Payment Processing Pass-through Fees
As credit card processing costs have risen dramatically over the years, the practice of embedding those costs into the pricing of products and services seems less and less ideal for either merchants or customers. CardCharge offers a new and transparent way to unbundle those costs from regular pricing and pass along only those costs to each customer that are appropriate to the actual cost of processing their transaction.
The cost of processing some credit cards can sometimes be twice or three times as much as processing transactions with other cards. In extreme circumstances, the cost to process a transaction with a particular credit card can be as much as ten times as much as to process the same transaction with some debit cards. It doesn’t make sense for merchants to always be forced to absorb these costs.CardCharge can be easily set up to pass the appropriate costs to the appropriate customers. When your customer presents their choice of payment, the CardChargeCalculator instantly takes the transaction subtotal, the card being presented, along with your merchant characteristics and calculates the total card processing cost that would be involved if the transaction proceeds. The CardChargeCalulator then forwards that information to your system, along with the recommend amount of Payment Processing Passthrough Charges that are appropriate for the transaction. If you customer approves the transaction with the added charges, you will receive the added amount and have exactly offset your processing costs for the transaction. If the customer would prefer to use a different method of payment with lower Payment Processing Pass-through Charges, the CardChargeCalculator will re-calculate the transaction reflecting the lower charges.
CardCharge Merchant Settings can be configured to set a Threshold at which Passthrough Charges begin. This is often set at the typical cost for the particular merchant to accept regulated Debit cards, but can be set higher or lower as determined by the Merchant. A Passthrough Charge Percentage can also be set that determines if the entire expected cost of processing a transaction will be passed on to the customer or if only a percentage of the cost will be passed through. Merchants who wish to absorb some or all of the payment processing costs for their customers can configure the settings to accomplish what they want.
You have set your merchant settings: (you can read about merchant settings here)
- to allow Payment Processing Passthrough Charges
- to a Pass-through Charge Threshold of $.35 + .05%
- to a Pass-through Charge Percentage of 90% (you pay 10% over set threshold but pass on 90%)
Customer uses a MasterCard Credit World card.
Product Sticker Price – $100
CardCharge calculates the Passthrough Charge Threshold for this transaction = $0.40
CardCharge calculates, in this scenario, a transaction processing cost (CardCharge) of $3.70
Difference between the CardCharge and the Threshold = $3.30
You elected to absorb 10% of the amount over threshold = $0.33
You elected to calculate the Passthrough Charge at 90% of the Difference = $2.97
Total before taxes to the customer becomes $102.97
If you had passed 100% of the CardCharge Fee on to the customer their total would have been $103.30
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