3rd Party Credit Card Processor Fee

These days a Credit Card has become a broadly accepted online payment solution. Hence it is extremely important for an online seller to be able to accept Credit Cards in your transactions. There are many ways to accept Credit Cards in your daily transactions. The two widely used options are-

1. Owning an Online Merchant Account
2. By using 3rd party Credit Card Processor

A 3rd party Credit Card processor scheme takes a certain percentage of fee from your transaction while in a Merchant Account you only have to pay a fixed service charge. Usually a merchant card account service charge consists of 1. Per transaction fee. 2. Gateway monthly fee 3. Address verification fee. To further understand about the difference lets see this sample case below:

If you use a 3rd party Credit Card Processor, per transaction charge will be around 13.5% (some offer less, whilst others offer more). While if you use an
Online Merchant Accounts, per transaction cost will be around $5, gateway monthly fee will be $ 30 and AVS fee will be $4. The transaction cost for both types of payment processors will be:

1. High value recurring transaction-
Sample company (online car dealer)
Average cash flow per transaction = $3000.
Monthly transactions = 50 transactions.
The fee comparison will be:

* If the company is using a 3rd party Credit Card, the average monthly fee will be 3000 x 13,5% x 50 = $ 20.250
* If the company is using an
Online Merchant Accounts, the average monthly fee will be 30 + ((5+4)x50) = $ 480
2. Small value non recurring transaction
Sample company (small online customized printed material shop)
Average cash flow per transaction = $50
Monthly transactions = 10

* If the company is using a 3rd party Credit Card processor, the average monthly fee will be 50 x 13,5% x 10 = $ 67,5
* If the company is using an
Online Merchant Accounts, the average monthly fee will be 30 + ((5+4)x10) = $ 120

From the above fee calculation we can conclude whether it really is important to have a merchant card account or 3rd party services.