For some reason, the financial people in every organization like complicate things far beyond what they have to be. People need to actually study for months to understand all the different levels of airfares there are. The same goes for how bank charges work. And when it comes to retail businesses that accept credit cards, even businessmen who have years on the job often don't understand entirely all the different kinds of credit card processing charges, fees, penalties and whatnot apply to each transaction. If you have a small online retail business and you don't really know how to get started with a grasp of all the ecommerce credit card processing intricacies there are, here's a little primer that should do the trick.
The first thing they hit you for when you get into e-commerce credit card processing is the upfront fee that's usually about $100, but that can go up to twice as much in some cases. They also require that you buy a shopping cart. In some cases these days, credit card service providers throw in the whole lot in for free.
Once you get started and you actually start accepting orders online, the discount rate fee is about the biggest e-commerce credit card processing charge that you will end up paying. The discount rate is a commission that the credit card processing company charges you as a percentage of every sale you make. The more expensive the item you sell, the bigger the charge works out to be. The exact percentage they charge you varies widely from business to business. If your area of business is considered high risk, they can charge you as much as 2.4%.
Of course, on the other end of the spectrum they will often charge you as little as 10 cents a transaction and not a percentage – when they feel that there isn't much risk in a transaction that the card is stolen. For instance, if you’re buying on your computer at home and you’re asked to type in your billing information for verification purposes, the credit card companies feel that there isn't much chance that it's a stolen card.
If it's a person buying at home, but the website doesn't require that the customer key in his billing information, that is still considered a somewhat non-risky thing. And they'll charge you about 1.25% as your e-commerce credit card processing fee. If they find that the customer is using a foreign credit card the other hand, that's considered pretty risky and they will charge the full amount. They also charge a transaction fee of about 30 cents a sale.
The bottom line for the discount rate is about $25 a month and a statement fee that's about $15 a month. You pay that even if you don't make a single sale. But there's more to come.
Every month, they charge you a gateway fee that's about $30. And then there are the programming fees, cancellation fees and chargeback fees. Basically, it can really eat into their profits doing credit card processing.
0 Comments