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What You Need to Know About Credit Card Processing
If you want to set up a merchant account for credit card processing, you probably wonder about the credit card fees you will be charged. The most important determinant of how high your fees will be is the type of business you are in. Certain businesses are more likely than others to suffer payment disputes and chargebacks, so their transactions are considered riskier by issuing and acquiring banks. Businesses with these riskier transactions are therefore charged higher fees to offset the risk of chargebacks.
Chargebacks are what happens when a customer successfully disputes a credit card fees transaction with your business. The safest transactions, as far as the issuing and acquiring banks are concerned, take place when the cardholder swipes his or her own card in the credit card reader and signs the receipt to pay for goods that are inexpensive and not likely to generate complaints. Restaurants, gas stations, and car rental agencies all fall into this category. Plus, since their chargeback risk is low, they pay less in fees for credit card processing transactions.
The risk of a chargeback is highest when transactions are completed via the Internet or by phone. The risk is even higher if the transactions are expensive, involve shipping, and the business is one that is subject to complaints. The bottom line is that when a merchant applies for credit card processing services, the business the merchant is engaged in figures significantly into the fees that the merchant will be charged.
