What are per-transaction fees?

Understand what per-transaction fees and where they are being applied.

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August 21, 2023
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What are per-transaction fees?

What was that famous Benjamin Franklin quote? That the only constants in life are death, taxes – and per-transaction fees.

Well, he’s right. Because, however your business accepts payments – whether through credit and debit cards in-store or online, or directly from your customers’ bank account via direct debit – you’ll always pay some form of per-transaction fees.

But what are per-transaction fees, exactly – and how do they work?

We’re answering these burning questions, and breaking down each what each type of per-transaction fee – from tiered and terminal to interchange, subscription, and beyond – means for you. As well as providing our top tips for gaining transparency and control over your business’s per-transaction fees. Read on!

What are per-transaction fees?

Per-transaction fees are costs your business incurs every time you accept electronic payments from a customer. 

Per-transaction fees go towards paying the plethora of parties involved in processing your payments. These include:

  • Your payment processor: this is the company you’ve chosen to handle your transaction’s more technical aspects – authorising, settling, and routing funds from your customer’s bank account to yours.
  • The acquiring bank: your business’s bank (the one collecting the funds).
  • The issuing bank: the customer’s bank (the one dispensing the funds).
  • The card schemes: the companies (such as Visa, Mastercard, Discover, and American Express) that facilitate the networks payments travel on.

How do per-transaction fees work?

Typically, per-transaction fees are a percentage of the sale’s value (for instance, 3.3% per transaction). So exactly how much your business will pay in fees depends on how much you’re selling, how much your items sell for, and how you’re taking payments.

Per-transaction fees can also be a flat fee associated with each transaction (say, 60 cents per sale). Not so bad if you’re selling a lot of big-ticket items; but a killer if you do a lot of lower-value sales. More likely is that you’ll end up with a blended per-transaction fee: a percentage of the sale’s value combined with a flat fee (for example, 2.9% + 30 cents).

Here, it’s important to remember that different payment methods come with different costs. ACH (Automated Clearing House) payments and direct debits come with lower per-transaction fees than debit cards – which, in turn, tend to be cheaper to process than credit card payments.

Another factor that’ll influence how much you’ll pay in per-transaction fees? The payment processor you pick. Like all businesses offering a service, what payment processors charge varies – as does the service you’ll receive through each provider.

With that in mind, choosing a reputable, reliable payment processor – like Checkout.com – is the best way of staying in the loop around what you’re paying every month (and every transaction) in fees.

Our dashboard makes it easy to see exactly how much you’re paying in fees – and to whom – through an itemised list of charges you can tap into at any time. Learn more below!

Types of per-transaction fees

Interchange fees

Interchange fees are per-transaction fees levied by the card schemes – including Visa, Mastercard, Discover, and American Express. 

These fees are paid to the issuing (your customer’s) bank by the acquiring (your business’s) bank – which, naturally, passes the cost on to you. That said, you typically won’t see these fees reflected on your statement, as they’re usually bundled up with all the other per-transaction costs we’re discussing here.

How much you’ll pay in interchange fees depends on the type of card and card brand, the nature of the transaction (i.e. whether it’s taking place online, in-store, or through a mobile app), and the industry you operate in.

Any payment involving an intermediary (think Visa and Mastercard again) will incur interchange fees – so they’re almost unavoidable.

Almost. A2A payments, which include direct debits, ACH, and real-time payments, funnel funds straight from your customer’s account to yours: negating the need for the ‘middle man’ and saving your business on per-transaction fees in the process. 

Terminal fees

If your business takes payments at the point of sale (POS) – in-store, for example, where the cardholder is physically present – you’ll be eligible for per-transaction terminal fees.

These fees go towards maintaining the physical equipment (namely the card reader, or ‘terminal’; often called a ‘PDQ’ in the UK). Terminal fees come in many shapes and sizes:

  • Ongoing terminal rental fees (or a one-off fee to purchase the terminal outright).
  • Compliance fees to cover the costs of ensuring the terminal’s PCI compliance.
  • Maintenance and support fees to make sure the terminal’s hardware – and software – is secure, functional, and up-to-date.

While terminal fees can be charged on a per-transaction basis – and will, therefore, cost you more as the sales you make add up – they can also be billed on a monthly basis, as a flat fee.

Tiered fees

Different types of transactions come with varying levels of risk. Card-present transactions, for example – ones where both the card and cardholder are physically present – are less risky than their card-not-present counterparts, where the likelihood of fraud is higher.

To reflect these differing levels of risk, banks group transactions into categories, or ‘tiers’. Each tier – qualified, mid-qualified, and non-qualified – comes with its own per-transaction fee rate.

Qualified per-transaction fees are the most affordable for the merchant; unqualified the most expensive.

Subscription fees

Subscription fees are a kind of catch-all term for the wealth of other value-adding services and support a payment processor provides.

These can include:

  • Access to the payment processing platform of service: such as merchant reporting and analytics dashboards, and the features and technology required to take payments.
  • Customer support: such as email, phone, or live chat services to help out with technical issues and inquiries.
  • Extra services: many payment processors, like Checkout.com, offer additional features designed to boost your understanding of your business’s payments and data: including recurring billing, tokenisation, and advanced analytical tools.

Chargeback fees

Chargeback fees happen when a customer wins a credit card dispute against you.

This happens after the bank rules in favour of the customer – claiming a charge was fraudulent, perhaps, or that the goods and services didn’t arrive or were faulty – and refunds them.

On top of this refund (plus the loss of the goods or services, if they were provided legitimately) you’ll also be charged a chargeback fee.

Chargebacks are financially and reputationally damaging for businesses – so it pays to avoid them. Find out more about what a chargeback is – and how you can win credit card disputes – with our comprehensive guides.

Fee processing with Checkout.com

As we’ve seen, there’s a lot of per-transaction fees to get your head around.

So the least your payment processor can do is make it easy for you to understand what you’re paying, why you’re paying it, and – most importantly – how much you’re paying every month.

Fortunately, Checkout.com does all this, and more. Simply navigate to the ‘Payment details’ section of your Checkout.com dashboard to view your payment fees. You’ll get instant, intuitive, and itemised visibility over all the charges picked up along the way of the payment lifecycle.

Or, if you’re after a breakdown of the fees incurred for a specific transaction, you can get acquainted with our payments endpoint. Here, you can quickly search across a range of parameters – including the currency, payment method, card type, transaction date, and plenty more – to quickly locate and analyse a transaction.

And, for any other questions, you can reach straight out to your sales representative.

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August 21, 2023 18:21
August 21, 2023 18:21