Pricing & Cost Structure

What follows is an abbreviated description of the three main costs every Member Service Provider (MSP) and or Acquiring Member Bank is subject to. Developing a strong understanding of a service providers cost structure allows you to better evaluate the service that is being offered and will allow you to more effectively negotiate better pricing for your business.

1.       Interchange Banking Fees: Acquiring Member Banks and their credit card processing service providers are subject to Interchange Banking fees. These fees are compiled of over 270 “Interchange categories” and are set by Visa/MC. Most processing companies bundle these 270+ categories into Qualified, Mid-Qualified, and Non-Qualified rates. Interchange Banking fees are uniform across the industry and are designed to compensate Visa/MC Card Issuing Member Banks for the risk associated with the transaction. Interchange Banking fees are (by far) a credit card processing company’s largest expense.

Twice a year (April and October) Visa and MasterCard decide whether or not to modify the existing “Interchange Rate Structure.” ALL credit card processing companies reserve the right to pass any rate increases on to their clients. Unfortunately, many credit card processing companies take opportunities like this to hike rates across the board instead of just maintaining their original markup on your account.

2.       Dues and Assessments: Like Interchange Banking Fees, all Acquiring Banks and their credit card processing service providers are subject to Dues and Assessments. Dues and Assessments are set by Visa/MC and are uniform (the same for every processor) across the industry. Currently Visa Dues and Assessments are 0.0925% (0.000925) and MasterCard Dues and Assessments are 0.095% (0.00095). Dues and Assessment are paid by Acquiring Banks directly to Visa and MasterCard.

3.       Transaction Fees: So far we have discussed Interchange Banking Fees which get paid to the Card Issuing Member Banks and Dues and Assessments which get paid to Visa and MasterCard. The third significant fee every credit card processing company is subject to is the fee associated with physically routing your transaction through one or many of the various credit card processing networks. The processing networks house huge servers and are responsible for authorizing (validating) credit cards in real-time and transmitting data back and fourth between banks and merchants. Transaction Fees vary slightly amongst credit card processing companies and generally range between $0.08 and $0.15 per transaction.

To further your understanding of the credit card processing industry we suggest that you contact one of our educational representatives to discuss the important factors your business should consider when evaluating a service provider. Click here to have the appropriate Payment Logistics personnel contact you.