What Does It Really Cost to Accept Credit Cards?

Accepting credit cards can be a great way to increase sales for your business. But it can be tricky to figure out how much it will really cost. Fees can be confusing, especially when many providers are not clear and upfront about the fees they charge. Here are the five most important costs to look out for before you sign an agreement with a provider.

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Qualified rate

This is the base rate many credit card companies quote to potential customers. It’s also the rate most business owners initially think they’ll pay to accept credit cards. The qualified rate is frequently quoted at somewhere between 1.4% and 1.7%. However, it’s usually a gross underestimation of the true cost, because it doesn’t account for the many added fees.

Non-qualified surcharge

When your customer’s card falls outside the basic credit card category, merchant service providers charge this fee. It is estimated that 70% of credit cards are non-qualified. For example, many credit cards offer rewards points for airline miles, hotel nights or cash back. The cost to provide these rewards to consumers is passed on to the merchant.

Interchange differential

Every time a provider charges you a non-qualified surcharge (see above), you’re also charged this additional fee to accept a non-basic credit card.

Brand surcharge

The brand surcharge is a fixed amount — usually somewhere around .1% and .2% — that goes back to the card networks such as Visa, MasterCard or Discover. This fee is fixed by the networks but some merchant service providers may also mark up the fee at their discretion.

Foreign surcharge

When a consumer pays with a foreign credit card, issued either in the United States or overseas, the merchant service provider adds on an additional fee. These fees can range anywhere from an additional .4% to 1%, depending on your contract.

While these are the most common fees added to transactions, small business owners may also face monthly account service fees, PCI-compliance fees, batch fees to receive funds in your bank account and rental fees for the [POS terminal][1]. There are often minimum monthly processing requirements to consider as well. Many providers also require multi-year contracts with hefty cancellation fees if you need to break your contract early. And don’t forget the cost to install a phone line or internet connection — if you don’t already have one — so you can process payments through a traditional terminal.

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“Traditional credit card processors usually require appointments, lots of time at the bank and complicated contracts. They also often lock you in for a set period of time, while charging all sorts of fees,” says Ana Viseroiu of AnaV Beauty in Vancouver, BC, who spent time shopping around for a credit card terminal. “With Square, there is no long term commitment, I could cancel at any time. It arrived at my doorstep very quickly, it was very simple to install and start using,” she adds. “Square has made my business function more easily.”

At Square we’ve made it easy to accept credit cards without hidden costs: signing up for your Square Reader is free with no long term commitments or monthly fees. You pay a flat rate of 2.65% per swipe for Visa, Mastercard, Discover and American Express. You also don’t have to buy or rent expensive point-of-sale hardware or software. With Square you can focus on your business and forget about fees.