The majority of ecommerce sales are completed using credit or debit cards, and processing fees are a necessary part of accepting credit card payments. These fees can often sneak up on merchants that don’t consider them in their budgeting process. Payment processing fees come in many shapes and sizes, so it is important to understand how they work.

Additionally, merchants that offer consumer financing for their consumers through a third party will also be paying processing fees for transactions that are performed through the financing platform. This adds an extra layer of complexity, and merchants should know a few important details:

• What processing fees cover
• Credit card processing fees
• BNPL processing fees

To not be caught off guard, merchant processing fees will be explained so that you can best utilize options like credit cards and buy now, pay later financing programs.

What Do Processing Fees Cover?

While payment processing fees are taken in one lump sum on each transaction, they are actually comprised of three separate fees:

• Assessment Fee: This is the fee paid to the card network (Discover, MasterCard, Visa, and American Express).

• Payment Processor Fee: This is the fee paid to the actual payment processor that the merchant is working with, common examples being Elavon, Square, and Clover.

• Interchange: This is the card issuer's fee for providing the funds needed to make the purchase. These allow card issuers to make money even if consumers don't incur interest on their cards by simply taking a portion of the money they spend using them.

Now that we know what the fees cover, let's see how they differ between the two types of transactions.

Credit Card Merchant Processing Fees Explained

Credit card processing fees are fees taken from merchants with each credit card transaction. Now, if every credit card processing fee were a simple flat rate, high-volume small-ticket retailers would be much worse off than low-volume luxury retailers.

As a result, card processing fees usually take two different forms: Flat rate fees and percentage fees. When working with a payment processor, a merchant will usually offer information on their business model to help the processor determine which fee breakdown will work best for their situation. Regardless of which option is chosen, processing fees are typically an extremely small portion of each sale, with percentages usually ranging from 1.5%-3.5% of each transaction. 

BNPL Merchant Processing Fees Explained

For Buy Now, Pay Later (BNPL) financing programs, fees are handled similarly. Just like card processing fees, they can either be a flat rate for every transaction or a given percentage of the total purchase price that the third-party partner finances. Processing fees are typically not taken out every time a consumer makes a payment, as those payments are made directly to the lender that provides the funds for the program.

The difference between BNPL processing fees and card processing fees is the information needed to determine the proper fee breakdown. While credit card fees are usually determined primarily by predicted sales volume and ticket size, BNPL providers will also be looking to determine how often their services are going to be used by a merchant’s customer base. 

Skeps BNPL Platform Makes Things Easy

By working with Skeps, merchants can take advantage of our cutting-edge POS financing platform to ensure that consumers can pay how they want to. With our network of lending partners, retailers can offer any variety of financing, including BNPL, branded credit cards, consumer loans, and leases. Give customers a clean, branded payment experience with the only truly end-to-end financing and payment platform.