Quick Question on Credit Card Processing
Posted December 2nd, 2008 @ 10:45pm by Erik J. Barzeski
Are all credit card transactions through all processors handled roughly like this: $0.30 + 0.022x. In other words, does every processing gateway charge a small fee (the 30 cents) and then a percentage of the overall transaction?
Or are there gateways/processing agents/whatever-they're-called that just charge a flat percentage, like 5% ((Or even, I suppose, a varying percentage, so long as it didn't get too high.))
I ask because I'm interested in micropayments from about a dollar and up, and this is likely a problem I'll have to solve sooner or later.
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Posted 03 Dec 2008 at 3:00pm #
(I think) it's incredibly difficult to find a processor that doesn't follow the flat fee+percentage model. Micropayments are really awkward because of that, and possibly worse because chargebacks can be extremely expensive, up to the point you'd be losing the equivalent of dozens of sales to make up for the fees they'll charge you.
This is why lots of retail stores add on charges or have minimum purchase limits to use a credit card, although technically they are not allowed to. It's also why lots of gas stations are now putting up higher gas prices for credit card users (or rather, a "cash discount"), because the processing fees almost obliterate any profit to be made from selling gas, even more diminished because many people paying with CC don't go into the store to buy something else with a higher profit margin (i.e. snacks and a drink).
Anyway, all I can suggest is to find the cheapest possible processor that works for you. I think I'm paying 1.5-2% plus 20-27 cents per transaction through Elavon, however the lower end is for physical retail, which is traditionally cheaper than the higher-risk online transactions on the higher end.
Also, I thought you might be interested in this: http://rentzsch.com/notes/creditCardMicropayments
Posted 03 Dec 2008 at 3:17pm #
This is exactly why there was a lot of talk a few years ago about setting up micropayment systems to avoid these credit card fees. Not that much came of it.
It's also why you can only buy Wii points in $10 increments.
Posted 03 Dec 2008 at 3:40pm #
I'm afraid I've no beneficial input here either, but if someone else here does, I'd be glad to hear it!
Posted 06 Dec 2008 at 8:58pm #
For amounts <$10, Amazon charges $0.05 + 5%. Interesting.
Posted 10 Dec 2008 at 3:16pm #
I also had a keen desire to get any information on this subject. Please post a follow up if you find some good options.