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Rates & Fees mean very little... in fact rates are often used as a "smoke and mirrors" tactic by sales people.  What really matters are the total fees you pay as a percentage of your processing volume.

Interchange fees vary by card type. 





The Credit Card Industry & How It Works

When a credit card transaction occurs, the merchant gets charged a minimum of two fees:

  1. Transaction fee
  2. Discount rate fee

Most processors charge around 20-25 cents each time a credit card transaction occurs.   If you sell a lot of small ticket items (drinks, donuts, etc) then this is the MOST important fee to negotiate.   Sometimes, sales people merge the two fees listed above into what's called a bundled rate.   This means you pay a flat rate that includes both fees.

For the best deal, make sure the discount rate is different for each type of credit card.   If it is not, then you are definitely paying too much.   Depending on where you are in the USA, expect to see rates from 1.49% for DEBIT cards up to 2.49% for higher risk transactions (like a bar/strip club).

Of course, there are many other fees that the merchant will likely be charged in addition to the two listed above.  

If you see a gateway fee on your statement, this means your credit card transactions are being sent through a third party before they are processed.   Obviously, this indicates you are paying a middleman.

A settlement fee is charged when you submit your credit card batch at the end of the night/shift.  Sometimes, in no-tipping environments, the settlement fee can be reduced or eliminated by switching to HOST based processing.  

The monthly statement fee is for producing and mailing a printed statement to your business address.   If you are doing a lot of business, often this fee will be waived or paid by the processor.  If you don't have sales volume yet, ask about an online statement instead to save money.

Sometimes, you will be charged for leasing equipment.   Recently, a typical rate is $29 to $79 per month for 36-48 months.   Unless you cannot afford your own card terminal, be careful about signing leases.

Often processors will quote a monthly minimum fee.   This means that regardless of your account's activity, a monthly fee will be charged.

Contract termination fees also appear frequently.   If you ever decide to change processors, this fee (or a pro-rated portion of this fee) will become due.  Often a termination fee is required in order to get the most competitive rate... so don't be turned off by this type of fee.   If the processor knows you are in this for the long run, they will work harder to earn your business.

Many processors will charge fees on "gross amounts" versus on the "net amount".   For example, a $24.00 meal with a $5 credit might be charged on a $19 basis or on a $29 basis.   Check out the computation method carefully.

Also be aware that some processors charge a transaction fee for each authorization and then another transaction fee when a tip is added.   You should be careful to pay a fee only on settled transactions... not authorizations.

Positive Feedback Software will no longer offer integrated credit card processing due to increasing expenses related to PCI regulations.  We strongly recommend merchants use one or more standalone credit card machines to avoid potential PCI fines & liability.   By keeping card processing on dedicated hardware terminals (not on a computer system), the merchant can greatly reduce the costs related to payment processing. 


Articles About Merchants Being Fined By Way Of PCI Regulations

Effective October 31, 2013 FreePOS will only be PCI Compliant for existing installations.   Due to increased regulatory costs, we recommend using standalone credit card machines where possible and avoiding computer based card processing to reduce PCI related expenses.

Check out these links and then ask yourself if you want to run credit card processing software on a computer.   Using a stand alone credit card terminal can be a safe move.

Example 1:  Even the big guys are not safe

Example 2:  Restaurant owner class action

Example 3: Raising your rates unless you jump through hoops

Example 4: A Plan Emerges.. But Is It Cost Effective?

Example 5:   PCI Compliance Video