When it comes to credit card processing fees, online merchants are not spared the problems that they potentially face in this area. Merely comparing the best card processors out there is not quite enough – merchants will still be dogged by issues pertaining to credit card processing fees. Here are some issues that you need to know about so that you can stay clear of them:

1. Interchange refund
When a merchant processes a refund, the card issuer returns the interchange to the processing bank. At this point the Processor has two options: to keep the returned fee or to pass it on to the merchant. Make sure that the processor passes on the returned interchange to you! The processor should keep nothing more than its own fee they charged to facilitate the transaction.

2. Downgrades
If the pricing is based on a tiered model, your Non-Qualified transactions would be processed at a higher rate than your Qualified transactions. This is known as a downgrade. Your downgrades must not exceed 10% of your overall processing volume. If they do, you should contact your Processor and ask for assistance. It is the Processor’s duty to implement on your behalf the best processing standards required to get the lowest interchange. The problem, however, may have more to do with the way you process your sales orders, than with your Processor. Even then your Processor should be able to help you modify your business practices in a way that will reduce downgrades.

3. Multiple authorizations
Real-time transaction processing creates the possibility for multiple authorizations, especially if you are using a dial-up connection. If, during transmission, the connection is lost, the data must be retransmitted which can result in a second authorization. Moreover, your customer’s credit limit will be reduced with each authorization request. Your authorization requests should not be more than 110% of your sales (for 100 sales you should not have more than 110 authorizations).

In order to get rid of hidden fees and fully optimize processing costs, merchants are advised to:
1. Have their pricing done using the interchange-plus model. Research on the differences between interchange-plus model and tiered model and you will find that the former is more beneficial.

2. Evaluate on a continuous basis the cost-effectiveness of your own business practices and their effect on your processing fees. You should establish your own benchmarks and adhere to them. Do not hesitate to request your Processor’s assistance, they have contracted with you to do just that.

3. Make sure that you fully understand your pricing structure. Before you have signed up with your Processor, you should have asked them to fully explain the basis on which you would be charged for your credit and debit card processing. If you have not done it, contact your Processor now and request it! A better understanding of your pricing will help you set your benchmarks and reduce downgrades.

4. Perform an independent audit of your processing fees at least once per year. An independent audit will best show you exactly what your processing costs are and point to areas where you need to work on.

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