Pricing FAQ for payment processing and merchant services
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FAQ (Frequently Asked Questions)

The most common questions in pricing for payment processing

We’ve been in the payment processing business for many years and processed millions of transactions. These are the most important questions that merchants have in pricing for payment processing.

The fees charged to a merchant for accepting credit cards is generally around 2.4%, so this means $2.40 for every $100 charged. This goes to several companies. Most goes to the bank that provided the credit card to the consumer. The rest goes to the card brand (i.e. Visa, MasterCard, etc) and the payment processor.

Banks charge flat fees for transactions along with the interchange rate (the percentage). The percentage and flat fee depend on the type of card, type of business and how the transaction is processed. Flat transaction fees exist to ensure there is a charge with low dollar amount transactions. For example, 2% of a $0.50 credit card transaction would not cover the general costs involved to process that transaction. 

Monthly fees are the flat amount a merchant pays to keep the merchant account open. This is generally around $10 per month. Some processors charge up to $50 per month. 

A monthly minimum fee similar to a monthly fee. It ensures there is activity in the merchant account. Merchants pay a minimum amount per month, even if they do no transactions. However, if the merchant does do a certain level of transaction the monthly fee disappears. In general, monthly minimum fees are much better than monthly fees.

Here’s an example: if you process $1,000 in credit card sales over a month, and let’s say your credit card fees totalled $22.20 for that period. If your monthly minimum is set to $25, you would be charged $2.80 ($25.00 – $22.20) for the month. That’s much better than a flat rate of $25/mo. In general, monthly minimums are achieved with around $2000 in credit card sales.

There are a couple of reasons. First, there are several different ways processors price: flat rates, interchange plus, tiered. Here’s a quick explanation of each:

Flat rate: you get a fixed percentage and fixed transaction fee for all transactions (i.e. 2.7% and $0.15 per transaction). This is the simplest to understand and predict. Interchange plus (also called cost plus): you get a fixed markup on the wholesale costs (i.e. 0.3%, or 30 basis points, fee on all wholesale costs). This is the most transparent as long as there are no hidden fees.

Tiered: you get different rates for different types of cards and transaction methods. This is the most common and also complex to understand. If you know your stuff, you can use tiered to customize your rates to benefit your business. The different pricing methods is one reason why it’s difficult to compare. It’s not always clear which one is being used. Secondly, many processors either don’t explain or hide certain fees. Unfortunately this is quite common in the payment industry. That’s why it is best to find a processor you trust.
Interchange plus (aka “cost plus”) pricing is a straightforward way to price. If you have cost plus pricing, it is more transparent because it is much more difficult to have hidden fees. In cost plus pricing, processors take all the bank fees, card brand fees etc, pass them straight through to the merchant, then add a markup (i.e 20%) for their fees. So, if you were being charged 20% using interchange pricing, you would say, I am being charged “cost plus 20”, which in general is a pretty good deal. You can check out all the interchange rates as they are published by Visa and MasterCard.

TCM primarily uses cost plus pricing. Overall, the best way to tell what you are being charged is to take all your fees and divide that by how much you processed in credit card sales. This is known as your effective rate.
When you charge a card at your business, there are two fees added on to the charge that you have to pay. There are interchange fees, which are set by the card companies (like Visa and Mastercard) and cannot be adjusted. Then, there are the processing fees. Traditional merchant service providers make money by charging an additional percentage on top of the card interchange fees.

At TCM, we offer a membership pricing model, so you pay a flat fee every month for all of your credit card processing. You’ll always know what you’re paying. It’s predictable and clear.

With our membership (subscription) plans, every subscription gives you a membership that provides access to the direct cost of interchange, no hidden fees and no markups.
American Express (AMEX) sets their own rates and based on region, industry and volume. AMEX also only reveals their rates directly to merchants via the phone. Businesses that have very little in credit card sales would pay around $8 monthly fee. Higher volume merchants will be charged a flat rate (i.e. 3%) or a rate and flat fee (i.e. 2.89% + $.15).

Qualified rates are for qualified transactions, which are generally referred to card present transactions. “Card present” really means that you physically saw the card.

The non-qualified rate applies transactions with most internationally-issued cards, corporate, and rewards credit cards. There are also specialized transactions like eCommerce and over the phone (AVS), that fall into non-qualified rates. Read more

The international fee is charged for transactions from credit cards that are from out of your home country. These are sometimes called “cross-border fees” or “international acquirer service fees”. This fee is an additional 0.5% to 1.25% of the transaction amount.

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TCM is a payment processor in Canada. The TCM name and logo are trademarks of TCM Inc payment processing in Vancouver, Canada. The Interac name and logo are trademarks of Interac Inc Canada. The Visa, MasterCard, and AMEX logos are trademarks of Visa International, MasterCard International Incorporated, and  American Express Company. TCM is a Registered Partner/ISO of the Canadian Branch of U.S. Bank National Association.