In most cases, yes—it's legal to surcharge credit cards. According to federal law, there's a 4% maximum allowable surcharge on credit card transactions. Debit card surcharging is illegal in all 50 states.
The average credit card processing fees range from 1.5 percent to 3.5 percent of each transaction, according to industry analysts, although the final percentage depends on a host of factors.
In order to calculate a 3% processing fee, you will have to multiply the whole transaction value by 0.03. For instance, the processing fee would be $3 (100 x 0.03 = 3) if the transaction value was $100.
That's why they are the ones who get paid by a business who accepts credit card payments. From there, they pay the other parties their cut. So no matter the business, every time someone uses a credit card, payment processors make money by managing that credit card payment.
As a rule, interchange rate is a percentage of a transaction cost plus a fixed dollar amount. Its value depends on the type of card, processing, category of e-commerce, etc. Visa's interchange fee is from 1.15% +$0.25 to 2.70% + $0.10. MasterCard's interchange fee is from 1.35% + $0.00 % to 3.25% + $0.10.
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.
In most cases, credit card processing fees will run between 1.5% to 4% of the total value of a transaction. A $1,000 transaction, therefore, could have fees ranging from $15 up to $40.
What is an Effective Rate for Payment Processing? Your effective rate is your month's total processing fees divided by your monthly total sales volume. It's calculated as a percentage and can be found on your monthly credit card processing statement.
There are a few ways of legally passing on credit card fees to customers. Some are direct, and some are indirect. Adding a surcharge to cover the credit card fee is the more direct method while incentivizing cash payments is indirect.
Here are some additional factors that contribute to the high cost of card processing fees: Fraud. Credit card fraud is a major problem, costing businesses billions yearly. Credit card companies and banks charge interchange fees to offset the fraud cost.
The formula for calculating processing fees is as follows: (order amount * percentage fee) + (transaction fee * number of transactions).
Strategies to lower credit card processing fees include buying your payment terminals instead of leasing, staying PCI compliant, finding the best merchant services provider for your business, considering surcharging or cash discounts, and avoiding cancellation fees.
Use a different payment method.
Merchants often charge convenience fees or surcharges when credit cards aren't a standard payment method. If you have a rent, utility or tax bill, consider paying by check or electronic transfer instead.
Surcharging is widely accepted in the US except in Maine, Massachusetts, Connecticut, and Puerto Rico. Illinois, Colorado, Georgia, Kansas, Texas, Nevada, New York, South Dakota, New Jersey, Minnesota, California, Florida, Oklahoma, Michigan, and Montana allow surcharging with certain contingencies.
Credit card surcharges are optional fees that merchants charge customers who use a credit card to pay at checkout. Surcharges are legal unless restricted by state law and are limited to 4% of the total transaction.
While there is no set standard for good effective rates for credit card processing, around 2-3.5% is ideal. Keep in mind that some businesses may have slightly higher rates.
A take rate refers to the fees online marketplaces (such as Amazon or eBay) or third-party service providers (such as PayPal) collect for enabling third-party transactions. Put simply, a take rate is how much money a business makes from a transaction.
Payment processing is a lucrative, high-growth, and profitable business. Every business needs a payment processing provider, whether they sell online or in local shops. In this article, we take a closer look at how to start a payment processing company.
Credit card processing fees typically cost a business 1.5% to 3.5% of each transaction's total. For example, you'd pay $1.50 to $3.50 in credit card fees for a sale of $100.
Something important to consider when it comes to PayPal fees is the “fixed fee.” Whether the products you sell are economically priced or luxury items, you will have to pay 2.9% of the money you receive from the transaction.
Find the total amount deducted for processing and your total monthly sales. Remember to include any additional monthly fees your processor charges for administration. Use this formula: (Total transaction fees / Total sales) x 100 = Effective rate. Example: ($234.71 / $7521.22) = 0.0312 x 100 = 3.12%.
Card networks like Visa and Mastercard set interchange fees to cover their costs and risks, and these fees are non-negotiable. Payment providers add their charges for facilitating transactions, gateways offer technology and ensuring security.
Card present or in-person transactions such as taps, dips, or swipes are 2.6% + 10 cents per transaction. Online transactions through Square Online Store or eCommerce API are 2.9% + 30 cents per transaction and Square Payment Links are 3.3% + 30 cents per transaction.