No matter the size of your service station or how long it’s been running, every service station owner needs to understand merchant fees and charges.
What Are Merchant Fees and Charges?
Merchant fees are the amount of money that you have to pay in order to receive the proceeds from a customer credit card transaction. Usually, this fee combines three factors: assessment (or service) fees, interchange fees, and the payment processor’s markup.
Your payment processor is the one who sets the amount for the merchant fees, but the card issuer and the card network also play a role in determining what is taken from each transaction you process.
Average Credit Card Fees
Having an average number is always helpful, but there are no statistics that show the average credit card processing fees. Instead, your amount will depend on a number of factors such as the type of transaction you process, yoru type of business, and the size of your average transaction.
Once you get a hold on these factors, you’ll be a better judge of quotes you’re offered rather than relating the number back to an arbitrary average.
Common Merchant Account Fees
Along with credit card transaction fees, there are other fees that are included as a part of your account. These fees include:
- Credit card transaction fees
- Charged by banks, card associations, and your processor.
- Scheduled Merchant Account Fees
- Fees charged by the merchant provider for maintaining the account.
- Miscellaneous and Incidental Credit Card Processing Fees
- Typically one-time additional charges that will only be assessed if a triggering event occurs like a chargeback.
Least Cost Routing
Once a customer makes a contactless payment, it’s up to you, the merchant, to send the transaction through the debit network that costs the least to accept. This is called ‘least-cost routing.’ If you do not choose a route, the transaction will be sent through the default network programmed onto the card.
When you use least-cost routing, it doesn’t affect which deposit account the money is paid from, and each network offers similar protections from fraud and disputed transactions to the cardholder. If a customer would like to choose the network themselves, they have the option to insert their card (instead of tapping it) and select one.
Least-cost routing can bring down the cost of payments by allowing merchants to choose the least expensive payment route, and it also increases the competition between debit card payment schemes in a way that encourages all of them to lower their fees.
Please note that least-cost routing only applies to customers using debit cards, and does not affect those using credit cards.
How Much Should I Be Paying?
It’s common for service station owners to think that the best merchant account is the one that offers them the lowest credit card processing rates, but this is not necessarily the case. Getting low rates is important, but you’ll want to look at your effective rate – which is the ratio of every processing cost compared to your overall sales volume.
To make sure that you’re getting a fair rate with your merchant account, in the quote, look for details like:
- Month to month billing without a long-term contract
- No early termination fees
- Low recurring fees that you are made aware of before you sign up
- No fees for leasing equipment
- Access to high quality customer service
A Final Note
At ServoPro, our valued partner for everything related to merchant fees and charges is Suncorp, a corporation that is dedicated to helping Australians make good choices and take positive action to meet their financial goals. They are the best partner for our business, and we hope you can find the best partner for yours.