Because a significant portion of the large players in the restaurant point of sale markets are now owned or have exclusive agreements with credit card processing companies, a large portion of consideration in what a software company will charge for maintenance on an ongoing basis is your potential credit card processing revenue.
Many in the restaurant space may not be familiar with some of the fees on the applications, or why the rates are what they are. A simple breakdown on the fees helps explain who is charging what, and where there may be opportunity for better rates for the finance tech savvy restauranteur to negotiate with potential technology and processing partners.
Credit card processing fees can be a significant expense for merchants. The fees charged by credit card processors are typically broken down into three categories: processing fees, interchange fees, and card brand fees ¹²³â´âµ.
Processing fees are charged by the processor for the services they provide, such as authorization, settlement, and customer service ²âµ. Interchange fees are charged by the bank that issued the credit card and are typically the largest component of credit card processing fees ²â´. Card brand fees are charged by the card brands (e.g., Visa, Mastercard, Discover, and American Express) ²³âµ.
The average credit card processing fee ranges between 1.5% and 3.5% ¹. However, the exact fees charged depend on several factors, including the type of card used, the merchant’s industry, and the merchant’s processing volume ¹â´.
To reduce credit card processing fees, merchants can take several steps, such as negotiating with their processor, choosing the right pricing model, and optimizing their payment processing systems ¹â´âµ.
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I hope this helps!
(1) Credit Card Processing Fees (2023 Guide) – Forbes Advisor. https://www.forbes.com/advisor/business/credit-card-processing-fees/.
(2) How to Read a Credit Card Processing Statement. https://gravitypayments.com/blog/how-to-read-a-credit-card-statement/.
(3) How to analyze a credit card processing statement – Merchant Accounts. https://www.merchant-accounts.ca/how_to_read_a_credit_card_processing_statement.php.
(4) How Much Do Credit Card Processing Fees Cost? – Merchant Maverick. https://www.merchantmaverick.com/the-complete-guide-to-credit-card-processing-rates-and-fees/.
(5) How to Read a Credit Card Processing Statement – PayJunction. https://blog.payjunction.com/read-credit-card-processing-statement.