Companies pay merchant service fees to process card payments. These costs depend on your transaction volume, card type, and price plan. Knowing the different merchant service fee and how to minimize them may save businesses money and boost revenues.
What Are Merchant Service Fees?
Companies paying merchant service fees (MSF) handle card payments through their merchant facility. Westpac and other payment processors receive a portion of each sale for transaction management. The cost depends on the business, sales, and cards used.
Merchant Account Fee Types
Store service charge price models fall into three categories. The optimal model depends on the company’s needs.
The flat-rate pricing model
Under this arrangement, the firm pays a predetermined sum for each transaction, either a percentage of the sale or a predetermined sum. For example, a firm may pay 2% of the sale plus 10 cents for every transaction. This simple price plan is ideal for small enterprises.
Interchange Pricing Model
Interchange Plus starts with Visa and MasterCard’s base charge. The payment company adds a tiny profit. This price model is cheaper than flat-rate pricing and helps firms understand transaction expenses.
Tier-based pricing
Tiering is the most sophisticated pricing strategy. It splits purchases into credit, debit, and prepaid card categories and charges varying fees for swiped, inserted, and manually input cards. This strategy is costly and challenging to comprehend and forecast; therefore, small enterprises should avoid it.
Different Merchant Service Fees General and particular merchant service fees exist.
Types of Merchant Service Fees
All companies are required to pay the following Universal Merchant Service Fees:
Universal Merchant Service Fees
- A modest fee per transaction, either set or a percentage of the sale.
- Online shops that accept payments via a payment network pay this cost.
- Monthly or annual fees for utilizing the payment processor’s system or software.
Situation-Based Merchant Service Fees
Fees only apply in certain situations:
- Customers who dispute payments incur chargeback fees.
- For large purchases or security concerns, this cost applies to cards that require human approval.
How to Reduce Merchant Service Fees
Ways to lower store service fees:
1. Find L3 rates
Level 3 processing requires more payment information, such as item counts and product numbers. It can lower processing fees, but this is mainly only for larger companies.
2. Choose a Level 3 Payment Gateway fee
Customizing the site and sending electronic invoices are common aspects of payment gateways. This lowers business transaction fees.
3. Offer Multiple Payment Options
Digital payment solutions like PayPal or direct bank withdrawals can reduce credit card use. Offering alternatives reduces credit card processing expenses, which are more excellent.
Summary
Companies that accept cards must pay merchant service fees, which vary by transaction type and pricing. Businesses may save expenses by picking the optimal pricing strategy and researching payment providers. By choosing Zen Payment may also save money by offering many payment methods and lowering processing rates.
