What Do Your Processing Fees Pay For?

Sometimes you have to spend money to make money.

If you have a business and collect electronic payments from your customers, you most likely work with a payment processor and pay processing fees. But do you understand what fees you’re actually paying, and why you’re paying them?

Understanding the fees you’re paying and the value you’re receiving in return is crucial for making smart decisions for your business. Let’s take a closer look to better understand what you’re really getting when you pay for your fees.

Set Up Fees

Some payment processors charge set up fees for you to make use of their services. They are typically charged only once when you first sign up, to cover the administrative costs related to setting up your new payment account. They can range from $0 to $49 or higher.

Ask up front: Are there any one-time administrative costs related to setting up an account?

Bambora’s answer: Yes, we have a $49 set-up fee.

Per-Transaction Fees

These are fees that are charged with every transaction.

Transaction Fees

Transaction fees are what payment processors charge every time you receive a payment. This is likely the fee you’re most aware of, and one of the biggest factors you consider when you’re choosing a payment processor.

Many payment processors charge transaction fees that include both a fixed fee (~10¢-30¢) and a percentage fee (1.7%-3.9%) based on the amount of the transaction.

The various card associations (e.g. Visa, MasterCard) charge transaction fees at different rates from one another in different situations. There are a few ways that payment processors deal with these pricing differences:

• Blended rates: Your payment processor might blend these different rates into one, so that you can have peace of mind with a single rate applied to all your transactions — for example, 2.8% + $0.30. No matter which card type (Visa or a foreign MasterCard) you’re accepting payments from, the per-transaction fee will stay the same.
• Interchange-plus pricing: Your payment processor can also charge you different fees depending on the cards you are processing. This pricing model breaks down the charges going to the issuing bank and credit card associations.
• Tiered rates: The least common, tiered pricing categorizes credit card transactions into three categories: qualified, mid-qualified, and non-qualified. Generally, payment processors charge the lowest rates for qualified transactions (transactions that meet all their specific criteria for processing, such as swiping the card in-person, or paying with debit instead of credit) and the highest for non-qualified transactions (those that fail to meet one or more standards established by the payment processor).

Which Is Right for Your Business?

If you have a high monthly payment volume, you may want to consider an interchange-plus pricing model. With this approach, your payment processor will charge you different transaction fees depending on your specific payment mix (e.g. all Visa transactions will be charged Visa-specific fees), rather than applying a tiered or blended rate. However, interchange-plus pricing is typically available only if your monthly payments exceed a specified threshold.

On the other hand, if your business needs to accept payments from multiple countries, a blended structure might work best for you, as the fees for processing foreign cards are already worked in. This way, you won’t be charged astronomical transaction fees for accepting cards from a wide range of card associations.

Ask up front: Does a lower transaction fee come with a locked contract or fewer modes of payment?

Bambora’s answer: We offer a blended rate at 2.8% + 30¢ per transaction with no locked contract! Card types depend on the type of account you have (US vs. Canadian), not on the price you pay! We also have interchange-plus pricing for those who meet the minimum threshold.

Batch Processing Fees

If you need to process a high volume of payments at once, batch processing may be a good option. Rather than entering credit card details for individual transactions in an online form, batch processing involves sending a large number of transactions to your payment processor all at once.

Fees for batch processing vary depending on the payment processor and whether the transactions involve credit card or bank-to-bank payments.

In general, batch processing fees are significantly lower per transaction than the regular transaction fees described above, and could save you a fair bit of money.

Ask up front: Would my business model benefit from batch processing?Bambora’s answer: Maybe! Request a consultation with one of our payment experts to find out!

Recurring Fees

These are fees you can expect to pay regularly, typically on a monthly basis.

Statement Fees

These fees are charged to cover the costs of printing and mailing monthly payment statements. Online billing can alleviate the need for this extra cost, which can be as much as $15 per month.

Ask up front: Does the payment processor offer online billing or charge a statement fee?

Bambora’s answer: No!

PCI Fees

These are fees charged to confirm your compliance with the Payment Card Industry Data Security Standard (PCI DSS), or to pay a penalty for noncompliance. PCI compliance is mandatory for all businesses that receive credit card payments, or for the payment processors they work with.

Some payment processors will charge you an annual PCI fee. However, it is important to ensure that your payment processor is in fact providing this service in full, and not just charging you the fee. It’s also worth noting that some payment processors will charge this annually as a lump sum.

Ask up front: What level of PCI certification does the payment processor have, and do they charge a PCI fee?

Bambora’s answer: We are PCI Level-1 certified (the highest level), and no, we don’t charge a fee.

Other Recurring Fees

Some payment processors charge additional monthly fees to cover some of the ongoing costs related to the service that you receive, such as fraud prevention and customer support. Monthly fees can range from $0 to $30 or higher.

When you’re keeping a close eye on the bottom line, it can be tempting to choose a payment processor that doesn’t charge monthly fees. However, it’s important to carefully assess whether making this choice would mean sacrificing crucial services.

Saving $30 per month is great, but not if you end up wasting countless hours and dollars because you can’t reach support.

Ask up front: What recurring fees will I be charged for this service?

Bambora’s answer: We do charge a $25 monthly fee.

Incidental Fees

These are fees that are charged only when specific incidents occur.

Chargeback Fees

Chargebacks are the forced reversal of payments made to a business by a customer using a credit card. After a chargeback request is made by one of your customers, you may have to pay an additional fee on top of returning the money from the sale. Rates vary, but many of the leading payment processors charge a fee in the range of $15–25 per chargeback.

While chargebacks are decided by the customer, fraud management tools can help you cover your bases and avoid chargebacks based on fraud.

Ask up front: What is the payment processor’s chargeback process and fee

Bambora’s answer: There is a $20 fee for chargebacks. If a merchant disputes the chargeback and can provide proof of purchase, the fee is returned. You can review our chargeback process here.

NSF Fees

If you have insufficient funds to pay a bill from your payment processor, you will be charged a non-sufficient funds (NSF) fee.

Ask up front: How much do you charge for non-sufficient funds?

Bambora’s answer: We call it a return fee and charge $15.

Maximizing the Value of Your Processing Fees

Any time your business is paying for something, it comes down to more than just the dollar figure — it’s about getting bang for your buck. And that’s no different with processing fees. At Bambora, we are committed to providing valuable services based on simple and transparent pricing.