Understanding Your Credit Card & it’s Processing Fees
Understanding Your Credit Card & it’s Processing Fees. When you get a credit card, you get a whole lot of benefits with it. From being able to make cashless transactions to getting things on credit, a credit card brings forth many advantages. However, every time you use your credit card, a processing fee is deducted and added to your bill. What is this processing fee and what affects it? Let us learn more about the credit card processing fee details in the article below.
What exactly is the credit card processing fee?
Credit card processing fees are made up of three components. They are:
Transactional fees – The transactional fees are charged every time the card is used. It is the fee you pay for using your card to make a transaction.
Fixed fees – This is a scheduled fee that is fixed and you always have to pay just because you use the credit card.
Incidental fees – These are specific fees or fines that are charged when certain incidences take place such as insufficient funds in the bank account, etc.
There are some factors that affect the processing fees of a credit card. We take a detailed look at those in the next section.
Type of card – Credit cards are available from different issuers such as Visa, MasterCard or American Express. Each credit card company has a separate rate at which it charges the issuing bank. The bank transfers a portion of this fee to you and it forms a part of the processing fees. Therefore, the type of credit card you have impacts your processing fee rate.
Category of card – Credit cards are available as business credit cards, personal credit cards, etc. A business credit card has a higher processing fee as compared to a personal credit card. This is another factor that determines the amount of money you pay towards your total credit card processing fee each month along with the bill.
Type of payment – The type in which the card is used plays a deciding role in the credit card processing fee. A card can be swiped at a shop along with entering the PIN. It can be used online by entering the numbers. It can be tapped on a machine and used without entering a PIN. The way in which the credit card is used impacts the processing fee. A card swipe is usually cheaper than an online transaction.
These are the ways in which a credit card processing fee gets affected.
The bottom line
Processing fees are an important part of your credit card bills. No matter how they are charged, it is your duty to pay them. Once you take the credit card, you promise the issuer that you will pay all the applicable fees. This is why it is important to read the documents carefully and then take a card that has a reasonable processing fee. Also, compare different credit cards and see which one has the most attractive fee structure. Take the card and make the best use of it.