The Merchant Processing Guru Tip#6: What about the transaction fee? In the credit card processing industry, the transaction fee is the amount of cents you pay for every transaction on top of the “discount fee” (percentage rate). I typically see transaction fees ranging from $0.18 to $0.35 per transaction. How does this work? Say for instance your volume for the month was $10,000 and you ran 100 transactions of $100.00 to make up that volume. If you pay $0.25 Per transaction then that is $25.00 on top of your discount rate.
When is the transaction fee important? Transaction fees are important to take note of when you have a lot of transactions… This sounds very elementary, I know, but you would be surprised how many people are not aware of this fact. To look at it in another way, the lower your average ticket the more important the transaction fee will be to you. $0.20 out of a $100 transaction is not a big deal but $0.20 of a $5.00 transaction is.
Here is an example of how important the transaction fee really is for small transaction amounts.
$5.00 X 1.63% + $0.23 = $0.3115
$5.00 X 2.00% + $0.18 = $0.28
As you can see the higher percentage rate is less important in this case than the higher transaction fee, the 5 cent difference actually translates into a savings of 3.11 cents all together, even though the percentage rate is so much higher.
3 cents is not a big deal you say? Lets take the volume of $10,000 in our first example but now instead of 100 transactions of $100, how many $5.00 transactions would there need to be to make up the same volume of $10,000? Answer: 2,000.
2,000 X $0.23 = $460
2,000 X $0.18 = $360, a $100 difference. So, do you still think a few cents can’t make a difference?
As always, rates shown are just for the examples in the topics discussed and are not a reflection of actual rates you could receive. To get a comprehensive quote, contact me at: 888-368-GURU (4878), you can fax your statement to: 888-726-9267 or email at: [email protected]