there fees beyond Interchange? When I first entered the bank card space
I was asked a million times ‘What’s your rate?’. Today the same
questions are asked by a merchant base generally in the dark as to how
fees are assessed, not educated on ALL the fees from equipment to early
cancellation fees. Which brings us back to both interchange - the core
fees which constitute the majority of the fee assessed to the merchant,
and all the ancillary fees charged against the merchant.
Merchants must pay fees to the issuing and acquiring banks, as
well as the card associations. Processing fees are discussed, including
who gets what fee. We review interchange in this context as well.
Consumers require some means to conduct a purchase. Whether
face to face in a store, online purchases, or mobile transactions we
review the expenses which are tied to each solution. We also discuss
the merits and downfalls of each purchase method - cash, lease, and
The processor (third party, ISO, or MSP) plus the agent
receive their compensation within the fees assessed as part of the
merchant agreement. There are many fees which, collectively,
constitute a significant earnings opportunity for processor and agent
alike. We will discuss many of the fees to set the stage for our
pricing discussion in a future chapter.
iProcess - Knowing the Payment Industry (Part 1)
Chapter 15 - Processing Fees Simplified
Creative. Use unconventional thinking. And have the guts to carry it out
- Lee Iaccoca
Equipment Fees ‘Demystified’
When any merchant accepts credit cards, there must be some method to
conduct the payment process. Typically, there is a physical device, but
not always. In the early days before the advent of electronic
equipment, card imprints were made using a device called an imprinter,
also affectionately referred to as a ‘knuckle buster’. You would place
your card in the tray, place a multi-part receipt on top, and push a
slide back and forth making an ‘imprint’ on the paperwork.
This process required the merchant to call the bank to receive an
authorization, or to look through a list of published lost and stolen
cards if a floor limit existed. A floor limit allowed merchants to
process small card transactions with the necessity of calling the
acquiring bank. It was time consuming and many fraud issues arose.
That is old school, though you will run into them from time to time.
Today, most consumers and merchants are familiar with credit card
terminals where the card is swiped and the data is collected
electronically and submitted for settlement.
If you have never seen such a device, you must be a relative of the
‘Boy in the Plastic Bubble.’ Immediately go to Target, Starbucks,
McDonalds or almost ANY retail store and use your credit card to make a
purchase. The equipment staring back at you is an example of what I am
talking about at the moment.
Seemingly, there are an infinite number of equipment types, styles, and
systems that will facilitate card processing. Loosely, they fall into
physical - equipment based or software - virtual based systems.
The following are some examples of equipment-based solutions:
Terminal. Simple equipment that provides card-processing capabilities
yet lacks the fuller features of larger systems (cash drawer, inventory
POS. Point of Sale terminals are more robust than their smaller
siblings and provide ancillary benefits to manage inventory, provide
cash drawer solutions, etc.
Mobile Card Reader. An attachment that works with your smart phone
allowing a merchant to capture card data by ‘swiping’ through a device
on the phone – the device is often referred to as a ‘dongle’ or
Purchasing a mocha at Starbucks, fueling up at BP, or buying your
groceries at Kroger’s are all examples of transactions which are
performed through physical equipment solutions.
The following are some examples of virtual based solutions: . . .