What does a credit card transaction actually cost?

[Cruiser Elite]

We pay .65% on ALL Visa and MC transactions and have done so for last 15yrs - no changes. We did have Amex facility at one point in time and paid 2.2% + GST on transactions - that was a beautiful thing during the Westpac Krisflyer Amex promo of double points when first introduced.

 

[alexy23]

We pay .65% on ALL Visa and MC transactions

What industry are you in sounds like it's pretty low risk?

On another note, I just got an invoice from a supplier and a note saying "Credit Card Visa/MC, No AMEX, 4% Surcharge" and responded saying could you please justify 4% and where you came up with that number. No industry I know of has a 4% surcharge...

 

[woodborer]

Re: What does a credit card transation actually cost?

(after MC/Visa take their cut I guess).

They are assessment fees, and are about 0.1% of the transaction value. They may or may not be specifically called out in your agreement.

Another thought for discussion - what does a cash transaction cost? It's something so many small businesses ignore (theft, time, storage, transport, human error). The rest of them ignore it on purpose in their pursuit for tax evasion.

Although these days, cash is not always the competition. There are direct debit options, POLi, etc, that have lower costs than accepting credit cards.

 

[alexy23]

Re: What does a credit card transation actually cost?

Banks also started rolling out "platinum" debit cards a while ago, they have a higher interchange rate. This added pressure to the businesses and the money goes to the banks pocket (not ours) as we don't get any points (only some banks give cashback). Paywave also carries an additional charge afaik, which is where the dispute with Apple Pay comes in, once again banks pockets not ours. And I forgot to mention the 20-30c processing fee, plus the cost of the merchant terminal (offline). Plus also the added cost of chargebacks, where the credit card is stolen and disputed, merchant takes the fall (unless PIN was used, or they have a signature slip) so this is more common in online.

 

[Bundy Bear]

Our visa/mastercard is 1.21% with all the fees involved.
American Express is around 1.25%
Then you have the $24.75 terminal rental fee.
Interesting for non domestic the fee is 2.008%
Reading off the statement now.

Because I wanted to know what were the fees,
When I first joined this bank they offered less than 1%.

 

[Finale]

Re: What does a credit card transation actually cost?

I run an online store for a friend and the fee is a bit different from a physical store.

1. Visa/MC service fee 0.459%
2. Card issuer fee ranging from 0.275% (maybe standard or debit card) to 2.097% (International VS/MC card). Domestic premium cards are around 0.924% - 1.22%.
3. NAB charging 0.10c per transaction
4. Merchant facility $7 per month
5. Eway gateway basically $60 for 200 transactions per month. Anything over 0.40c per transaction. Charged for failed attempt and doing a refund as well.
6. Chargeback fee I think around $20-$25

Another possible expense is fraud detection which could cost less than 1c per transaction to something like eway beagle enterprise $1500 a year + 0.45c per transaction.

Most customers are from overseas so our average is quite high at 2.5%+. We don't pass this to customers.

Being a small business is tough.

 

[VPS]

Re: What does a credit card transation actually cost?

I haven't read anywhere what the taxi industry is doing - are they still doing a 10% surcharge?

 

[Timtammi]

We have an online merchant facility for our Webstore - 1.7%+30 cents per transaction. An Internet payment gateway with a bank for processing manual credit card payments-1.6% + $20 per month. Then there is paypal, I think we pay 1.6% for that. For Amex we pay 2.6%. Yes running a small business is tough.

 

[Homer]

In my restaurant we are with one of the major banks which has negotiated a rate with the peak restaurant industry body. They have two levels - one for low-end places such as cafes that deal mostly with domestic/entry-level cards and that is just 0.33% for Visa/Mastercard. But the problem with that level is that there are add-on fees for premium cards such as Platinum/Black Visas and overseas cards, so it's only good if you don't see a lot of those cards. As my restaurant has lots of higher end cards and foreign cards, we chose the second level which is a flat rate (the card industry term is "blended rate") of 0.8% regardless of card type/level/country of origin. AMEX, however, stings us 1.99% and I'm envious of the medical rate of 1.49% but it's hard to get...

 

[Pointcollector]

Amex charged us 2.7%, switched to Squared now 1.73% for any card, no monthly charges or any additional charges at all. PM me if you want a referral link that gives you $1000 fee free processing

 

[bPeteb]

Re: What does a credit card transation actually cost?

The cap is $70.

Personally I don't think it's fair that someone pays $30 surcharge for a ~$500 airfare and pays the same surcharge as someone purchasing a ~$8000 airfare.

Now the surcharge on a $500 airfare will be $6.50 and surcharge on $8000 airfare will be $70 capped.

Much fairer but best if they sold the $500 airfare for $507 and did away with surcharges right?

Agree completely John

 

[grounded]

Re: What does a credit card transation actually cost?

What is interesting in this thread is that the banks habitually pass on the premium fee for premium cards to merchants, and the smallest merchants have the least negotiating power and so foot the bill (e.g. cafes).

Moving forward the premium fees from domestic banks will presumably flatten (reducing points earn), whereas non-Aussie deposit taking institutions (i.e. out of APRA's reach) can carry on regardless. Can anyone enlighten on how this might all play out?

My view is that the RBA has a poor track record at planning this sort of thing... e.g. $2 ATM fees were meant to be to the benefit of the consumer...

 

[esseeeayeenn]

Re: What does a credit card transation actually cost?

What is interesting in this thread is that the banks habitually pass on the premium fee for premium cards to merchants, and the smallest merchants have the least negotiating power and so foot the bill (e.g. cafes).

Moving forward the premium fees from domestic banks will presumably flatten (reducing points earn), whereas non-Aussie deposit taking institutions (i.e. out of APRA's reach) can carry on regardless. Can anyone enlighten on how this might all play out?

My view is that the RBA has a poor track record at planning this sort of thing... e.g. $2 ATM fees were meant to be to the benefit of the consumer...

Both the RBA and the ACCC always seem to act out of some abstract regard for competition theory and end up actually hurting consumers.

 

[Andyc]

Re: What does a credit card transation actually cost?

I work for a company the processes a few hundred million through merchant facilities each year and know the merchant fee structure very well.

We see a range from under 0.5% for Visa/MC to 1.25% Paypal and 1.65% AMEX. We do online and in-person.

As mentioned already, the interchange fee is just one element of the direct costs. We're paying around $0.10 per transaction for fraud protection and have seen chargeback cost levels reach as high as 3.5% (and a more regular level around 0.75%).

We don't charge a credit card surcharge but I can definitely understand the logic behind it. You have to consider what the profit margins are - for businesses running on a 10% profit margin or less, it really is hard to justify giving up a quarter or more of your profits so that customers can pay by credit.

 

[alexy23]

FYI Stripe now offers 1.75% for AMEX. The cheapest online rate I've seen for a direct payment API. PayPal can go lower but need to direct customers to PayPal.

AMEX also emailed us saying they can now do 2.2% in their merchant facility, not that we use them anymore (ripoff)

 

[Homer]

FYI Stripe now offers 1.75% for AMEX.

Stripe's 1.75% rate for AMEX is for Australian-issued AMEX cards only. The rate for all other AMEX cards is 2.9%. Both rates also come with a 30c per transaction charge. But, yeah, good on Stripe for being competitive and pro-active with lowering rates (my SaaS business has had three rate reductions from Stripe in the last year).

 

[ComeFlyWithMe]

I find some of the comments on this thread rather hypocritical. You can't make comments about banning credit card surcharges and then turn around and say "well I want to pay ATO on my Black card to maximise my points earn".
Who do you think is paying for those points? Without a surcharge, the merchant is subsidising your points balance, in some cases up to 3%.
At 0.5% or lower, surcharges may be unreasonable and considered a cost of business, but at up to 3% cost to the merchant, surcharges are fair. There should be protections for consumers with gouging merchants, but otherwise let the free market decide.

It is no coincidence that the drying up of points earning opportunities coincides with these changes. They are ruining it for those of use who are happy to pay a modest surcharge to effectively "buy" points for travel, something which may soon be a thing of the past.

 

[alexy23]

Who do you think is paying for those points?

In the case of ATO payments - IMO the card holder is. As a business owner I consider the 0.81% a cost of taking payments, and I believe anything under 1.5% should be the same. If paying by AMEX we charge our clients only the difference between Visa/MC and AMEX i.e. 1% extra to use AMEX. What I don't agree with is merchants charging 2.5% for AMEX but no surcharge for Visa/MC, it has no fairness behind it.

Points are designed to stimulate spend, but instead merchants ruin this concept by charging exorbitant rates (4% at some corner stores, 10%+ JQ). Now the RBA steps in to put a stop to it (or more like have people use EFTPOS??? again), and rather than regulating how much merchants can charge (i.e. only what the merchant gets charged), the RBA has just regulated the interchange rate.

If I had a physical business - my motto would be - Card Preferred, Cash (3% surcharge).

 

[grounded]

@comeflywithme I respectfully disagree.

For premium cards, the card issuers charges a) a higher annual fee and b) higher interest rates on balances. Credit card debt is something in the region of $30 billion in Australia at any one time.

The banks make a good margin on their credit card business and can afford to go about their business without slugging small business merchants with the highest transaction fee AND the highest surcharges on premium cards.

As an end user I'd be happy to pay a small additional surcharge to use my premium card as long as it's about the value of its point earn, but it's not me that pays that surcharge under the old or new system.

The asserted problem with the previous regime was that credit card surcharges were blended (i.e. all Visa and MC = x%, all Amex = y%), so in effect the low-cost Visa / MC cardholders paid a higher fee than they should have which was used to supplement the points and benefits of premium cards.

Whether that's an accurate assessment of the market or not, I don't know, but I'd expect that there's more to it than that (annual fee, balance interest, volume and value of transactions, packaged cards with mortgage and banking products, international cards etc).

Big merchants can negotiate bulk / lower rates on transactions, smaller merchants don't have that ability.

Basically, the big banks had their cake and ate it too. The new rules simply reduce the benefit to us, the points collectors. The banks still have their cake and eat it. I'd be interested to see if the fees to small merchants are reduced accordingly. If history is any guide (e.g. ATM fees), I doubt that will happen.

 

[JohnK]

It is no coincidence that the drying up of points earning opportunities coincides with these changes. They are ruining it for those of use who are happy to pay a modest surcharge to effectively "buy" points for travel, something which may soon be a thing of the past.

You are only paying a modest surcharge to earn your precious points because those who don't earn points are also paying a surcharge. That is totally wrong.