There are 3 levels of fees associated with processing electronic payments. There are interchange fees, processor fees and merchant service provider fees. The first two levels of fees are unavoidable and not negotiable, unless you’re Wal-Mart. These fees are the price of accepting credit or debit cards.

The top-level fees associated with processing electronic payments are set by the card issuers and the companies that own them. These rates are referred to as interchange rates. These rates are represented as a percentage of the gross charge and a per transaction fee. At the time this was published, if you processed a standard, card-present Visa, the rate would be 1.6325% plus $.10 per transaction. That is the interchange rate on a qualifying Visa transaction. There are more than 300 different card types. Each has its own rate and per transaction fee. The type of transaction you process (card swipe, keyed entry, online, phone order, etc.) and type of business you own also impact these fees. You can see the entire list of interchange rates by clicking on our Interchange tab.

The second level fees are from a handful of processors that handle almost every transaction processed in the US. These processors generally charge a flat fee of $.05 per transaction processed. So the same Visa transaction referenced above would now be 1.6325% plus $.10 and $.05 per transaction.

Unless you are a large corporation you will be working with a merchant service provider like Intersource Solutions. The chain now looks like this: interchange, processors, merchant service providers and then your business. The fees the merchant providers collect will pay the processors and interchange fees. Even the merchant service providers pay these fees. The service providers then add their own fees for handling these transactions. This is where the explanation of fees can get tricky.

There are many pricing models and many fees that fit into this category. Merchant service providers can charges fees as a gross percentage, per transaction, increased rate, flat fees, surcharges or any combination of these fees. Intersource Solutions recommends choosing a provider that offers interchange plus pricing. A standard interchange plus pricing model may be interchange fees plus 1/10th of 1% of gross charges plus $.10 per transaction. This is a pretty good rate for merchants. The service provider will collect and pay the interchange fees and the $.05 for the processors. This will leave 1/10th of 1% of your gross charges plus $.05 per transaction as the service provider’s profit.

Example: Your business processes 200 transactions per month with a total of $10,000 in gross charges. For simplicity we will assume that all 200 transactions were standard qualifying Visa credit card charges with an interchange rate of 1.6325% and $.10 per transaction.

It is important to understand your merchant account provider’s profit. To do so you will need to figure you total fees and the fees your account provider pays for you. The fees your provider pays for you are those first and second level fees (interchange fees plus $.05 per transaction).

To figure your total fees you would add the unavoidable fees and your merchant account provider’s fees. Given the parameters above we know that interchange fees are 1.6325% plus $.10 per transaction. The merchant account provider, in this case, will add .1% and $.10 per transaction. Total fees are 1.7325% and $.20 per transaction.

1.7325% x $10,000 = $173.25
200 x $.20 = $40
$173.25 + $40 = $213.25 in total fees.
To figure your provider’s profit multiply the .1% by the gross charges and add the per transaction fees. In this example the provider is getting .1% and $.05 per transaction. They charge .1% and $.10 but $.05 goes to the second level processor.

$10,000 x .1% = $10
200 x $.05 = $10
You provider would be making $20 on this account, this month.

Unfortunately, most providers do not make it that simple to decipher once your bill arrives. In fact, many providers intentionally make their statements difficult to read to maximize their profits. If you have one of these undecipherable bills just fax it to us for a free account analysis.