Merchant processing pricing and fees

Merchant processing fees are charges applied to payment transactions processed through the Payabli platform. This guide explains the key concepts of merchant fee processing in Payabli that you should understand before beginning your integration.

In this guide, you’ll learn about:

• Fee structures available in Payabli
• Different types of fees that can be applied
• Options for who pays the transaction fees
• How often fees are paid (fee frequency)

Fee structures

Fee structures define the overall fee strategy applied to each paypoint. Payabli offers three fee structure options: flat rate, tiered pricing, and interchange plus.

When choosing a fee structure, consider the following factors:

Flat rate

Flat rate is a fixed rate for all processing fees, including interchange and processor markup, that remains the same regardless of card type. This structure bundles interchange fees and markups together, making it the easiest structure for merchants to understand.

Tiered pricing

Tiered pricing groups transactions into different tiers based on the card used, with each tier having a different rate. Payabli offers two options for setting pricing tiers:

1. By network - Set different rates for Visa, Mastercard, American Express, Discover, etc.
2. By card type - Set different rates for credit vs. debit cards

Use tiered pricing when you want to set certain card types (like American Express) to higher rates to offset their higher processing fees.

Interchange Plus

Interchange Plus applies to credit card fees only and is the sum of interchange fees plus processor markup.

Card networks set the interchange rates. The rates are typically updated twice a year and can vary between different card types. The processor markup is a fixed rate applied to every transaction.

The interchange rate a merchant pays is determined by several factors:

• Transaction size
• AVS and other security features
• Merchant size
• Industry or Merchant Category Code (MCC)
• Card type (debit, credit, rewards, etc.)

Fee types

Fee types represent the different reasons fees attach to transactions. The main fee types include: discount fees, authorization fees, ACH fees, chargebacks, and ACH returns.

Authorization fees

Authorization fees are charged per attempted transaction. The authorization fee applies to all card transaction attempts, because the process of checking cardholder information with card networks occurs whether the transaction is ultimately approved, declined, or voided.

Due to declined and voided transactions, authorization counts typically exceed actual transaction counts.

Discount fees

This percentage-based fee is calculated based processed volume for transactions using a given card type. You can set these rates to be the same across all card types (flat rate), or different for each card type (tiered pricing).

This fee type applies to all transactions. They’re called “discount fees” because they were traditionally deducted or “discounted” from each transaction amount before settlement. The term is used even when fees are collected monthly or on other schedules.

For a detailed example of how discount fees work, see Card Processing Fees.

ACH fees

These fees apply to ACH transactions, and can be set as either a fixed amount per transaction or percentage-based fee (often capped at a specific dollar amount).

For example, if you set ACH fees to 1% with a $100 USD cap, any transaction over $10,000 USD would incur a $100 USD fee.

Chargeback fees

Chargeback and retrieval fees are assessed when a credit card transaction is disputed. See Payment Disputes for more information.

ACH return fees

When an ACH transaction can’t be processed, the receiving bank returns the transaction and charges a fee to the originating merchant. You’ll need to specify whether the merchant is responsible for this fee or if you’ll absorb it.

See Payment Disputes for more information.

Who pays the fees

In Payabli, there are three options for who pays transaction fees: absorb, service, and bill to parent. Each option is explained in the following sections.

Absorb

The merchant pays fees directly, typically by absorbing transaction costs into the price charged to customers.

Service

The payor may pay a fee at the time of purchase. This appears as a separate line item on customer receipts. See Payor fees for the fee types this can include and how they’re sent on a transaction.

When configuring these fees, you can choose:

• A percentage-based fee
• A flat rate fee

When offering a model where the payor pays a fee, contact the Payabli team for guidance on the appropriate messaging to display at checkout.

Bill to parent

Paypoints and customers make transactions without paying fees. Instead, the partner pays them. Processors sometimes use this approach to encourage paypoint sign ups.

Fee frequency

Fees can be paid using two different schedules: daily or monthly.

• Daily: The merchant pays fees daily via a deduction from their transfer amount. For example, with a 2.9% flat fee on credit card purchases and $1,000 in daily credit card sales, $971 is deposited ($29 is deducted to cover the 2.9% fee).
• Monthly: The merchant pays fees in bulk at the end of the month.

Related resources

See these related resources to help you get the most out of Payabli.