If your business uses a payment gateway or is thinking about using one to facilitate online and mobile payments, take a look at this article to help you understand the fees involved .
Payment gateways are convenient tools for businesses to process online and mobile payments. While they are convenient for users and business owners alike, there are costs for this convenience. Business owners need to understand the different steps of implementing a payment gateway and what each step costs them.
Before we jump into the fees, let’s go through the different steps to set up a payment gateway. Understanding this process will help a business owner understand the different stakeholders, services and technology needed to set one up.
When you set up a payment gateway, the first thing you need is a merchant account/merchant processor. Merchant accounts allow a business owner to accept payments via debit cards, credit cards or internationally. Some payment gateways have merchant accounts available, but for many payment gateways, a business owner will need to set up a merchant account that will work with the gateway. There are several different merchant account providers available, and fees are based on the types of payments made. Conducting research on several different merchant account providers, like Visa, MasterCard or AmEx, is important for any business owner.
Credit card processing usually has a per purchase fee, plus a percentage of the total purchase. There are three different types of merchant account fees:
In addition to credit card fees, merchant accounts may charge a different rate for debit card fees as well. Typically, this is transactional fee similar to the credit card fee above; there is a per purchase fee that comes in the form of a percentage of the purchase, a per purchase fee, or a combination of the two.
Not all merchant accounts and payment gateways are created equally. Some are able to allow for international purchases, and others are not. If a business owner plans to sell products or services internationally, they should research their providers to see if international payments are possible. If so, there is typically an additional charge.
It is important to understand that all card processing fees have wholesale fees and markups. Wholesale feescannot be negotiated, and go to the credit card issuing banks and credit card associations. They are a fixed amount. Markupsgo to credit card processors and payment gateways/technology providers, and vary from provider to provider. Markups are not fixed. They are also negotiable.
A virtual terminal is an alternative to payment gateways; it can also accept credit card payments. Virtual terminals are for merchants to use (not customers) to manually enter in credit card information. For those business owners who do not wish to use an e-commerce site, this is a great option. They typically charge a monthly fee, but some terminals may charge a transactional fee (a percentage of the charge plus a fixed dollar amount).
Payment Gateways integrate with a business’s online store, securely connect purchase information with merchant accounts, and approve or decline purchases. Some payment gateways, like PayPal, combine the payment gateway with a merchant account. Most gateways do not and have additional fees to consider. Prior to choosing a payment gateway, a business owner should consider the following different fees:
To break down the basics of the fees, take a look at the following chart with some of the top payment gateways along with their fees:
|Payment Gateway||Transaction Fee||Chargeback Fee||Security/PCI Compliance||Other Fees|
|Braintree||2.9% + $0.30||$15||Provided|
|Stripe||2.9% + $0.30||$15||Provided|
|Authorize.Net||2.9% + $0.30||$25||Not provided||$49 setup fee, a $25 monthly gateway fee|
|Square||In Person: 2.75%|
Online: 2.9% + $0.30
|Covered up to $250||Provided||Shopping Cart Fees (if applicable). Also, for Square Recurring Invoices and Square Invoices, the fee is 3.5% + $0.15 per payment|
|PayPal Standard and Express Checkout||2.9% + $0.30 per transaction (with option for volume discounts)||$20||Checkout security is up to the business, or you can utilize their PCI compliant solution called PayFlow Link||No monthly or set up fees|
|PayPal Payments Advanced||2.9% + $0.30||$20||Checkout security is up to the business, or you can utilize their PCI compliant solution called PayFlow Link.||Monthly fee: $5.00|
|PayPal Payments Pro||2.9% + $0.30||$20||Checkout security is up to the business, or you can utilize their PCI compliant solution called PayFlow Link.||Monthly fee: $30.00|
|PayFlow Link||2.9% + $0.30||$20||Checkout security is up to the business, or you can utilize their PCI compliant solution called PayFlow Link.||Merchant provider fees + $0.10 per transaction|
|PayFlow Pro||2.9% + $0.30||$20||Merchant provider fees + $0.10 per transaction; $25/month, $99 to set up|
Hopefully this article sheds some light on the various fees associated with payment gateways. There are several options available that, regardless of the size of your business, will help you thrive in the online economy!