Are You Paying Too Much For Credit Card Processing?

Yes, yes you are.  Credit card processing fees are not for the faint in heart, and while the fees can be categorized, there are over 700 possible billing elements depending on the card and the incentives attached to the card, and sifting through when and where each charge is assigned is no simple task.  To quote Merchant Maverick, “Credit card processing fees are extensive, complicated, and somewhat overwhelming.”

In their  blog entitled, The Complete Guide to Credit Card Processing Rates & Fees, Merchant Maverick lists the four pricing models used to sell credit card processing services to merchants:

  • Interchange Plus Pricing Model:  “This is the most transparent pricing model with the most understandable terms and fees. Interchange-plus itemizes wholesale fees and markups and clearly lists them on your monthly statement.”
  • Tiered (or Bundled) Pricing Model: “Tiered pricing plans categorize credit card transactions into three categories – qualified, mid-qualified and non-qualified Generally, qualified rates are the lowest, and the transaction rates increase for mid-qualified and are highest for non-qualified transactions. Qualified transactions must meet all of the processor’s criteria for processing, such as a swipe in-person with a batch settlement the same day. Failure to meet one or more standards may result in a ‘downgrade’ to mid-qualified or non-qualified tiers.”
  • Subscription/Membership Pricing Model:  “It is similar to interchange-plus in that the actual cost of the transaction is charged separately from the mark up. But the difference is that you do not pay any percentage markup, just a small transaction fee. For merchants with large transactions especially, this kind of pricing can save a lot of money without decreasing transparency. “
  • Blended Pricing Model:  “This is like tiered pricing, but without the tiers. Instead all transaction cost the exact same percentage and transaction fee, regardless of the wholesale cost. All costs are blended together to create one consistent rate and fee. “

Most small to mid-sized businesses are on a Tiered/Bundled Pricing Plan, which is the most complicated plan and allows less reputable credit card processors “to charge merchants excessive fees.”

These fees are unavoidable if you process credit cards through your business.  While unavoidable, that doesn’t mean they are not negotiable, which could save thousands, even tens of thousands of dollars each year depending on the volume of transactions being processed.  Like other areas of your business, when you take it to the marketplace and there’s competition, vendors tend to sharpen their pencils and lower their prices.  If you don’t have the time to take it to the market yourself because you’re focused on running and growing your business, find someone who can.  Your B2B CFO will know someone in their network who can help you with this expense.



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