transaction. This fee is charged by the seller.

Because the fees are bundled together, card holders have no idea that anything extra is being paid or to whom. Nor do they know whether or not a merchant is charging too much.

Due to economies of scale and the ability to negotiate high volume transactions, larger companies usually end up paying less processing fees than smaller merchants, passing the savings down to card users. Conversely, small merchants usually pay higher fees. While higher fees are warranted, exorbitant fees should not be charged to consumers.

Instead, card users should be pre-emptive, speaking to owners and managers to uncover how much each merchant pays in processing fees and how much is relayed to customers. Consumers looking for the best deal may want to stick with the merchant that pays the least in processing. Keeping this in mind, small merchants should not be altogether avoided.