Business Credit Card Processing: Legal to Charge Customers?

Business credit card processing is a complicated undertaking that involves more parties than the average consumer realizes. Rather than deal directly with Visa, MasterCard or another issuing credit card company, merchants must deal with business credit card processing companies that are essentially middlemen in transactions. These processing companies, in turn, charge merchants a fee for handling the transaction. The fee cannot be charged to the consumer.

How Business Credit Card Processing Works

Business credit card processing is set up with middlemen to ensure that payments are handled expediently and effectively. If Discover, Visa or MasterCard attempted to handle processing for each and every client, the time to close transactions would be rather lengthy.

As it stands, business credit card processing works in this manner:

  1. A consumer makes a credit card payment at a store or business.
  2. The payment is authorized through a sponsoring bank via the store's processing company.
  3. A verification and approval or denial is granted by the bank issuing the credit card.
  4. The merchant requests payment from its sponsoring bank or credit card processing company.
  5. The credit card processing company pays the merchant and then requests payment from the credit card company directly in batches.
The Real Cost of Fees

Business credit card processing fees can tack onto the cost of doing business, but they are considered well worth the expense by many. When a business does offer the convenience of debit and credit card payments, it provides its customers more options for payments, which increases the sales.

The actual cost of business credit card processing fees to a business can vary greatly. A lot depends on the actual processing company used. Fees are typically based on a percentage of the actual transaction. On the low end, the cost is about 2 percent of a transaction, but this number can climb rather significantly from company to company.

How to Make Business Credit Card Processing Fees Worthwhile

Although a store or service provider cannot pass business credit card processing fees directly onto consumers, there are things companies can do to keep their expenses lower in this regard:

  • Shop around for processing companies. While it might be more convenient for a business to use its own banking institution to process credit card payments, this can sometimes cost more. To get the lowest fees, it is best to shop around among banks and third-party processors.
  • Set a minimum for your customers' credit card purchases. This simply helps a business avoid fees and the hassles involved with them on minor purchases. Many companies have, for example, a $10 minimum.
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