credit card transaction fees

What Are Credit Card Transaction Fees?

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 wise 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.

Diving Deeper Into Credit Card Transaction Fees

Transaction fees are unseen by the customer but paid by the business. These fees are set rates determined by one of several groups. Some of these groups include:

  1. Merchant Category
  2. Payment Method: whether swipe, dip, slide, etc.
  3. Payment Processor
  4. Card Network or Issuer

A 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. Evidence 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. Learn how to potentially grow your wealth here!

Who Charges What?

One of the main factors determining how much businesses pay in fees is the card the customer uses. Four large card companies charge each business variable amounts. Some examples of these include:

  1. Visa charges 1.7%
  2. Mastercard charges 1.8%
  3. Discover charges 1.9%
  4. 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.

Credit Card Transaction Fees: 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 loans. Here are the pros and cons of each:

Cash Advance

Sometimes, a consumer needs the cash as soon as possible. One option is to take out a cash advance. With that, there is a steeper transaction fee, meaning 3% to 5% of the cash 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.

Cash Loans

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 a pre-determined interest rate. The benefit to this is that the consumer can pay back the loan as they see 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 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.