Credit and Debit Card Fees
How to Avoid Surprises

By Todd S. Whiton

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Small-business owners should expect competitive and transparent pricing and terms when analyzing an electronic payment–processing agreement with a vendor. Owners should focus on the following:

• The agreement should reflect a rate structure that matches how the business conducts its payment processing. For example, a merchant set up with a “Retail” or “Swiped” category rate structure but that does all of its payment processing online will pay a higher rate on every transaction.
• The rate for check-card processing should always be lower than the rate for processing a credit card.
• In a “swipe” environment, debit cards should be accepted with a PIN pad to lower costs.
• Do not pay an application fee, a termination fee, an annual fee, or any kind of surcharge.
• Terminals should be fairly priced. Wireless terminals should cost no more than $1,000. Other terminals should cost no more than $400 to $500.
• Look at card acceptance inclusively; add all fees together (discount rate plus fees) and divide by total sales processed to get an all-inclusive rate. Except for some high-risk merchants, this rate should never be more than 3%.
  

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