Payment Gateway Comparison: Know Your Fees

January 10, 2019

January 10, 2019

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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 .

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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.

Transaction Fees through a Merchant Account:

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 Fees: 

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:

  • Transaction Fees: Every time a transaction is completed, a fee is charged to the business. While each merchant account might have a different set up, the fees are either a percentage of the sale, a fixed amount per purchase, or a combination of the two.
  • Scheduled Fees: This is essentially a flat fee that is part of the contract you sign with the merchant account.
  • Incidental Fees: These fees are charged only if there are issues with the transaction. A classic example is a chargeback fee – the merchant account provider has a specific dollar amount or percentage that they charge when a chargeback occurs.

Debit Card 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.

International Fees:

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.

Wholesale vs. Markup Merchant Account fees:

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.

Virtual Terminal Fees:

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 Gateway Fees

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:

  • Payment Gateway fees:The fee to utilize the payment gateway service. There may be set-up fees involved, and some advanced services also have monthly fees for usage.
  • Transaction fees: A per transaction fee, typically a percentage of the charge plus a fixed monetary amount.
  • Chargeback fees: Chargebacks are charges disputed by the individual consumer or bank for various reasons, like identity fraud, authorization errors or processing errors.
  • Security/PCI Compliance Fees:These fees cover fraud protection and are sometimes provided by payments gateways. However, not all gateways provide this, so it is an important factor to consider.
  • Recurring Billing Fees:This allows a customer to set up a recurring payment through the payment gateway. Some examples include paying for a monthly gym membership, or a nonprofit that collects monthly donations.
  • Other application fees:For example, a business owner may choose to use a payment gateway that does not provide a shopping cart, so they may need to purchase a separate shopping cart application and pay fees for the service. Another example is PCI/fraud protection: a business owner may need to purchase a separate service to integrate with their payment gateway.
  • International Fees:Not all payment gateways allow for international payments to occur, and if they do, there may be a limited amount of foreign currencies that are accepted. If a payment gateway does accept international currency, there is typically an additional charge, or the payment gateway may charge a monthly fee for the elevated service.

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 GatewayTransaction FeeChargeback FeeSecurity/PCI ComplianceOther Fees
Braintree2.9% + $0.30$15Provided
Stripe2.9% + $0.30$15Provided
Authorize.Net2.9% + $0.30$25Not provided$49 setup fee, a $25 monthly gateway fee
SquareIn Person: 2.75%

Online: 2.9% + $0.30

Covered up to $250ProvidedShopping 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 Checkout2.9% + $0.30 per transaction (with option for volume discounts)$20Checkout security is up to the business, or you can utilize their PCI compliant solution called PayFlow LinkNo monthly or set up fees

 

 

PayPal Payments Advanced2.9% + $0.30$20Checkout security is up to the business, or you can utilize their PCI compliant solution called PayFlow Link.Monthly fee: $5.00
PayPal Payments Pro2.9% + $0.30$20Checkout security is up to the business, or you can utilize their PCI compliant solution called PayFlow Link.Monthly fee: $30.00
PayFlow Link2.9% + $0.30$20Checkout 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 Pro2.9% + $0.30$20Checkout security is up to the business, or you can utilize their PCI compliant solution called PayFlow Link.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!

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