Merchant Services

Credit Card Processing Guide

It's important to know what you're paying for, so we've put together a guide to how credit card fees work

Credit Card Processing Fees Explained

It's important to understand where your credit card fees are going. 

Every time you swipe a card there are two types of fees:

(1) Interchange & Card Brand Fees and

(2) Processing Fees

Interchange & Card Brand Fees

Processing Fees

Credit Card Processing Pricing Models

There are four types of Credit Card Processing Pricing Models:

Tiered, Interchange Plus, Cash Discount / Surcharge and Flat Rate

  • These are "wholesale" costs

  • These fees go to the Card Networks (Visa, Mastercard, etc.) and the Issuing Banks (Chase, Wells Fargo, etc.)

  • Fees based on the type of card you swipe and how you do it

    • Debit cards have the lowest fees (as low as 0.05%)​

    • Credit cards are more expensive (as high as 4.00%)

    • Online sales have higher fees than in-person

  • These are "retail" costs

  • These fees go to the Card Card Processors (TSYS, FirstData, Elavon, etc.) and their Resellers (Square, Stripe, etc.)

  • Fees based on size of merchant

    • Big merchants pay lower % fees

    • Small merchants pay higher % fees

Now that you understand the Processing Fees, it's important to know how they are passed on to you...

Zilment Recommended

Tiered

  • Credit card fees based on "tiers" of cards chosen by processor

  • Fees tied to volumes

  • Typically biggest mark-up to Wholesale costs

  • Typically most expensive for businesses

  • Zero transparency

Interchange Plus

  • Credit card fees based on (A) Wholesale costs plus (B) a fixed percentage Processing Fee

  • Both Wholesale costs and Processing fees tied to volumes

  • Typically lowest mark-up to Wholesale costs

  • Typically cheapest for businesses

  • 100% transparency

Cash Discount / Surcharge

  • Flat-rate credit card fee (i.e. 4%) charged to customer 

  • Zero credit card fees for businesses

Flat Rate

  • Credit card fees based on "flat" percentage

  • Fees tied to volumes

  • Typically biggest mark-up to Wholesale costs

  • Typically most expensive for businesses

  • Zero transparency