Credit card merchant rates are the fees charged by credit card companies and the card processors every time a transaction is made. These fees are not paid by the consumer, but by the business accepting the credit card as part of the arrangement to use their services.
Credit cart merchant rates are established as part of a contract between the merchant and the credit card company when it is decided that the business will allow customers to use credit cards. Since consumers with credit cards tend to spend more than those paying in cash alone—not to mention the greater level of convenience of using a credit or debit card—agreeing to the processing fees is usually something a vendor will do without much hesitation. But they can also be hit with an additional processing fee by the company providing them the machines and data transfer capabilities needed to complete the transaction.
Every time a customer uses a credit card as part of a transaction, it is swiped through a card reader. That information is then sent to the credit card company, whose servers either accept or reject the credit transaction. If it is approved, the company who just made money off the sale pays a credit card processing fee. That credit card merchant fee can vary by credit card company, the amount of transactions made during a certain period of time or the amount of the transaction. Due to their high credit and debit card processing rates, some businesses refuse to accept American Express.
The vendor can also be hit with a second credit card processing fee for each transaction. This fee is charged by the company providing the card reader, then transmits the information to the credit card company’s server. These fees are not the same as the credit card company’s; they can be greater or less, depending on the agreement that the vendor has with their machine supplier.
While credit card merchant rates are normally a very small percentage of a transaction, they can pile up quickly and hurt a company struggling to get by. Some vendors have attempted to renegotiate their credit and debit card processing rates downward in order to stay profitable while still taking credit cards.