Credit card is a banking instrument which is very popular nowadays. Today, banking facilities all across the world get automated and quick. Due to innovation and technology, banking goes easier. Now, every bank has an internet banking and mobile banking facility. Today, I do not need to go to a bank every time for small transactions. Banking technology is so much advanced that I can transfer my cash anywhere in the world even in seconds.
Credit cards are so common today. That is why, each and everyone is accepting it. Many businesses around the world survive due to credit card transaction. We can count the names of multinational companies who are purely into money transaction and credit card business. Visa, Paypal, MasterCard, etc. are the biggest names in this industry. For the credit card holders, processing fees and interest rates are their main concerns. Credit card holders should be taking into consideration the merchant services and fees associated with them.
Credit cards are so commonly used by consumers, government agencies, professionals, businesses and even big corporate houses. Hence, purchases made by credit card account for 65% to 100% of a lot of companies’ sales. Just like all other businesses, credit card holders have to pay fees for every transaction. These fees can vary by hundreds of dollars a month — or more, depending on sales volume and which merchant service’s provider the merchant chooses to provide their credit card processing services.
The credit card processing industry is complex, with several parties making money on each transaction of your business processes. However, looking into the process more in the broader way, mainly two types of basic fees charged by providers
1. Interchange fees- The interchange fee on credit card and debit card purchases charged by the banks that issue the cards. The interchange fee is designed to compensate for risk and for the costs of processing a transaction. It is paid by the merchants who accept the cards for payment. An interchange fee is usually composed of a fixed charge per transaction plus a percentage of the amount charged.
2. Additional fees- An additional fee charged by your merchant service provider, which may be the merchant bank or an authorized independent sales organization of the merchant bank.
Now, if consumers want to reduce fees, they have to take care of the following things-
1. Qualification system- There are over 125 interchange categories that each has different fees based on how the card is processed, what kind of card is being used, and other factors. Many merchant service providers merge these 125 categories into three categories: qualified, mid-qualified and non-qualified. Merchant service providers average out interchange rates in each tier, and then add a margin. This kind of system makes an average interchange fee higher than actual fees. Consumer has to take care of that policy of the merchant regarding interchange fees.
2. Consumer age and size of business matters- Age of consumers and size of their business decides the fees of credit card. Consumers should search out for all the available options and then decide for credit card purchase. Moreover, if it’s a business card then the size of your business will be dependent on how much you have to pay more fees according to that. Consumer and business cards are both driven by different rules and regulations. The best way is for you to talk to several merchant service providers and negotiate the possible rates before making your final decision.
3. Avoid leases on low cost transactions- Small purchases like $100 to $400, can be made by consumers without leasing. However, some sales people will try to insist you just lease on the products. Avoid it as much as possible. The only one who benefits from this type of lease is the salesperson who gets a fee for selling you the lease.
4. Go through the small print- Read every single point of application carefully. Find out if you’ll have to pay any penalties if you want to change processors or stop accepting credit cards. Many merchant service providers added the clause of penalty in the contract and consumers are unaware about it. Be sure all fees listed in the contract are the same as what you were quoted.
In conclusion, I want to include one more suggestion, every credit card has a different processing fee and different terms and conditions. Card holders can be charged by service providers by many ways. These are just a few tips for consumers who want to reduce processing fees of credit card. If a consumer wants more information about credit card, they can refer to the website of various banks and financial institutions. Consumers can make a reduction in their bill amount by following some basic steps and rules.
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About the Author
Gajendra Purbia is a professional blogger and research analyst by profession. Gajendra is fond of Social Media and also write about his experience in Social Media via his Blog http://researchanalystblog.wordpress.com/. Gajendra can be reached via facebook and twitter.
How to reduce processing fees on credit card
