How Much Do Credit Card Companies Charge Per Transaction to Retailers
The question of how much a retailer must pay a credit card company per transaction is a complicated one. That's because the credit card company, issuer and processor all get a chunk of the total per-transaction fee and each of those companies charges a different rate per transaction. Additionally, retailers pay different rates based on how the card is processed.
The credit card company charges a base fee for all transactions processed with their cards. These fees vary depending on factors such as whether you process the card as a debit or credit transaction or based on the value of the transaction. Generally, Mastercard, Visa and Discover charge an average of .13 percent, but the percentage changes by the company with regularity.
The interchange fee is charged by the credit card issuer, such as Citibank or Wells Fargo. These fees are the largest part of the total fee per transaction formula and they will vary based on whether the charge was credit or debit, the type of business placing the charge, the credit card network (Discover, Visa or Mastercard) and whether the card was swiped in person or charged over the phone or internet. American Express charges the highest interchange fees, in part because they are the only credit card company that also issues their own cards, so they do not charge assessment fees.
These transaction fees will usually consist of a small flat fee as well as a percentage of the total sale. For example, a Visa credit card transaction could be 1.51 percent plus $.10, while the same card processed as a debit card could result in a fee of .05 percent plus $.21. These fees are in addition to the assessment fees for the credit card companies, and the combination of both fees is known as the discount rate.
Known as black or purple cards, premium reward credit cards are seen as status symbols. Most of these cards offer a high credit limit and special perks that only these cardholders can receive. To offset some of the costs of doing business, card companies charge retailers a much higher interchange fee than they charge for using a basic card. Businesses have to accept all forms of each card they accept, but some are trying to change these rules because of the high cost of accepting these premium cards.
A business does not run a credit card transaction that runs straight to the credit card issuer or company. Instead, it is processed by a third party company that will charge an additional fee. These fees vary greatly by the processor. For example, Square charges a flat 2.75 percent per transaction, including the discount rate. On the other hand, Cayan charges .5 percent plus $.15 per transaction plus the discount rate for the credit card itself.
Once you add the processor fee to the discount rate; a MasterCard transaction will have a fee between 1.55 percent and 2.6 percent, Visa will have a fee between 1.43 percent and 2.4 percent, Discover will charge between 1.56 percent and 2.3 percent and American Express will charge a fee of 2.5 percent and 3.5 percent.
Processors may charge other fees on top of their transaction fees, which may include a leasing fee for the credit card reader (though you may be able to buy the reader up front), monthly processing fees, compliance fees, customer service fees, cancellation fees and more. It is important to look into all fees charged by a credit card processor before signing an agreement with them.