Credit Card Networks: What are they and how do they work?

When you use your credit card or a digital wallet to make a purchase, a credit card network goes to work behind the scenes. In seconds, it connects your card issuer and the merchant’s bank to process the transaction. In general, credit card networks manage the systems needed for credit card transactions. But there’s plenty more to understand.

What is a credit card network?

Credit card networks build and maintain the technology behind credit card authorization and payment processing. These networks connect card issuers and banks to help make purchases possible. For example, the network must check with the issuing bank to make sure there’s enough available credit to approve the purchase. American Express, Discover, Mastercard and Visa are the four major credit card networks in the U.S. The credit card network logo can usually be found on the front or back of a credit card.

Credit card network vs. credit card issuer: What’s the difference?

Credit card issuers are financial institutions that supply credit cards. Credit card networks run the technology that processes card payments—among other functions. In other words, the credit card issuer is the one you’ll be paying back for your purchases. For example, Capital One is a credit card issuer that works with the networks Mastercard and Visa.

Can a credit card issuer also be a credit card network?

Credit card issuers and networks are usually separate entities. But there are two exceptions—American Express and Discover. These credit card networks also issue credit cards. And they’re referred to as closed credit card networks. Networks that also issue cards act as the acquirer, which means they process the transactions and also pay the merchant for what’s owed for each transaction, minus any fees.

Types of card networks

Generally speaking, there are two major types of credit card networks:

Four-party networks: In a four-party network—also known as an open network—the credit card network relies on third-party financial institutions, such as banks, to issue and distribute cards to customers. Examples of four-party credit card networks include Visa and Mastercard. 

Three-party networks: In a three-party network—also known as a closed network—the credit card network acts as the card processing network and the card issuer. Three-party networks process payments on behalf of merchants and generally don’t allow third-party institutions to issue their credit cards. Examples of three-party credit card networks include Discover and American Express.

How do credit card networks work

To better understand how credit card payment networks work, it may help to look at an example transaction.

Let’s say you’re filling up your car at the gas station. Here’s how a credit card network makes the purchase happen:

• Using a card or digital wallet, you tap, swipe or insert a credit card at the gas pump or inside the store at the register. 
• The gas station’s point-of-sale (POS) system reads your card information and sends it to the gas station’s bank—called the acquiring bank—to request a charge.
• The acquiring bank sends the request to the credit card network.
• The credit card network contacts the card issuer to authorize and approve the transaction.
• If the card issuer approves, the credit card network gives the go-ahead to the POS system and charges a processing fee.

Credit card networks work with credit card issuers and merchant banks to process cardholder transactions quickly and securely. It helps to know which credit card network is linked to your card—just check the logo on the front or back. And keep in mind that it can be smart to have cards from different networks so you’re more likely to be able to pay with a card anywhere you go. Source

What is a Card Reader and How Does it Work?

A card reader is an electronic device that enables businesses to more securely accept and process credit, debit, or gift card transactions. It can come in various forms, such as part of a countertop POS system, as a smartphone attachment, mobile reader, or even as a handheld or wireless device.

Credit card terminals work by decoding the information stored on the card, encrypting it, and then transmitting it to the payment processor for authorization. The process involves several steps:

• The cardholder initiates the transaction by either swiping, inserting, tapping, or waving their card or mobile device over the card reader.
• The card reader decodes the card’s information and encrypts it for secure transmission.
• The encrypted data is sent to the payment processor, which routes it to the cardholder’s bank for verification and authorization.
• The card-issuing bank approves or declines the transaction, and the response is sent back to the card reader.
• The card reader displays the transaction result and, if approved, the sale is completed.

What is a magstripe reader?

Magstripe readers, also known as magnetic stripe readers, are card terminals designed to read the information stored on the magnetic stripe on the back of credit and debit cards. These card readers use a magnetic head to decode the card data, which is then sent for authorization. While magstripe readers are still used in the U.S., they are less secure for in-person shopping than EMV card readers because the data on the magnetic stripe can be easily copied or cloned.

What is an NFC card reader?

NFC card readers, or near-field communication readers, allow for contactless payments using cards or mobile devices with NFC technology. These card terminals use short-range wireless communication to exchange data between devices. To make a payment, the customer simply needs to hold their card or mobile device near the reader. Contactless mobile wallet payments, like Apple Pay® and Google Pay™, continue to increase in popularity due to their speed and convenience.

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Why Merchant Fees Are So Important For Businesses To Understand

Merchant fees directly impact a business’s profitability. The cost that comes with every swipe of a credit or debit card can eat into a business’s bottom line if they are not managed properly.

Here’s why understanding merchant fees is so important:

They affect pricing: Merchant fees are a business expense, just like rent or employee salaries. To cover these costs, businesses need to absorb them into their profit margins or pass them on to customers in the form of higher prices. Understanding your merchant fees helps you make informed decisions about pricing strategies and avoid losing money on transactions.

They can vary substantially: Different types of cards, transaction amounts, and industries have different interchange fees. For example, debit cards typically have lower interchange fees than credit cards, and online transactions often have higher fees than in-store purchases. Learning these variations allows you to choose the payment methods and processing options that are most cost-effective for your business.

They can be negotiable: While some fees, such as interchange fees, are set by the card networks, others—such as merchant account fees—can be negotiated with your payment processor. Understanding the different types of fees, and how they are calculated, can give you the power to negotiate for better rates.

They can help you identify fraud: Some merchant fees, such as chargeback fees, are incurred when a customer disputes a transaction. Learning about the fees associated with chargebacks can prepare you to deal with potential fraud and prevent it from eating into your bottom line. Source

Types of Merchant Fees

Merchant fees encompass a variety of charges that businesses face when processing electronic payments, such as credit or debit card transactions. The main types of merchant fees include:

Interchange fees: These are fees that the bank issuer of the customer’s credit or debit card charges. The amount is a percentage of the transaction value and may include a fixed fee. Interchange rates vary based on factors such as the type of card used, the transaction’s risk level, and whether the transaction was in person or online.

Assessment fees: These fees, which are charged by the credit card networks (e.g., Visa, Mastercard, American Express, etc.), are usually a fixed percentage of the transaction amount. The business’s bank pays assessment fees to the card network.

Payment processor fees: These fees are charged by the payment processor company handling the transaction processing on behalf of the business. They can be structured in a variety of ways, including as a percentage of each transaction, a flat fee per transaction, monthly fees, or a combination of these.

Monthly statement fees: Some payment processors charge a fee for providing a monthly statement of transactions.

Payment gateway fees: Businesses often use a payment gateway for online transactions, and this service may come with its own set of fees. This can be a per-transaction fee, a monthly fee, or both.

Minimum monthly fees: Some processors charge a minimum monthly fee, which is the lowest amount a business must pay in processing fees per month. If transaction fees don’t add up to this amount, the business pays the difference.

Setup and equipment fees: These fees cover setting up a merchant account or renting or purchasing necessary hardware (such as POS systems or card readers).

Chargeback fees: When customers dispute a transaction, it can result in a business needing to return funds, which is known as a chargeback. When a chargeback occurs, businesses are often charged a fee. This fee covers administrative costs associated with handling the dispute.

Early termination fees: Some merchant service agreements have a contract term, and terminating the contract early can result in fees.

Incidental fees: These fees can include fees for additional services such as paper statements, batch processing fees, or fees for noncompliance with security standards.

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Payment Submission: The Starting Line

When a consumer submits a card payment online or at a physical terminal, the unsung hero of the interaction is the payment gateway.

The payment gateway is the software that captures and transmits the sensitive data from a customer’s card (along with other key transaction information) to the acquirer so the authorization process can happen. For online and software-based payments, the gateway runs in the background behind the checkout page. In-store, the gateway software is built into the merchant’s physical payment hardware.

In addition to facilitating the flow of data to and from the merchant, the payment gateway is also the first line of defense against bad actors looking to steal valuable customer data.

Several initial security measures begin at the gateway level. The first and most universal is encryption. All gateways encrypt customer payment data before sending it. At the most basic level, they use legacy protocols like SSL (Secure Sockets Layer) and TLS (Transport Layer Security). However, modern gateways increasingly employ a more advanced and secure method known as tokenization.

A gateway can also require additional security steps that must be met before submission, like 3DSecure or the European Union’s Strong Customer Authentication (SCA). The former requires online shoppers to enter a PIN before a transaction can go through. This step ensures an authorized holder is using the card.

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Understanding Card Declines Due to Suspected Fraud

In today’s digital age, credit card fraud has emerged as a significant threat, costing billions annually and affecting millions of individuals and businesses worldwide. The ramifications extend beyond financial loss, damaging reputations, and eroding trust between consumers, businesses, and card issuers. As eCommerce grows, so does the number of legitimate transactions mistakenly rejected due to suspected fraud, a phenomenon known as false declines. 

False declines – also known as false positives in the realm of fraud detection – represent a significant challenge for both consumers and financial institutions. These declines occur when a legitimate credit card transaction is erroneously rejected under the suspicion of fraudulent activity. The reasons for such declines are varied and can include behaviors perceived as atypical for the cardholder, such as making high-value purchases that deviate from their normal spending habits, conducting transactions in geographic locations where they don’t usually shop, or making several online purchases in quick succession.

For example, consider a scenario where a consumer, typically making modest purchases in their hometown, suddenly attempts to buy expensive jewelry while on vacation abroad. Despite the transaction being legitimate, the sudden change in spending pattern and location might trigger a fraud alert, leading to a declined transaction. Similarly, during the holiday season, a shopper might purchase multiple high-ticket items online to take advantage of Black Friday deals. Such an unusual spike in online spending could also be misconstrued as fraud, resulting in declined transactions.

The real-world consequences of false declines are not trivial. According to research,  approximately 10% of all eCommerce dollars are rejected by fraud detection systems, but up to 70% of these declined orders are from legitimate customers. In some industries, payment decline rates can be as high as 20% or even 30%.  This highlights the financial impact false declines can have, even exceeding the losses they aim to prevent. In addition, the global reach of e-commerce and the increasing sophistication of fraudsters have exacerbated the issue. Fraud tactics are constantly evolving, with scammers finding new and innovative ways to bypass security measures.  The ongoing struggle for card issuers to refine their fraud detection algorithms—balancing sensitivity to suspected fraud (decline reason) with the need to minimize inconvenience to legitimate customers—remains a critical concern in the financial industry.

5 Fraud Monitoring Tools to Help Card Issuers Reduce False Declines Due to Suspected Fraud

To combat these challenges, card issuers are implementing more advanced fraud monitoring and authentication measures. These initiatives are not just reactive steps in response to the current threats but are also part of a broader strategy to improve the ratio between stopping the “good guys” vs stopping the “bad guys”. Through these concerted efforts, card issuers protect their customers and themselves from immediate risks while reducing the number of false positives that negatively impact the payment ecosystem.

1. Enhanced Authentication Techniques

• EMV Chip Technology: This technology has significantly reduced fraud by transmitting an encrypted, one-time code containing the card information to the card reader, making it nearly impossible to counterfeit cards.
• Biometric Verification: Incorporating fingerprints, facial recognition, or iris scanning adds an extra security layer, ensuring that the cardholder is the one making the transaction and reducing incidents of false declines due to suspected fraud.
• Two-factor Authentication: This requires the cardholder to provide two forms of identification (something they have, like a card and something they know, like a PIN), enhancing security.
• 3D Secure (3DS): A credit card security technology that helps card issuers check the authenticity of online transactions. The technology requires consumer action such as a one-time password (OTP) or other multi-factor authentication method via phone call, text message, or email before completing the purchase.

2. Real-time Transaction Monitoring and Analytics

• Machine Learning and AI: These technologies analyze transaction patterns to identify anomalies that could indicate fraud, enabling real-time decision-making and preventing unnecessary false positives that cause cardholders to experience a card decline for suspected fraud.
• Cross-channel Monitoring: This helps detect coordinated fraud attempts across different transaction platforms.

3. Tokenization and Network Tokenization

• Tokenization: This process involves replacing sensitive card details, such as the 16-digit account number, with a unique digital token. These tokens are then used to complete transactions without exposing actual card details, significantly reducing the risk of card data being stolen or misused.
• Network Tokenization: This involves the creation of tokens by the card networks (such as Visa, MasterCard, and American Express) that are specific to each transaction, merchant, or device. This means that even if a token were to be intercepted or stolen, it would be virtually useless outside of the specific transaction context for which it was generated. Network tokenization not only secures the cardholder’s data during the transaction process but also across the entire payment ecosystem, including online, mobile, and in-store environments.

4. Collaboration with Networks and Merchants

• Information Sharing: By exchanging data on fraud trends, card issuers, networks, and merchants can stay ahead of fraudsters. 
• Universal Security Standards: Implementing shared security measures creates a unified defense against credit card fraud.

5. Investing in Customer Education

• Awareness Programs: Educating consumers on secure transaction practices is crucial for preventing unnecessary instances of false declines.
• Practical Tips: Offering guidance on recognizing and avoiding fraud helps consumers protect themselves.

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Who Is Involved In Credit Card Processing?

The following entities are central to how credit card processing works to securely capture payments at the point of sale (POS).

• Consumer. The cardholder, or the person making the purchase.
• Merchant. The person or business selling the product or service the consumer is purchasing.
• Payment gateway. The technology that connects a merchant to a payment processor. Typically, a gateway integrates with card-present (e.g., in-store purchases) as well as card-not-present (e.g., online or eCommerce) payment environments, captures payment details for customer transactions and routes them to a payment processor or the merchant bank, and sends an “approved” or “declined” message to the merchant.
• Credit card processor. Also known more generally as a “payment processor.” The entity that facilitates communication between the merchant, the credit card network, and the cardholder’s bank. Processors, along with merchants, are responsible for maintaining compliance with the Payment Card Industry Data Security Standards (PCI DSS). Some payment processors provide their own payment gateways, while others, typically the larger processors, have reseller agreements with payment gateways.
• Card network. Also referred to as the “credit card network” or “credit card brand.” This is the brand of the customer’s credit card, such as American Express, Visa, Mastercard, or Discover. The credit card networks are responsible for setting interchange and assessment fees, as well as the standards for PCI DSS.
• Issuing bank. Also referred to as the “cardholder’s bank” or “consumer bank.” This is the bank that provides the customer with their credit card. One of the primary functions the issuing bank serves in the credit card processing cycle is to determine whether the cardholder’s account holds the funds to complete a transaction, and to release those funds for settlement.
• Acquiring bank. Also referred to as the “merchant bank.” This is the bank used by the merchant to hold their business funds and receive money from transactions. It can provide the merchant with card readers and equipment to accept card payments. The acquiring bank can also serve as a credit card processor.

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What do Credit Card Decline Codes Mean?

What do Credit Card Decline Codes Mean? How to Read and What to do with a Decline Code

Credit card decline codes are responses from the card issuer indicating why a transaction was unsuccessful. When a transaction is declined, the payment processor provides a numerical code that corresponds to a specific reason. These codes help businesses and customers understand what went wrong so they can take appropriate action.

Declines can happen for various reasons—insufficient funds, suspected fraud, or technical issues with the card issuer. Some decline codes require simple fixes, like retrying the transaction, while others indicate more serious problems that need further investigation.

General Guidance: When you receive a decline code, it’s essential to remain professional and helpful with your customer. Avoid making assumptions about why their card was declined. Your best approach is usually to suggest they contact their issuing bank for more information, or to offer an alternative payment method.

The Most Common Credit Card Decline Code Definitions and Solutions:

• Code 01 & 02: Refer to Issuer: These codes mean the card issuer declined the transaction, but they don’t tell us why. Code 02 sometimes suggests a more serious issue, like a blocked account. In either case, politely ask the customer to contact their bank to resolve the issue. Offer an alternative payment option.
• Code 04: Pick Up Card: This card is no longer valid (expired, cancelled, etc.). If possible, retain the card and inform the customer that their bank has flagged it as invalid. Request another form of payment. Important Note: While this code doesn’t necessarily indicate fraud, exercise caution.
• Code 05: Do Not Honor: This code strongly suggests suspected fraud. Contact the issuing bank immediately for instructions. Be very cautious about accepting another payment method from this customer.
• Code 07: Pick Up Card, Special Condition (Fraud Account): This confirms a fraudulent account. Do not attempt the transaction again. If possible, retain the card and return it to the issuer. Avoid accepting other payment methods from this customer. If you have an existing relationship with the customer (e.g., a recurring subscription), you might suggest they contact their bank, but proceed with caution.
• Code 12: Invalid Transaction: Something is wrong with the transaction details (incorrect card number, CVV, expiration date, etc.). Double-check the information entered. If the problem persists, ask for an alternative payment method.
• Code 13: Invalid Amount: The transaction amount is incorrect (e.g., negative number, special characters). Verify the amount and try again. If the issue continues, contact your payment processor.
• Code 14: Invalid Card Number: The card number is incorrect. Verify the number with the customer’s card. If the number is correct, request another payment method.
• Code 15: No Such Issuer: The card issuer can’t be identified. This could be due to an incorrect card number, a non-existent issuer, or the issuer not being part of your network. Double-check the card number. If the problem persists, the customer will need to use a different card.
• Code 19: Re-enter: A temporary error occurred. Try the transaction again. If the problem continues, contact your payment processor.
• Code 28: File Temporarily Unavailable: The issuer’s system is having trouble accessing the cardholder’s information. Ask the customer to contact their bank. If the problem persists, request an alternative payment method.
• Code 41: Lost Card, Pick Up: The card has been reported lost. Retain the card if possible and return it to the issuer. Be cautious about accepting another payment from this customer.
• Code 43: Stolen Card, Pick Up: The card has been reported stolen. Retain the card if possible and return it to the issuer. Do not accept another payment from this customer.
• Code 51: Insufficient Funds: The cardholder doesn’t have enough money in their account. Inform the customer. They can try again after depositing funds, or use another payment method.
• Code 54: Expired Card: The card is expired. Request an alternative payment method.
• Code 58: Transaction Not Permitted to Cardholder: The card isn’t valid for this type of transaction. This might be due to card type restrictions or technical issues. Request another payment method.
• Code 61: Exceed Issuer Withdrawal Limit: The customer has exceeded their daily or overall withdrawal limit. Advise them to contact their bank. Offer an alternative payment method.
• Code 63: SEC Violation Credit Card: A security issue occurred, possibly an incorrect CVV. Verify the details. Be cautious if the issue persists, as this could indicate fraud.
• Code 65: Activity Limit Exceeded or Insufficient Funds: Similar to Code 61, the customer has hit a spending limit. They should contact their bank. Offer an alternative payment option.
• Code 97: Invalid CVV: The CVV is incorrect. Verify the CVV. Be cautious, as this could be a sign of attempted fraud.
• Code R0/R1: Stop Recurring Payment: The customer has cancelled a recurring payment. Cancel future payments to avoid chargebacks. If you have a contract with the customer, contact them to discuss the situation.

Credit card declines can be frustrating, but by understanding decline codes and knowing how to respond, you can keep transactions flowing smoothly.

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Authorization Responses

An authorization is a request for verification that the cardholder’s account is in good standing with funds available at the time of the request. For most merchants, the authorization is obtained during the sale transaction.  It does not warrant that the person presenting the card is the rightful cardholder, nor is it a promise or guarantee the sale will not be subject to a chargeback. The following are some examples of responses received from the card issuers.

• Approved - Transaction is approved by issuer/company that governs the payment card
• Referral - Message indicating that the merchant must call their authorization center and follow instructions provided. Note: When a referral response is received the merchant should not attempt additional authorizations on the same card. The merchant should call the authorization center to receive a voice approval code to complete the transaction. A voice authorization should only be requested when a referral response is received. If the merchant receives an unfavorable response, another form of payment should be requested.
• Declined - Transaction was not approved by issuer/company that governs the payment card. The transaction should not be completed. Request another form of payment. Note: If a sale is declined, do not pursue alternative measures with the same card to obtain approval. Instead, request another form of payment. Merchants accepting and processing transactions with multiple authorizations are subject to chargebacks, Payment Card Company fines and/or cancellation of their processing agreement
• Pick Up Card - Card issuer wants to recover the card. Do not complete the transaction. Ask for another method of payment and if you feel comfortable recover the card from the cardholder. Note: Follow your internal procedures for card recovery

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5 Factors For Banks To Consider When Choosing A Payment Processing Partner

Banks can derive powerful benefits by partnering with a top-notch payment processor. But financial institutions that don’t vet those partners with due diligence may inadvertently invite problems. 

There are five key considerations to explore when selecting the right payment processing partner, and these can help ensure a more rewarding and value-adding relationship;

1.) Experience Serving Banks

Banks are advised to seek out a payment processor with a proven and verifiable track record of successful bank partnerships. Experience in the nuances of banking, coupled with an understanding of the needs and preferences of merchants who rely on banks, is essential. Otherwise a bank’s vital merchant relationships may be jeopardized because of the payment processor’s lack of knowledge, resources, and vision. A qualified payment processor will anticipate what a bank and its merchants require. Then it will offer customized solutions to help ensure stability, profitability, and growth.

2.) Robust Security

Proactive risk management is priority number one for banking institutions. Don’t let a processing partner who isn’t vigilant compromise security. When vetting a payment processor, make sure they are expert at guarding against potential data breaches. They should use all the latest payment protection technologies such as data encryption, tokenization, PCI-compliant Level 3 processing, and access-restricted cloud backup. They should also know how to accommodate the needs of businesses within regulated industries. Law firms, for example, need a payment system that supports approved escrow accountability. Healthcare providers must ensure airtight HIPAA compliance. A qualified payment processor will stay updated on compliance issues, technological solutions, and best practices. They’ll also facilitate ongoing payment system security training for bank personnel and partnering merchants.

3.) Specialized Public Sector Solutions

A partner with creative solutions for government agencies, municipalities, and educational institutions is a great asset. They can open up new opportunities for banks to pursue those potentially lucrative accounts. For example, a flexible rate payment system, which utilizes industry-compliant legal surcharging, can ensure that the organization never again has to pay credit card “swipe fees” to companies like VISA and MasterCard. Overhead is significantly reduced, net revenue is increased, and flex-rate payments build public trust through greater financial transparency and equity.

4.) Strategic Consultation and Collaboration

Always demand that a payment processing partner does more than simply sell products and services to the bank. Look for one that will become a long-term solution-focused success collaborator. Their support and innovation should improve the bank’s customer service to help attract and retain merchant accounts. Banks who choose a superior payment processing partner can reduce in-house labor and overhead, while expanding their merchant account portfolio and market share.

5.) Flexibility and 24/7 Support

A B2B payment platform should be designed exclusively for B2B and be able to process multiple payments simultaneously, in a variety of currencies, with instant electronic invoices and receipts. Choose a partner with dedicated, personalized support that is not outsourced to a third party and extends around the clock, even on bank holidays. Then enjoy the competitive advantage derived from having a technologically advanced, strategically innovative, and highly responsive payment processing partner. Source

Credit Card Processing Fees and Costs

Whatever pricing structure they use, processing companies base their pricing on four primary fees. These include interchange fees, assessment fees, processor markup fees and monthly account or statement fees. Knowing what goes into credit card processing fees can help you understand your options and spot the best payment processing service for your business.

Interchange Fees

Interchange fees are set by Visa, Mastercard, Discover and other card brands. These are the unavoidable, base-level costs of processing credit cards. Often called wholesale or base fees, interchange fees generally range from 1% to 2% of the transaction amount. Payment processing companies collect interchange fees during the transaction process. They then transfer these funds to issuing banks as payment for the credit service.

Interchange rates vary greatly and depend on the merchant’s industry, the transaction type and the brand and type of card used. Here are a few examples of factors that impact interchange rates merchants pay to process credit cards.

• Transaction type: Card-not-present transactions, such as online sales, have higher interchange rates than in-store sales, where cards are physically swiped.
• Debit vs. credit card: Debit cards have lower interchange rates than credit cards because they are considered a lower credit risk.
• Card brand: Discover and American Express have higher interchange rates than Visa and Mastercard.
• Card type: Rewards, corporate and governmental purchasing cards have higher interchange rates than non-rewards cards since these programs cost the issuing banks more to administer.

Assessment Fees

Assessment fees, often called per-transaction fees, are also set by the card brands. These are flat per-transaction fees attached to interchange fees and typically range from 1 to 5 cents, based on the type of card and transaction.

As with interchange fees, assessment fees are collected by card processing companies during the transaction process. However, these fees are paid to the card associations, such as Visa, Mastercard, Discover and American Express, not to the issuing banks.

Processor Markup Fees

Markup fees are what credit card processing companies charge for their processing services. Markup fees vary based on the card company’s processing fee structure, such as a straightforward markup percentage called interchange-plus, complex tiered rates or simple flat-rate fees.

Each fee structure has benefits and drawbacks, which we explore in more detail below. Bottom line, markup costs vary greatly from processor to processor, so it’s essential to shop around for the best deal.

Monthly Fees

In addition to markup fees, many credit card processing companies charge monthly fees for specific services, such as statements, online gateways, PCI compliance and card terminals and other processing hardware. Some roll all of these services under a monthly account or subscription fee.

A few charge no monthly fees for credit card processing services. However, these providers typically have higher flat-rate processing fees that can cost more compared to providers that combine monthly fees with lower processing rates.

Other Costs To Consider

Some credit card processing companies have add-on and conditional fees that can affect your overall processing costs. To avoid surprises on your monthly statement, always check the fine print for add-on fees when comparing credit card processing companies.

• Chargeback fees: Unfortunately, chargebacks are an inevitable part of accepting credit cards and the cost of processing a chargeback varies greatly among processing services.
• Batch processing fees: Some tiered and traditional merchant services providers charge per-batch fees.
• Setup or termination fees: Card processing services with negotiated or tiered rate plans often require contracts with setup costs and hefty early termination fees.
• Monthly minimum fees: Some negotiated and tiered rate plan providers charge a monthly fee if contracted transaction volume minimums aren’t met.
• Same-day funding fees: Most card processing services deposit funds within one to two business days with no added fees but charge a fee for instant or same-day access to processed funds.