What are credit card transaction fees? These fees may have shown up unexpectedly at the end of purchase or disappeared before being aware of what they were. Though it is easy to get lost in financial jargon, it's important to know what each word means. Below, credit card transaction fees explained.
Want the shortest answer? Credit transaction fees, or processing fees, are the money that businesses pay each time someone uses a credit card to purchase a good or service.
Transaction fees are hardly seen by the customer but are paid by the business. The fees are set rates determined by one of several groups. Some of these groups include:
- Merchant Category
- Payment Method: whether swipe, dip, slide, etc.
- Payment Processor
- Card Network or Issuer
A normal credit card transaction fee is between 1.5% and 3.5%.
The business, however, can build these fees into the customer payments, charging enough to cover the price of the transaction fees. This is sometimes evidenced in the fact that some stores have a minimum amount for card usage. If the amount paid by the customer is not enough to cover the fees, the sale may not be worth it to the seller.
Who Charges What
One of the main factors determining how much businesses pay in fees is the type of card the customer uses.
There are four large card companies that charge each business variable amounts. Some examples of these include:
- Visa charges 1.7%
- Mastercard charges 1.8%
- Discover charges 1.9%
- American Express charges 2.3%
Whichever card the customer uses, merchants must pay the correlating amount. These charges do not apply to debit cards, only credit.
Other Cash Options
If using a credit card is not the best choice for the purchase, there are other options. Instead of using credit cards, there are cash advances and cash loans. Here are the pros and cons of each.
Sometimes, a consumer needs cash as soon as possible. One option is to take out a cash advance. With this, there is a steeper transaction fee, meaning 3% to 5% of the advance will be taken as a fee. For a $250 cash advance, there would be a $12.50 fee. While getting a cash advance will move the money quickly, it is also the most costly way to gain cash.
The other option is to take out a cash loan instead. Cash loans are short-term personal loans used to pay off emergency expenses. The advantage to cash loans is that they have a set date to pay them off as well as a predetermined interest rate. The benefit to this is that the loan can be paid back as the consumer sees fit.
Credit Card Transaction Fees
Credit card transaction fees are the least of a consumer's worries. Each fee is covered either in the cost of the item being sold or by the business. One of the ways to get cash quickly and efficiently is through a cash loan. These are used for emergencies like a new home, an expensive accident, or a new car. Check out our page to learn more about what a cash loan could do for you.