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What variables affect the cost of processing payments?

By: Zakry Chami August 1, 2018

The cost of processing credit transactions varies depending on a few variables. They do not affect your payment processor's costs of handling payments, but instead, these variables affect the non-negotiable base costs of processing payments.

First off, all credit cards are not created equal. The more benefits or perks a card grants a cardholder, the more expensive the rates are for you, the merchant. Each type of card has its own interchange fee that the card network determines.


Types of Credit Cards:

bluecard


BASIC (QUALIFIED) - no points, no perks, no benefits

 

orangecard

AFFINITY (NON-QUALIFIED) - on behalf of affiliations, partnerships, brand retailers, a small portion goes to the organization

 

blackcard

PREMIUM (NON-QUALIFIED) - corporate, business, or cards that offer additional perks, cash, points, insurance, discounts, etc. eg. cashback, airline/frequent flyer


Secondly, the rates are dependent on how the card is accepted. Is the card being tapped at a terminal, entered in over the phone, or on your e-commerce site? In card-not-present scenarios, the rates are usually higher due to increased risk of fraud and chargebacks.


Types of Transactions:

present
CARD PRESENT - when the card being used is physically present at the time of the transaction: in-store with tap or chip.


notpresentCARD NOT PRESENT - when the card being used is not physically present with the merchant at the time of the transaction: manually entered online on an e-commerce site or over the phone.


And lastly, some industries or some types of businesses are at a higher risk of fraud and therefore have higher rates. For example, adult entertainment and electronics stores are at a greater risk of chargebacks and card networks and banks need to recoup the loss of these fraudulent purchases.



Looking to learn more about the costs of processing payments? Get in touch with one of our payment experts about our transparent billing model!

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