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Section 6 - Demystifying the Primary Payment Processing Costs

Are 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 rental.


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.