Understanding Payment Processing Costs & Fees
Know What You're Paying-and Why
Payment processing costs can be confusing. Rates, interchange, assessments, monthly charges, and other fees can make it difficult to determine what your business is actually paying to accept electronic payments.
Understanding how these costs work gives you greater visibility into your payment processing expenses and helps you make more informed decisions when evaluating a payment provider.
At Kimeris, we believe businesses shouldn't have to become payments experts to understand what they're paying.
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Where Do Payment Processing Costs Come From?
When a customer makes a card payment, several organizations work together to authorize, process, and settle the transaction. The cost of accepting that payment can therefore include several different components.
Interchange Fees - Generally paid to the bank that issued the customer's card. Interchange rates can vary based on factors such as card type, transaction method, and how the transaction is processed.
Card Network Fees - Fees associated with card networks such as Visa, Mastercard, American Express, and Discover for transactions processed across their networks.
Processor or Provider Fees - The amount charged by your payment provider for its processing services, technology, support, and other services.
Additional Service Costs - Depending on the provider and setup, businesses may also encounter costs associated with gateways, PCI programs, equipment, monthly services, statements, or other features.
That's why the rate advertised by a payment provider doesn't always tell you what accepting payments will actually cost your business.
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Understanding Payment Processing Pricing Models
Payment providers can structure pricing in different ways. Understanding the model behind the rate can make it easier to compare providers and evaluate the true cost of accepting payments.
Interchange-Plus Pricing - Separates the underlying interchange and card network costs from the payment provider's markup. This structure can provide greater visibility into how processing costs are calculated.
Flat-Rate Pricing - Charges a predetermined rate for transactions, making costs relatively easy to understand. While simple, the flat rate may not always be the most cost-effective option for every business.
Tiered Pricing - Groups transactions into pricing categories, often described as qualified, mid-qualified, and non-qualified. The rate a business pays can vary depending on how a transaction is categorized.
Subscription or Membership Pricing - Some providers charge a recurring membership or subscription fee along with transaction-related costs. The overall value depends on the business's processing volume and the specific pricing structure.
There is no single pricing model that's best for every business. Transaction volume, average ticket, card mix, sales channels, and other factors can all influence which structure makes the most sense.
Processing Fees Business Owners Often Overlook
The advertised processing rate is only one part of the overall cost of accepting payments. Depending on the provider and payment setup, additional charges may appear on a merchant's processing statement.
Monthly or Service Fees - Recurring charges for maintaining the merchant account, platform, or related services.
PCI-Related Fees - Charges associated with PCI compliance programs, security services, or non-compliance when applicable.
Gateway Fees - Businesses accepting online or integrated payments may incur charges for use of a payment gateway.
Batch or Settlement Fees - Some providers charge a fee when a group of transactions is closed and submitted for settlement.
Statement or Administrative Fees - Charges for statements, reporting, account administration, or other services may be assessed depending on the provider.
Equipment Cost - Terminals and POS equipment may involve purchase, rental, lease, replacement, or other associated costs.
No individual fee necessarily indicates a poor payment solution. What matters is understanding the complete cost structure and whether the services you're paying for provide value to your business.
How to Read Your Processing Statement
A processing statement contains valuable information about how your business accepts payments and what those transactions are costing you. While statement formats vary by provider, there are several areas every business owner should understand.
Total Processing Volume - The total dollar amount of card transactions processed during the statement period.
Number of Transactions - The number of transactions processed can help provide context around your overall processing costs and average transaction size.
Interchange & Network Costs - Depending on your pricing structure, your statement may show costs associated with card-issuing banks and payment networks.
Processor or Provider Fees - Look for the fees and markups charged directly by your payment provider.
Additional Charges - Identify monthly, gateway, PCI-related, equipment, administrative, or other charges that may contribute to your total processing expense.
Total Fees - Determine the complete amount your business paid for processing during the statement period - not simply the advertised transaction rate.
Reviewing these areas together provides a much clearer picture of what accepting payments actually costs your business.
Understanding Your Effective Processing Rate
Your effective rate provides a simple way to understand what your business is actually paying to accept electronic payments. Instead of focusing on one advertised rate, it considers your total processing costs in relation to your total processing volume.
The calculation is simple:
Total Processing Fees / Total Processing Volume x 100 = Effective Processing Rate
Example:
If your business processes $50,000 in payments during a month and your total processing fees are $1,500:
$1,500 / $50,000 x 100 = 3.00%
Your effective processing rate for that period would be 3.00%
It's very important to remember that an effective rate can vary based on card mix, transaction types, average ticket size, sales channels, pricing structure, and other factors. For that reason, the effective rate is most useful as one part of a complete processing-cost analysis, rather than as the sole measure of whether your pricing is competitive.
Knowing your effective rate gives you a useful starting point for asking better questions about your payment processing costs.
Are You Paying Too Much for Payment Processing?
A high processing bill doesn't necessarily mean you're being overcharged-and a low advertised rate doesn't necessarily mean you're getting the best value. The key is understanding what you're paying, why you're paying it, and whether your payment solution still fits your business.
Review Your Effective Rate - Track your overall processing costs in relation to your processing volume and watch for unexplained changes over time.
Look Beyond the Advertised Rate - Consider all processing, monthly, gateway, PCI-related, equipment, and other applicable charges when evaluating your total cost.
Understand Your Pricing Structure - Make sure you understand how your provider calculates its fees and how different transaction types affect your costs.
Review Services You're Paying For - Determine whether you're paying for equipment, technology, features, or services your business doesn't need or use.
Consider the Overall Value - Pricing matters, but technology, security, reliability, support, and the quality of your payment experience should also factor into your evaluation.
The goal isn't simply to find the lowest rate. It's to make sure you're receiving the right combination of cost, technology, service, security, and value for your business.
Not Sure What You're Really Paying?
Payment processing statements can be difficult to understand. Kimeris can help you take a closer look at your current processing costs and provide a clear, straightforward assessment of what you're paying.
Our consultative approach isn't simply about finding a lower advertised rate. We look at your overall payment environment-including pricing, fees, technology, equipment, security, and service-to help determine whether your current solution is the right fit for your business.
Start With a Complimentary Processing Statement Review
There's no obligation. We'll help you understand your current processing costs, identify areas that may deserve a closer look, and discuss whether opportunities exist to improve your overall payment solution.
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