I have had some conflicts about what I am about to do because I know it is not going to make me very popular with some of the other vendors on this forum, but I have decided to push forward because of some of the recent posts about credit card processing and the fee structure associated with acceptance. Let me start by saying IMO, many of you are asking the wrong question, instead of asking how much you are going to pay, you should really be asking your provider “How much are they going to make?”. Over the next few weeks I will be taking interchange categories that are relevant to the food/beverage industry and explain exactly what the category is, it’s cost and what it means to you.
What is included in Visa/MasterCard Interchange:
Interchange is the rate charged to any processor that sells to a business owner (and we all pay the same rate). The following is included in interchange:
300 different categories of card types and transaction types (I will be going in depth on these categories over time)
Transaction fee associated with each rate category ( ranges from 0-.25cents)
Dues and Assessments (fees paid directly to Visa/Mastercard to pay for network operations, fraud prevention, technology development. Currently Visa Dues and Assessments is .0925% and Mastercard is .0950%)
Visa/Mastercard access fee is $0.0195 for Visa and $0.0185 for Mastercard
So if your provider gave you straight pass through, these are the fees that you would see on your statement, however, if they did give you straight pass through, you would need to start looking for another provider because no one stays in business for long if they are making ZERO profit.
Let’s say your restaurant has pass through plus .20 basis point and $0.08 per transaction (assumption is that $0.01 is actually profit, may be more or less depending on the provider ) and you have monthly volume of $35,000 and you run 1750 transaction during the month. Here is the profit that your provider is getting:
$35,000 X .20% = $70.00 profit
1750 X$0.01 = $17.50
So the total profit for your processing company is $87.50 per month. You have to ask yourself, are they worth the profit you are paying them. Only you can make that decision, but at least you know where your negotiation figure begins. As you can see the bulk of the fees that you pay go to the interchange that Visa/Mastercard collect.