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Reasons That You Pay Different Fees to Accept Debit and Credit Card Payments

As a business owner, it is in your best interest to set up a merchant account so that you can accept credit and debit card payments from your customers. Many customers today do not carry a significant amount of cash or a checkbook. Instead, they prefer to pull out their plastic and pay for their purchases with a debit or credit card. A business merchant account facilitates debit and credit card processing, and there are different merchant account services that you can use. You will find that many merchant services charge a lower rate for debit card payments than for credit card payments.

The Differences Between Debit and Credit Card Purchases

When a consumer pulls out a card to make a purchase, the commonly asked question is if the charge will be a debit or credit charge. With a credit card, the consumer must always answer that this is a credit card transaction. With a debit card, the consumer generally can choose either option. When the debit card option is selected, the consumer will be asked to enter the PIN number. The funds will then instantly be deducted from the consumer’s bank account and transferred into the merchant account. With a credit card purchase, the consumer signs the receipt, and funds are borrowed from a credit account. The fact is that credit card purchases are riskier for the merchant account service to handle, and there is increased cost associated with this process.

How the Charges Are Assessed

Each merchant service will assess fees in different ways, but most do have different transaction fees for credit card and debit card purchases. In most cases, the fees associated with debit card purchases are more affordable. There are often flat fees that cover the general overhead that will be passed on equally to all card transactions in most cases. Because of the increased risk associated with credit card transactions, these transactions often have a fee that may be as much as a few percentage points higher than debit card transactions. In some cases, there is an additional surcharge for credit card transactions that equates to a higher flat fee per transaction.

While the charge per transaction may be relatively small, the total cost that you pay in merchant services over the course of a month or a year can be significant. Some businesses have offered discounts on purchases to cash customers. Others have established a minimum charge on credit and debit card purchases alike. By employing different strategies like these and by shopping around for the best rates on merchant services, you can most easily reduce your fees associated with debit and credit card processing.


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