Personal Finance

Fee per transaction

What is the per transaction fee?

A per-transaction fee is the fee a business must pay each time it processes an electronic payment for a customer transaction. Fees for each transaction vary by service provider, and merchants typically pay 0.5% to 5% of the transaction amount plus some fixed fee.

key takeaways

  • A per-transaction fee is a fee a business pays a service provider each time a customer payment is processed electronically.
  • The fee per transaction can vary by service provider, but is usually between 0.5% and 5%, plus some fixed fees.
  • Merchants work with merchant acquiring banks to establish electronic payment processes and fund deposit accounts.
  • Per-transaction fees typically include acquirer fees and processor fees.
  • American Express, Visa, Mastercard, and Discover all charge roughly the same fee, with slight differences in some components, equivalent to cents.
  • In the merchant’s statement, fees are usually divided into exchanges, tiers, and subscriptions.

Learn about fees per transaction

Merchants of several different entities in a transaction need to pay a per-transaction fee. Merchants work with merchant acquiring banks to facilitate all communications in electronic payment transactions. Merchants also establish merchant accounts with acquirers as the main deposit accounts for merchants’ funds for each transaction. Merchants who receive a large number of electronic payments will rely heavily on the merchant acquiring bank, so the terms of the merchant account agreement become an important factor for the merchant.

Components of each transaction fee

Merchants pay various fees associated with accepting electronic payments. Some fees vary, while others are fixed. Merchants have a wide range of acquiring banks with whom they can partner to provide electronic payment services. Each acquirer has a different fee structure and service capabilities, allowing merchants to choose the acquirer that best suits them. Acquirers typically charge a per-transaction fee as well as a monthly fee for merchant account management.

The second part of the per-transaction fee is a fee paid to the network processing company. Merchants determine the types of branded cards they can accept in their stores based on their merchant acquiring bank’s processing network. Payment card companies such as MasterCard, Visa, Discover or American Express have their own per-transaction fees that will be charged to the merchant during the transaction. Payment card company fees, also known as wholesale fees, are usually flat fees per transaction. Some acquirers may be able to negotiate lower wholesale fees through network relationships with processors.

Acquirer and processor fees are a major component of the consolidated per-transaction fee. In some cases, other merchant fees may also apply. One additional cost that merchants may encounter is terminal fees, which are per-transaction fees charged to terminal providers such as Square for using the terminal in electronic payment card transactions.

The fee-per-transaction is why some merchants impose a minimum fee that customers must pay when paying with a credit or debit card. It doesn’t make sense to have customers charge a payment card 50 cents when the merchant pays 30 cents to process the transaction. It is common and fully allowed for merchants to set a minimum $5 or $10 for credit and debit card transactions. Smaller merchants with less ability to absorb excess credit card fees are more likely to enforce these minimums.

American Express, Visa, Mastercard, and Discover all charge roughly the same fee, with slight differences in some components, equivalent to cents. Generally, Visa charges the minimum total amount. It also depends on the card used, as cards with rewards usually have higher fees.

Merchant Statement

The acquirer will detail the merchant’s total monthly costs and transaction activity in the monthly statement. Typically, service provider transaction fees will fall into one of three categories: exchange, tier, or subscription. The exchange fabric lists payment card company fees and service provider fees separately on the merchant’s monthly statement. The tiered structure assesses different fees based on transaction types, such as face-to-face and online transactions. Subscription fees are also assessed on a monthly or annual basis.

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