Credit Card Processing Fees & Cash Discount Programs – How does it Work?

credit card processing

Whether you are considering adding credit card processing to your business or starting a career in merchant services, it is helpful to understand the details of how fees work. For most businesses, card processing is an essential part of earning sales. However, there are so many options available, it can be hard to figure out which is the best choice.

Typical Credit Card Processing Fees

There are a few common fees that businesses pay to process credit cards. You can usually expect some or all of the following:

  • Transaction Fee: No matter what account you have, you will pay fees on your transactions. These are often calculated as a small flat amount plus a percentage of the transaction. Some businesses charge credit card surcharges and others plan this cost in their pricing.
  • Monthly Fee: Many accounts also charge a monthly fee. This is essentially a subscription that you pay for the opportunity to earn credit card sales. If you are considering a career as a reseller, consider finding a partner that will offer accounts without monthly credit card processing fees.
  • Setup Fee: Some providers charge setup fees. This is just an initial charge to get started and is owed only once.
  • Equipment Fee: Certain providers will offer equipment on a free lease included with the other fees. Others charge a fee for getting your processing equipment.

Cash Discount Programs

As mentioned above, all payment card transactions include a fee. Naturally, businesses often want to avoid paying this when possible. The only way to achieve this is by making sales in cash or other non-card methods. However, businesses are not completely at the whim of their customers.

A common solution is to offer a cash discount program for sales made with cash. Essentially, the seller passes on a portion of the savings to the customer. If the transaction fee would have been $4, for example, the customer may receive a discount of $3. Both parties save money by transacting with cash.

Some merchant services providers try to help businesses set up programs like these. With the right point of sale system, it is easy to get started.

Accounts With No Monthly Fees

Again, some accounts do not have monthly fees. They are designed to only charge the business when it makes a sale. This can be advantageous in many situations.

Typically, these accounts will have slightly higher transaction fees. Depending on the business’s consistent sales volume, the slight premium may be more than made up for by not paying a monthly fee.

Additionally, many new or otherwise inconsistent businesses (such as seasonal companies) can benefit significantly from not paying a monthly fee. They can avoid shelling out when they are making fewer sales. You will need to do the math for your business to determine which is the right option for you.

Learn More

The above information should help you to understand processing fees and cash discount programs. Whether you want to be a POS reseller or use merchant services yourself, understanding the ins and outs of fees is essential. Now you are ready to get started with credit card processing.