Category: Merchant Account Fees

Will Cross-Border Fees Increase in 2025?
World commerce is changing dramatically. New tariffs and trade deals are reshaping how businesses conduct international transactions.

In this turbulent environment, cross-border payment systems will adjust. From potential fee hikes by major payment processors to the rise of digital currencies, the changes we’re witnessing today will have far-reaching implications

PREPARE FOR THE FUTURE OF CROSS-BORDER PAYMENTS

Tariffs and Their Ripple Effects

Tariffs are shaking up the global economy, and businesses everywhere are feeling the impact. In recent months, the United States has introduced new tariffs targeting imports from Canada, Mexico, and China. These measures are designed to protect American industries, but instead they’re creating ripple effects far beyond U.S. borders.

For Canadian businesses, these tariffs pose a serious challenge. Higher costs on goods crossing the border make it harder for them to compete in the U.S. market. Companies that rely on American clients are scrambling to find ways to offset these expenses or risk losing valuable contracts. Some are looking at alternative suppliers or renegotiating deals to stay afloat.

Meanwhile, other countries are responding with their own tariffs, sparking trade tensions worldwide. Retaliatory measures from Canada, China, and Mexico could lead to higher prices for consumers and disrupt supply chains across industries. Businesses that depend on international trade must now navigate a more complex and expensive system.

These changes are forcing companies to rethink how they operate globally. Many are exploring new markets outside of the U.S., hoping to reduce their reliance on a single trading partner. Others are investing in technology to streamline operations and cut costs wherever possible.

The ripple effects of tariffs aren’t just about dollars and cents—they’re reshaping global trade patterns. As countries adjust their strategies, businesses must adapt quickly or risk falling behind in this rapidly changing environment.

NEGOTIATE YOUR CROSS-BORDER PAYMENTS RATE

Cross-Border Payment Evolution

The world of cross-border payments is changing fast, and businesses need to keep up. Let’s look at some big shifts happening right now.

Visa’s Fee Hikes

Visa, a major player in global payments, is thinking about raising its fees for international transactions.

This move could make it more expensive for businesses to accept payments from foreign customers. Companies might need to pass these costs on to their clients or find ways to absorb them without hurting their bottom line.

Interchange Rate Changes

Interchange rates, the fees banks charge each other for processing card payments, are also in flux. These changes could affect how much merchants pay to accept credit cards from international customers. Some businesses might see their costs go up, while others could benefit from new pricing structures.

Rise of Alternative Payment Methods

As traditional payment systems become more expensive, businesses are turning to new options. Cryptocurrencies like Bitcoin are gaining traction for cross-border transactions. They offer faster, cheaper transfers without the need for banks or other middlemen.

Other digital payment platforms are also stepping up. Companies like TransferWise and Payoneer are making it easier and more affordable to send money across borders. These services often beat traditional banks on both speed and cost.

The Push for Innovation

The pressure from new tariffs and changing fees is driving innovation in the payments industry. We’re seeing more companies invest in blockchain technology to create faster, more secure cross-border payment systems. Some are even developing their own digital currencies to streamline international transactions.

Banks aren’t sitting still either. Many are partnering with fintech companies to improve their cross-border payment offerings. They’re working on solutions that combine the security of traditional banking with the speed and efficiency of new technologies.

PROTECT YOUR INTERNATIONAL SALES

Global Trade Shifts: Looking Beyond the US

As tariffs reshape the international trade landscape, countries around the world are exploring new opportunities beyond their traditional partnerships with the United States. This shift is prompting nations to strengthen ties with one another and rethink their trade strategies.

Increased Trade Among Other Countries

With U.S. tariffs creating uncertainty, countries like Canada, Mexico, and members of the European Union are looking to boost trade among themselves. By forming stronger alliances and trade agreements, these nations aim to minimize their reliance on the U.S. market.

For example, Canada and Mexico may deepen their economic ties through joint ventures or collaborative projects that enhance their competitiveness.

New Trade Agreements

Countries are actively seeking new trade agreements that prioritize mutual interests over U.S. involvement. For instance, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) allows member countries to trade more freely with one another while reducing tariffs.

This agreement opens doors for nations in the Asia-Pacific region to strengthen their economies without depending on U.S. markets.

Regional Payment Systems

As countries shift their focus away from the U.S., we may see the emergence of regional payment systems designed to facilitate trade among neighboring nations.

These systems could streamline transactions and lower costs for businesses engaged in cross-border commerce. By using local currencies or digital payment methods, countries can reduce their exposure to fluctuations in the U.S. dollar and create a more stable trading environment.

The Role of Emerging Markets

Emerging markets are also stepping into the spotlight as they seek to expand their global presence. Countries in Africa, Southeast Asia, and Latin America are finding new ways to connect with each other and tap into growing consumer bases.

As these markets develop, they may become important trading partners for established economies, further diversifying global trade networks.

As we look beyond the U.S., it’s clear that international commerce is entering a new phase. Countries are seizing the moment to build stronger connections with one another, creating a more interconnected global economy that could redefine how businesses operate across borders.

SELL INTERNATIONALLY WITH CONFIDENCE

Preparing Your Business for the New Cross-Border Reality

As cross-border payments evolve, businesses must adapt to stay competitive and compliant. Here are key strategies to prepare for the changing landscape.

Diversify Payment Methods

Embrace a variety of payment options to meet the needs of global customers and partners. Consider implementing:
- Multi-currency accounts to hold and manage different currencies
- Digital wallets for seamless transactions
- Cryptocurrencies for faster, lower-cost transfers
Implement Robust Compliance Programs

Stay ahead of regulatory changes by:
- Establishing a comprehensive compliance program with clear policies and procedures
- Leveraging automated compliance software for KYC checks, sanctions screening, and transaction monitoring
- Regularly updating systems to guard against cybersecurity threats
Adopt Real-Time Payment Solutions

Prepare for the rise of instant cross-border transfers by:
- Integrating with emerging real-time payment rails
- Upgrading internal systems to handle faster transaction processing
- Training staff on new payment technologies and processes
Enhance Transparency and Data Management

Improve visibility into payment flows by:
- Adopting ISO 20022 messaging standards for richer data exchange
- Implementing end-to-end payment tracking solutions
- Utilizing analytics tools to gain insights from payment data
Mitigate Currency Risks

Protect your business from exchange rate volatility through:
- Forward contracts to lock in future exchange rates
- Currency options for flexible hedging strategies
- Natural hedging by aligning cash inflows and outflows in the same currency
Partner with Trusted Payment Providers

Choose payment partners, like DirectPayNet, wisely by:
- Selecting providers regulated by financial authorities like the FCA
- Evaluating their track record in security and compliance
- Assessing their ability to support your specific cross-border needs
Stay Informed and Agile

Keep your business adaptable by:
- Regularly monitoring changes in global payment regulations
- Attending industry conferences and workshops
- Fostering a culture of innovation within your payment operations team
By implementing these strategies, your business will be well-positioned to navigate the evolving cross-border payment landscape. You can ensure efficient, secure, and compliant international transactions in the years to come.

OPEN A CROSS-BORDER ACCOUNT
March 14, 2025
Decoding Your Merchant Statement to Lower Credit Card Processing Fees
As a small business owner, maintaining profitability and growth means managing expenses. One area that often goes overlooked is credit card processing fees. These fees can quickly add up, eating into your hard-earned revenue if left unchecked. That’s why it’s important to understand your monthly merchant statement – the detailed breakdown of all the charges associated with accepting card payments.

In this post, we’ll dive deep into merchant statements, demystifying the various fees and terminology. Our goal is to equip you with the knowledge and strategies to keep your extra credit card processing fees below $30 per month – a reasonable threshold for most small businesses.

Decoding your merchant statement may seem daunting at first, but with a little guidance, you’ll soon be able to identify opportunities for cost savings. By taking control of your payment processing expenses, you can redirect those funds towards more productive areas of your business, such as marketing, inventory, or employee development.

What is a Merchant Statement?

A merchant statement, also known as a merchant processing statement or credit card processing statement, is a comprehensive document that details all the transactions, sales activity, and processing fees associated with accepting card payments for a given month.

This itemized statement serves as a record of the payments processed through your merchant account, including crucial information such as:
- Total sales volume and number of transactions
- Breakdown of transactions by card type
- Interchange fees charged by the card-issuing banks
- Assessment fees paid to the card networks (Visa, Mastercard, American Express, Discover, etc.)
- Processor markup fees and other hidden fees charged by your merchant services provider
- Chargebacks, refunds, and reversals initiated by customers or card issuers
The merchant statement essentially acts as an accounting of the previous month’s payment processing activity. It provides transparency into the various costs involved in accepting card payments, allowing you to track your expenses accurately and identify potential areas for cost optimization.

While the format and terminology may vary slightly between different merchant services providers, the core components of a merchant statement remain consistent across the industry. Understanding how to read and interpret this document is vital for managing your payment processing costs effectively.

Breaking Down the Fees

Now that we understand what a merchant statement is, let’s dive into the various transaction fees that contribute to your overall credit card processing costs. By breaking down these fees, you’ll gain a better understanding of where your money is going and how to potentially reduce these expenses.

Interchange Fees

Interchange fees are the largest and most complex component of your credit card processing costs. These fees are charged by the card-issuing banks (such as Chase, Bank of America, or Capital One) to cover the risks and costs associated with facilitating each card transaction.

Interchange fees can vary significantly based on several factors, including:
- Card type (e.g., consumer credit, debit, commercial, etc.)
- Transaction type (e.g., card-present, card-not-present, recurring billing, etc.)
- Processing method (e.g., swiped, keyed, online, etc.)
- Industry or business type (e.g., retail, e-commerce, restaurant, etc.)
- Card brand (Visa, Mastercard, American Express, Discover)
For example, a typical interchange fee for a swiped consumer credit card transaction might be around 1.5% + $0.10, while a keyed e-commerce transaction could be closer to 2.9% + $0.30. These fees are non-negotiable and set by the card networks themselves.

Assessment Fees

In addition to interchange fees, you’ll also see assessment fees on your merchant statement. These fees are charged by the card brands (Visa, Mastercard, American Express, Discover) to cover the costs of operating their respective payment networks.

Assessment fees are typically a fixed percentage of your total sales volume, ranging from 0.13% to 0.15% for most card types. While these fees may seem small, they can add up quickly for businesses with high transaction volumes.

Processor Markup and Other Fees

The final major component of your credit card processing costs is the markup and other fees charged by your merchant services provider or payment processor. These fees can vary significantly depending on the pricing model used by your processor.

Common pricing models include:
1. Flat-rate Pricing: A simple, fixed percentage rate (e.g., 2.9% + $0.30 per transaction) charged for all transactions, regardless of card type or transaction details.
2. Interchange-Plus Pricing: The processor charges you the actual interchange fee plus a fixed markup percentage (e.g., interchange fee + 0.25%).
3. Tiered Pricing: Transactions are grouped into “qualified,” “mid-qualified,” and “non-qualified” tiers, each with a different rate based on various factors.
In addition to the markup, your processor may also charge additional fees, such as monthly account fees, PCI compliance fees, batch fees, monthly statement fees, and more.

By understanding the breakdown of these fees, you’ll be better equipped to identify potential areas for cost savings and negotiate more favorable rates with your merchant services provider.

Strategies to Reduce Fees

Now that you have a solid understanding of the various fees involved in credit card processing, it’s time to explore some strategies to help reduce these costs and keep your total fees (from what you can adjust) below the $30 threshold.

Negotiate with Your Processor

One of the most effective ways to lower your credit card processing fees is to negotiate with your merchant services provider. While interchange fees are non-negotiable, the processor markup and other fees are often open to negotiation, especially for businesses with higher transaction volumes.

Here are some tips for negotiating better rates:
1. Shop Around: Get quotes from multiple processors and use them as leverage when negotiating with your current provider.
2. Leverage Your Volume: If you have a high sales volume, use that as a bargaining chip to request lower rates or waived fees.
3. Ask for Interchange-Plus Pricing: This pricing model is generally more transparent and can result in lower overall costs compared to tiered pricing.
4. Negotiate Fees: Request that certain fees, such as monthly account fees or PCI compliance fees, be waived or reduced.
5. Consider Switching: If your current credit card processor is unwilling to negotiate, be prepared to switch to a more competitive provider.
Optimize Payment Methods

Another way to reduce credit card processor fees is to encourage customers to use lower-cost payment methods. For example, debit card transactions typically have lower interchange fees than credit card transactions.

You can also implement surcharging or cash discounting programs, which allow you to pass on a portion of the processing fees to customers who choose to pay with credit cards (we don’t recommend this). However, it’s essential to ensure compliance with card brand rules and local regulations when implementing these programs.

Improve Processing Efficiency

Streamlining your payment processing operations can also help reduce fees. For instance, minimizing chargebacks and reversals can save you money on associated fees and potential fines.

Maintaining PCI compliance is another crucial aspect of efficient payment processing. By adhering to the Payment Card Industry Data Security Standard (PCI DSS), you can avoid costly non-compliance fees and reduce the risk of data breaches, which can lead to even higher expenses.

Additionally, consider implementing processes to reduce keyed-in transactions, as these typically have higher interchange fees compared to swiped or dipped transactions.

By implementing these strategies, you can take control of your credit card processing costs and ensure that you’re not overpaying for the privilege of accepting card payments. Remember, the total amount of the controllable fees you pay should be less than $30 per month.

LOWER YOUR PROCESSING FEES TODAY
March 18, 2024
Why Credit Card Processing Fees Are So High and How To Lower Them
Are you shocked by how much your credit card processor charges each month?

You’re not alone. Credit card processing fees have become a big business, with companies charging upwards of 3% of each transaction.

While it may seem like you’re getting ripped off, there are ways to negotiate these fees and bring them down.

In a recent interview for Time magazine, the CEO of Visa reveals some interesting facts about the credit card industry, fees, and competition. Read on to see if you agree with his mentality or if you want to push forward and eliminate fees altogether.

Credit card companies charge a percentage to accept payments from customers on their network—why?

The reason why credit card companies charge a percentage to accept payments from customers on their network is because it’s how they make money. Simple as that!

This fee, known as the merchant discount rate (MDR) typically ranges from 2-3%, sometimes they can be as high as 5%. MDRs are negotiable, so if you’re being charged an unusually high rate, it is worth trying to negotiate it down with your credit card company.

Here is the range of average credit card processing fees per credit card network:
- Visa: 1.4% – 2.5%
- Mastercard: 1.5% – 2.6%
- Discover: 1.55% – 2.5%
- American Express: 2.3% – 3.5%
Why is there not just one flat MDR for all networks?

Unfortunately, there isn’t just one flat MDR for all networks because credit card companies are competing with each other to offer the best services and fees to their customers.

Each company strives to be more competitive in order to attract more business from merchants and consumers.

Why would I choose to accept payments from a card network with a higher fee?

The reason why you would choose a card network with a higher MDR is because it might offer more features and services that could benefit your business.

For example, AMEX has the highest fee of the four major credit card networks. AMEX also has the best rewards programs and loyalty from customers of any network. i.e., customers who use AMEX do so religiously and often don’t bother opening an account from another network. American Express cardholders also spend the most per month.

By only looking at the percentage, it’s easy to dismiss some card networks. But there are consequences that can negatively affect your bottom line. So the trade is paying a slightly higher fee but earning more in revenue.

Visa’s lowest rate is 1.4% but I pay 1.8%, why?

The 1.4% is the base rate that Visa sets for its merchant discount rate, but it typically increases after additional fees and assessments are added in.

These additional payment processing fees vary based on your business type, location, transaction volume, industry type, etc. Therefore, even though Visa’s base rate is 1.4%, you may end up paying 1.8% or more depending on the other factors involved. And that doesn’t mean Visa get’s 1.8% of your transaction. In fact, the network only gets about 0.13%. The rest goes to other players, which we’ll outline later.

Visa CEO, Al Kelly, in his interview with Time reminds us that these fees are nominal. 1.4% is like scraping the barrel. As business owners following financial news, we see record profits for networks like Visa. But in reality, those massive profits happen because Visa is used worldwide across every market.

What are all the credit card processing fees I pay per transaction?

The typical credit card processing fees associated with a transaction are the interchange fee, which is paid by the merchant to the cardholder’s issuing bank, and the acquirer fee, paid by the merchant to the credit card processing company.

You may also have additional fees from your credit card payment processor, such as a setup or monthly fee. Here’s a list of the fees that make up your processing rate:
- Interchange fee
- Assessment fee
- Payment processor fee
- Setup fee
- Monthly fee
Who gets the interchange fee and is it negotiable?

The interchange fee is NON-NEGOTIABLE. This fee goes to the card issuer (Capital One, Bank of America, Wells Fargo, etc.) and is designed to cover handling and risk. It’s the same rate for all merchant types and cannot be changed, though the fee changes depending on the card brand.

The interchange fee typically ranges from 1.29% to 3.5%, depending on the type of card used, transaction amount, etc.

It’s unfortunate that the interchange rate is non-negotiable because it makes up most of the fees you pay. Having said that you can opt to pass on the interchange fee to customers in the form of a surcharge, but it depends on your industry and state regulations. We don’t recommend doing this, though.

What about the assessment fee? Is it negotiable?

The assessment fee is what the card network charges. It’s around 0.13% – 0.14%. It’s also non-negotiable. Even if it were, you wouldn’t get too much back.

And the payment processor fee? It’s negotiable, right?

Correct! The payment processor markup is negotiable. It also makes up a nominal amount, but it works a bit differently than the other fees AND its structure depends on your business model.

This one is worth its own section, so let’s break it down in the next section.

What other fees might I be paying, and can I get rid of them?

The other fees you may be paying include:
- setup and monthly fees
- payment gateway access fees
- tokenization fees
- fraud protection services
- cancellation fees
- compliance fees
- chargeback fees
- statement fees
All these are negotiable, so you can get rid of them or reduce the rate by using a different merchant services provider. You can read much more about these other fees and how to lower them here.

Remember to take into account your business model when deciding which payment processor is right.

Types of Payment Processor Fee Structures

There are four fee structures used by payment processors.

1. Flat Rate

Popular payment processors and service providers like Stripe, Square, and PayPal use the flat-rate pricing. You pay a percentage plus a dollar amount per transaction for every transaction. There is no change in this per-transaction fee whether you have high-ticket items, low-ticket items, subscriptions, etc.

This structure is the simplest because it’s all packaged into one percentage that covers it all, but it’s non-negotiable.

Ex. 2.6% + $0.20

2. Interchange Plus

This, in our opinion, is the best structure you can opt for. You get the exact interchange rate for each transaction plus a markup that can be negotiated. The markup is the only negotiable fee, and it’s usually used to cover processing costs.

Ex. Interchange rate + 0.10% + $0.10

The markup is 0.10% and $0.10, so that’s what you can negotiate lower. Getting it down to $0.05 per transaction should see a bump to your bottom line.

3. Tiered Pricing

This model is a bit outdated but still used by some processors like First Data, Elavon, and WorldPay. It’s similar to the flat rate structure in that you get a single percentage fee, but what it does differently is break down transactions into different tiers based on the type of transaction.
- Qualified payments – low-cost, low-risk payments such as debit cards or non-rewards cards swiped or inserted at checkout in person. The lowest markup is added to this payment.
- Mid-qualified payments – payments that are more expensive for the merchant service provider than qualified payments. These include rewards credit cards or online transactions (card not present transactions). The merchant may be charged a higher markup and the customer will have to verify their address (AVS).
- Non-qualified payments – carry the highest markup for merchants and involve payments such as online transactions, international cards, corporate cards, and high-level rewards cards (also most card not present transactions). Merchants should expect to pay a higher rate for these types of payments under a tiered model, sometimes up to 4%.
Ex. (Mid-qualified) Interchange rate + 1.25% + $0.10

You can see the markup, which would changed depending on how it’s qualified, but you won’t be able to negotiate that rate lower. So you do have three potential rates, but all are fixed.

4. Membership

Some payment processors offer a subscription-based pricing model. You’ll pay a monthly fee for the service as well as other features, such as customer service or fraud protection. The rates are usually fixed and non-negotiable.

The value that this option offers is instead of paying a markup per transaction, you pay a monthly fee.

Ex. Monthly fee of $99 + interchange rate + $0.05

There is usually a small flat fee tacked on. If this model appeals to you, you should speak with the processor before subscribing to see if that swipe fee is negotiable.

Need help? A merchant services expert can help you find the lowest rate.

We, here at DirectPayNet, are experts in the payments industry. We’ll set you up with a payment processor and fee structure through a merchant account designed specifically to meet your business’ needs. Speak with us today to get started.
February 10, 2023
FAQ Friday – Understanding Fees Part 1: High-Risk Merchant Account Fees

It should come as no surprise that merchant account fees come standard with any high-risk merchant account. Understanding what these fees are and why you are paying them can help reduce costs in the long run. Some fees are negotiable, some fees can be removed entirely, and others are permanent. In any of these cases, it’s important to know what you’re paying and how you can adjust it to minimize extraneous payments and maximize profits.

This is the first part of a two-part post about fees. Here, we will focus on high-risk merchant account fees. Part 2 will focus on payment processing fees, which will be posted next week. If you want to hear more about your payment processing fees, please check out my podcast, Uncensored Direct Marketing and you can watch me explain and give more details about merchant fees. Click this link to watch, and don’t forget to like and subscribe for more content.

First, Understand Your Merchant Services Statement

Before doing anything, you should aim to understand your merchant statement from top to bottom. That might sound tedious and time-consuming, but after the first one or two times, it becomes second nature.

By the end of the month, you should have several documents: your merchant statement, processing statement (complete with a month of processing history), and your bank statement. You should compare these with your merchant contract (not to be confused with your merchant statement) as well as your payment gateway and CRM backlog.

Errors

The first reason you’re comparing these is to find anomalies or errors. These documents may not match up 100%, but they should be close enough to not raise a red flag in your head. Time zone differences and next-day payment processing are a couple of reasons why the data might not be identical. Reconcile the content anyway to understand what you’re being charged, and if there are errors then of course you should bring it up with your high-risk payment processor.

Fees

The second reason is to understand the fees on your statements. There are many transaction and monthly fees on your statements, including a setup fee, and most are looked over without question—but you should question them all. You can do the research yourself about what each fee is, contact us to do it, or use some other 3rd-party reviewer. This level of attention can quickly add some percentage to your bottom line. And if you have a high volume, say $100k per month, even just half a percent adds up to a significant amount.

Discount Rate

One of the most important items on your statement is called the Discount Rate. No, this isn’t an amount you’re saving. Instead, it’s the percentage taken from your sales volume as a fee and they can range by a lot (as low as 1%, as high as 6%).

The discount rate depends on how aggressive your business model is. The goal is to minimize the discount rate as much as possible. However, it’s not something you can negotiate whenever you want. For example, you shouldn’t negotiate this rate if you have a high chargeback ratio (say, over 2%). You also should know how much to negotiate—don’t try to ask for a 1% discount rate if you’re currently on 6%.

The best time is when you’ve been working with a processing company and your business is doing well, or if you’re just starting out (but it’s a little less likely). Remember, it’s always a good idea to aim for a healthy, positive relationship with your processor, acquiring bank, and merchant account provider.

Second, Understand the 3 Ways You’re Being Charged for High-Risk Credit Card Processing

There are three main ways you are charged for credit card processing: flat rate, three-tier, and interchange plus. There have been fluctuations with which method is most popular or “best”, but in the end it all depends on what your business needs and reacts to most positively.

Aim to understand the differences so you can choose or negotiate the method that suits you best.

Flat Rate

This is the method used by popular service providers like Stripe and PayPal. Flat rate means you get charged the same amount for everything. It’s usually on the higher end, like 3% or 4%. So that means 4% will cover all credit card processing fees instead of breaking each fee down into its own item.

You can think of it as an all-inclusive rate. You pay a little more, but everything gets covered and you don’t have to go through hours of scanning your documents because it’s neatly packaged in one percentage. However, this is the least beneficial charge rate for most business owners.

Flat rate processing solutions are good as a backup (e.g., in the case that your own merchant account is not functional, then you can implement Stripe or PayPal as a gateway temporarily), but rarely as your primary. It’s good if you’re just starting out and getting a feel for the industry and how sales works.

Three-Tier

The tiered pricing method gives a little more freedom and leniency when it comes to high-risk merchant account fees. There are three tiers here: qualified, mid-qualified, and non-qualified. Essentially, the processor can break down transactions by associated risk and then charge a separate fee based on that. You can more easily understand each rate and why it’s being processed that way, but it can also lead to higher fees. This is because processors define each tier differently.

Qualified means consumer credit cards without rewards. These are the lowest risk, so you get charged the least. In fact, most processors will charge this rate for your cards first, and then change the tier, so pay attention to your statement.

Mid-qualified is for Card Not Present transactions, like when typing in a customer’s credit card payment info over the phone or through the mail. There’s more risk here, so you get charged a higher rate. Some rewards cards also fall into this category, but it’s really up to the processor to decide.

Non-qualified is the highest rate. This is also for rewards cards as well as signature and corporate cards. E-commerce typically falls under this category, even the customer is using a regular consumer card.

Interchange Plus

By far the most beneficial category to date, interchange plus is the most negotiable rate plan available. However, it takes a lot more patience and effort to understand high-risk merchant account fees here as well as timeliness when negotiating interchange plus pricing.

There’s nothing hidden with interchange plus—all interchange rates are published online as the price each card network charges you (i.e., Visa, MasterCard, etc.). The trickiest part is that each rate changes based on your merchant category. For example, if the category states you’re charged a fee of 0.65% per debit card transaction and 1.2% per business card, then interchange plus will say “this transaction is from a debit card, so we’ll charge you 0.65% as cost + the payment processors fee of 1%”

One thing to note about interchange plus is that you’ll always pay far less for personal and debit cards even if your rate is higher, especially in comparison to flat rate processors like Stripe. Transparency is key here; you always know what you’re paying and can easily calculate the associated fees.

Merchant Category Code (MCC)

Back to the tricky part: your Merchant Category Code (MCC). There are upwards of 180 categories of interchange, and it’s not always clear which one your high-risk business falls under. For example, if you are a health and beauty store and you sell a wide range of products, from supplements and skin care to CBD and e-cigarettes/vapes, then you can be categorized under several different MCCs. The one your processor assigns you may not have the lowest rate or be the most fitting according to you. Luckily, you can negotiate this because MCCs are open to interpretation, especially when applying for your merchant services.

One thing to note, not every category can be negotiated. For example, if you work in adult entertainment or other business types that are always categorized as high-risk industries, then you’re stuck with that high-risk category code and the associated processing fees.

Different processors will categorize you in different ways, so it might be beneficial to assign a merchant account as one MCC and another as a different code, then compare the benefits at the end of the month. The results might surprise you. You might even be able to gain a low-risk merchant account category even if your business is technically higher risk. It’s all in the negotiation and the support you can provide to back up your claims.

It’s best to negotiate your code when filing your application, not after. So do the research beforehand and find out which MCCs you’re most attracted to, then plan out your argument for why that code fits you best. Processors won’t be so willing to change it later on. They also won’t be willing to change it if you receive excessive chargebacks

Security and Chargebacks

Lastly, interchange plus rates can be affected by anti-fraud measures like 3D Secure, which can lower rates to 0.1%. There are many 3D Secure integrations available that don’t disrupt the checkout experience, so your customers won’t be deterred from finishing their purchase. Pricing for 3D Secure may cost up to $0.10, but it prevents a lot of chargebacks. Similar statements can be said for AVS and CVV. In the end, you’ll save a lot of money because each credit card transaction is less risky for the credit card processor.

Part 1 High-Risk Business Fees Wrap-Up

By now, you should know interchange plus is favoured, it’s important to read and reconcile your monthly statements, and security pays off in the long run. If you have any questions, DirectPayNet is always here to help you make the best decision for your high-risk business. You can contact our customer representatives at any time. We specialize in high-risk payment processing for e-commerce businesses and are more than willing to help you understand your options and the benefits a merchant account can provide.

Contact us for more information about opening a merchant account with DirectPayNet.

Part 2 will cover processing fees, including chargeback fees, early termination fees, transaction fees, PCI-compliance and reserves (like rolling reserves). Keep reading to stay informed about how we can improve your operations, one fee at a time.

June 18, 2021
FAQ Friday: How can I Avoid Getting Ripped Off By Merchant Account Fees?
On a recent episode of the Uncensored Direct Marketing podcast, my guest Julian Reyes brought up how easy it is for agents like us to rip off business owners with confusing merchant services pricing.

He said that dozens of agents liked to operate in a cloud of obscurity, and it wasn’t until much later that he realized that he had been screwed over by several hidden fees that were buried in the fine print.

With that in mind, it’s worth spending time educating you on merchant account fees to ensure eager salespeople don’t push you into hidden processing costs and surcharges that could add up to as much as 10% (if not more) off the top of all your online sales.

Once you understand how payment processing fees actually work, you’ll know how to spot when someone is trying to sneak something in under the radar.

So without further ado, let’s get into it.

What are Merchant Account Fees?

The fees you pay associated with your merchant account are made up of a collection of charges passed over to merchants from entities such as payment gateways, payment processors, and credit card companies such as Visa and Mastercard.

There are a lot of fees that you may end up paying per transaction. But broadly speaking, they fall into three categories: set transaction fees charged by the card brands, universal fees every merchant pays regardless of circumstances, and situational fees that vary based on specific conditions.

Thus, as you might expect, merchant fees can vary widely depending on several factors. From the brand of card a customer pays with to the specific pricing policy your payment processor has concerning a certain transaction type, what you are charged could vary quite dramatically to another merchant in another industry if you make the wrong choice.

Need a little more help trying to compare payment processors? It goes much deeper than the fees they charge! We’ve distilled the evaluation process into some neat criteria for you. Check them out here!

The Three Primary Methods Merchant Account Providers Use to Charge You for Their Services

Once again, there are three primary buckets into which merchant account pricing structures fall: flat fees, tiered pricing, and interchange-plus pricing. So let’s quickly run through each of them.

Flat Pricing

Flat pricing is exactly what it sounds like. You pay one flat fee for all transactions regardless of the card issuer or the type of payment made. This could cost you anywhere between 1.5% – 3% and includes a per-transaction fee. For example, a flat pricing rate might look something like 2.5% + $0.30 per transaction.

This percentage and per-transaction fee is the standard for flat pricing models and is most commonly offered by third-party payment facilitators such as PayPal and Stripe.

Tiered Pricing

Tiered plans group different card types and card member associations into “tiers.” In most cases, there are three different price bands (it seems the payments industry LOVES the number three!).

So depending on the card type and issuer a customer uses, you’ll be charged a different rate accordingly. So you might pay one rate for a payment made with a Discover credit card, and a totally different rate for a payment made with a Visa debit card.

Not to libel any other merchant services providers, but this is the pricing method our merchants encounter the most problems with. Often the lowest rate is the one that’s advertised in marketing materials and gets merchants on board.

But once they integrate the credit card processing company into their small business, they find that most transactions fall into the highest pricing tier. Sometimes, a dozen or more conditions need to be met for a transaction to qualify for the lowest tier.

Of course, the other issue is that salespeople and processing service providers bury the qualification criteria for the best processing rates in 30 pages of small print in font size 4! (No, I’m not joking!).

Sometimes the markup being passed on you as the merchant is extortionate compared to the initial wholesale fees charged by credit card networks. The whole debacle is then made a thousand times worse by a monstrous cancellation fee for early termination of the agreement.

Interchange Plus Cost Pricing

Interchange pricing is the most granular and transparent way for a merchant account provider to charge you for their services. The interchange fee refers to the cut that each moving part of the payment processing chain receives during a transaction.

These parties include:
- The credit card association
- The credit card’s issuing bank
- The credit card processor
- Merchant account providers
- Payment gateway provider
Each different possible combination of the above is charged at a different rate based on certain agreements and integrations they have with each other. Thus, Visa may have several different interchange rates depending on how the card was run, who processed it, and which bank issued it.

Those rates are publicly released and are regularly changed and adjusted depending on current circumstances. Interchange plus cost pricing refers to charging you a transparent markup on those publicly-available interchange fees.

So a merchant services provider may charge interchange + $0.15 on each payment, to use an arbitrary example.

This pricing option is often far cheaper per transaction than using the above two methods. As mentioned, some merchant services companies are charging double-digit markups on those wholesale credit card processing fees. That’s how we can often save merchants switching to interchange pricing as much as 20-30% in fees associated with card transactions.

Plus, you have the advantage of knowing where you stand from the outset.

However, you need to be aware of several more fees you can expect to pay as a high-risk merchant.

Other Fees a Merchant Account Provider Charges

There is a myriad of possible additional or circumstantial prices your merchant account provider could charge you. There are also several fees that you will be charged regardless of your choice of pricing structure. So let’s take a look at the main fees.

Authorization Fees

When a transaction is being processed, an authorization token is sent back and forth between the issuing bank and the acquiring bank to check that the balance or credit is available for the requested transaction. The transition is subsequently either approved or declined. There is a tiny fee charged on a per-transaction basis for this procedure, and you’re charged it even if a transaction is declined.

Transaction Fees

The second part of the fees associated with each sale you make is a transaction fee. Merchant service providers use transaction fee to describe the per-transaction fee they collect. Many providers describe this fee differently. Some express it as a percentage of each transaction, which includes the authorization fee mentioned above. Others charge a set amount on top of the authorization fee they pass on to you from issuers and acquirers. So read the fine print!

Monthly Fees

Again, a standing monthly fee is pretty common for a merchant account provider. Sometimes this is expressed as a percentage of your processed revenues. Other providers prefer charging a flat fee. It all depends on their specific company policy.

Chargeback Fees

Not only will you lose the money from the card payments disputed by customers, but you’ll be hit with a chargeback fee from your MSP too! Again, this is a standard fee charged by all providers, and each prices them slightly differently.

Cancellation or Termination Fees

These can be enormous and quite deliberately hidden in the dossier of terms and conditions that accompanies the three-page long contract you sign! Make sure you find out what it is, as you’ll have to pay it when leaving an agreement you’re not happy with later down the line.

Foreign Transaction Fees

Again, domestic merchant account providers charge another standard fee for payments made in another currency or from a different country.

Other Common Fees

Those listed above are just a few of the most common fees, but there are several others that you may need to look out for, including:
- Payment gateway fees
- Minimum processing commitment fees
- Statement and reporting fees
- Address verification system fees
- Batch processing fee
- PCI non-compliance fee
- Application or setup fee
- Point-of-sale (POS) hardware fees
When it Comes to Merchant Accounts, Always Read the Fine Print

There are so many fees charged as part of your merchant account that it can be hard to know where to start. The truth is that there are no shortcuts when it comes to protecting your business. You need to read the fine print, with a magnifying glass if necessary!

It does help if you have an expert on hand to read the contracts for you and spot secret or completely made-up scam fees that could leave you losing as much as 20% off the top for simply accepting credit card payments for your small business.

We work with all kinds of high-risk online retailers and can secure much better rates on your behalf by leveraging the industry relationships we’ve built over the last two decades. By working with us, we can ensure that you don’t fall into any of the traps set by devious operators that give the payments industry a bad name.

So if you want peace of mind that you’re getting a good deal on your business credit card processing rates, speak to a member of our friendly team today!
February 5, 2021