Variables of the Credit Card Processing Equation
- Interchange = the percentage, and possibly an additional flat fee, that the card brand charges on a transaction.
This varies from card to card depending on its brand, type, and other variables. Most interchange percentages range from 1.15% to 2.4%.
- Merchant Services Fee = the percentage charged by your credit card processor.
- Authorization Fee = a flat fee charged for each transaction.
- Merchant’s Net Sale = the amount of the total transaction that you, the merchant, will receive.
Different Fee Structures Used by Merchant Service Providers
Interchange Plus – This is the system Merchant Guy uses because it’s the most transparent and fair fee structure.
Our low fees are consistent for every transaction you run, but because the Interchange rate varies with each card type, the rate
you’re charged will vary from transaction to transaction.
Flat Percentage – This type of system, which PayPal and Square use, charges the same rate all the time. If they charge 2.9%,
but the Interchange rate on a particular card is only 1.5%, Paypal makes a whole 1.4% on your transaction. With MerchantGuy, you would
only be charged 1.8% for the same transaction.
Tiered Fee Schedule – This fee structure usually divides credit cards into three categories — Qualified, Mid-Qualified,
and Non-Qualified. Cards fall into each category based on their brand and type and on how it is being run (i.e., if it is being swiped
or keyed in, or if it is received over the internet or in store). Companies who use this system quote their Qualified Rate, the lowest
of the three, but many of your transactions may fall into a category with a higher rate
See how MerchantGuy’s rates beat Paypal even with a high interchange fee from the credit card company!
|1. Interchange Fee||+||2. Merchant Account Fee||+||3. Authorization Fee||)||*||4. Merchant’s Net Sale||=||Total Cost|
|MG Average||1.65% + $.10||0.3%||$0.25||$75.00||$1.81|
|MG High||2.4% + $.10||0.3%||$0.25||$75.00||$2.38|
|Paypal||Included in merchant account fee||2.9%||$0.30||$75.00||$2.48|
Interchange Rate Variables
Interchange rates on a specific transaction vary based on these factors:
- Credit card brand
- Credit card type
- Credit card model
- Zip code provided
- CVV provided
- Card swiped
- Card number key entered
- Address provided
- Business’s volume of sales