Merchant Fee Price Increases from the Card Associations

Spring is just around the corner, which means it is once again time to outline the annual pricing changes from the Card Associations. The card brand changes are significant and will impact your business. The short of it? The card networks that enable card payment transactions to process are raising prices.

What’s a Credit Card Network?

Credit card networks work behind the scenes to make credit card transactions possible. The purpose of credit card networks is to control where credit cards are accepted and to facilitate transactions between merchants and credit card issuers.

Imagine you want to use a credit card to pay for groceries. In this example, the credit card network provides the infrastructure that helps the grocery store accept your electronic payment and collect the funds from your card issuer (who you agree to repay later).

There are four major credit card networks:

• Visa

• Mastercard

• American Express

• Discover

A credit card network also sets the interchange fees (sometimes known as “swipe” fees or processing fees) that merchants must pay to accept a credit card transaction. Going back to the grocery store example, the merchant pays an interchange fee to a credit card network each time a customer uses a credit card to make a purchase.

What do the pricing changes mean to small business owners?

As you can see here, the card brand changes are significant and will impact small business. How? Simply put, credit card processing costs will increase. The column on the right on the card brand price increase chart shows the percentage increase on the particular card type on the left. The increases range from a high of .69% to a low of 0.10%. Depending on transaction sizes, monthly volume, type of card accepted and how cards are processed, the price increases will make accepting cards go up even more.

What actions should a small business take in response to the coming price increases? First and foremost, have monthly merchant statements reviewed in order to locate any added unnecessary fees and if the account is priced with the most effective method to insure the amount paid above interchange costs are fair and reasonable. How are cards processed? Is the equipment and technology the best and up to date to accept every card transactions at the lowest rate possible? Have all processing pricing programs been explored? There are tiered pricing program that can be very expensive and there are programs that make the same profit on non-cash sales as cash sales as well as interchange plus programs that are transparent and help keep costs low.

As we all know, price increases are part of business, a part of life as we know it. Small businesses face challenges today that most have never known before. Credit card use has been on the increase before the pandemic and continues to grow. Own a small business. Prepare yourself. Merchant statements can be difficult to understand so finding a merchant services professional in your area to explain what you pay and why could be a wise choice now, before you are hit with the coming increase.