Merchants must pay for credit card acceptance capability. Such costs consist of three distinct components that go to a trio of parties involved in each credit card transaction, only one of which is negotiable.
Businesses must pay the customer’s card issuer, the specific credit card brand, and a processing company every time it accepts a credit card payment. Such fees are called “interchange,” “assessment,” and “processor” fees, respectively.
Charges that specific card brands and issuers impose are non-negotiable and their amounts remain constant regardless of which credit card processor a merchant may be using. Processor-imposed fees are subject to negotiation, however.
Credit card issuers calculate interchange fees on a per-transaction basis. Total interchange fees depend upon on specific related to each transaction. Credit card issuers make such calculations as a collective group. Card brand assessment charges include both a percentage and a flat fee. Visa also imposes a monthly service charge. Processor fees are merely the difference between the sum of interchange and assessment fees and final cost to the merchant/client end user. This cost differential is known as the “processor markup.”
Processor markups vary widely within the industry. Thus, it is essential for merchants that accept credit cards and want maximum value for a minimum cost to accurately isolate and compare markups among multiple processors.