Got Customers? Then you've got credit card processing fees.

I have learned a lot about the complexities of credit card processing, and I would like to share with small business owners how it all really works. Because there is so much to cover, I will probably break this up into two or more posts.

If you accept credit cards for your business, then you know that when you sell a widget for $10, you only get about $9.75 after credit card processing fees. If you’re lucky. There is no way to get around processing fees if you want to accept credit cards as payment. You cannot process directly with Mastercard or Visa – they will not handle your transactions. This is where the processors come in – and they are NOT all the same.

Obviously, the processor does not handle transactions for free. Mastercard and Visa are not banks, and neither are most processors. Banks are not free. So from the moment your customer swipes their card, to the moment you receive the cash, the information about that transaction is passed around amongst the banks, the credit card companies, and the processors.

Visa and Mastercard disclose their fees publicly, and adjust their fees twice per year. Visa’s fees are published in an easily digestible chart format, while Mastercard’s fees are contained in a 115 page document! Fees vary by industry, and whether a card is swiped, keyed in, or used over the internet. The kind of card your customer uses may be a consumer card or a business card, a credit or a debit card, and include a rewards program or not. All told, there are about 500 different descriptors amongst Visa, Mastercard and Discover. All of this variance is before the processors weigh in.

The only real way to determine the rates you are paying for credit card processing is the statement from your processor. This is where things can get really tricky. I have seen many statements from many processors, and in my experience, they are rarely straightforward. Even if everything looks very clear, beware the fine print! Statements often do not include all of the numbers needed to show you the real rates you are paying. Sometimes the timing of the transactions and their appearance on your statement may be spread across 2 or more months. Maybe you are paying a “low” rate of “just” 2.1%. Is that in addition to what Visa and Mastercard charge? What about statement fees, authorization fees, assessments-you get the picture.

If your head is spinning, you’re not alone. This is a good place to close, but I’ll post more information in the next few weeks.

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