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Credit Card Processing Fees – ridiculously expensive or surprisingly low and productive?

One thing for sure, no one stays indifferent when credit card processing fees are at stake. Bloggers and others often write about credit card processing in general and interchange fees in specific, usually to argue the rate charged and the need for such.

Many attack the credit card processing industry and state that credit card processing fees increase the cost of goods and services to the end consumer, as merchants embed such in the final prices charged from shoppers. Others, failing to understand the difference between credit cards and debit cards often compare credit card processing fees with those of debit cards only to realize that the latter is materially lower than the former, which helps them conclude the credit card processing fees are ridiculously expensive, non productive and increase overall costs.

“The truth is out there”, as well stated by Fox Mulder, yet is somewhat less obvious than it sounds… Credit card processing fees in general and interchange fees in specific are actually used for a good cause. When performing a credit card processing transaction, the credit risk embedded within the shopping transaction is transferred from the merchant to the issuing bank.

The issuing bank receives the interchange fees to manage this risk. As banks are better equipped to manage credit risks than merchants, this risk transfer lowers the historical costs previously incurred by the merchants. Cutting collection and bad debt costs out of the equation, actually lowers the costs of running a business and enables merchants to lower the final prices of goods and services.

 This statement remains true as long as the merchant cuts the right deal with the right acquiring bank…

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

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This entry was posted on Tuesday, September 8th, 2009 at 4:07 pm and is filed under Credit Card Processing, Domestic Merchant Account. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

4 Responses to “Credit Card Processing Fees – ridiculously expensive or surprisingly low and productive?”

  1. Mark says:
    September 9, 2009 at 5:30 am

    Finally! You took your time… I was starting to think that “credit card processing is magic” will be the only one… Already waiting for the next one :)

  2. Bodyc says:
    September 12, 2009 at 5:34 pm

    Hi there,
    http://www.creditcardprocessing-r-us.com to GoogleReader!
    Thanks

  3. Sean says:
    September 13, 2009 at 3:56 am

    One can argue about the rate yet concept is finally crystal clear. Thanks!

  4. Helena Spencer says:
    March 19, 2010 at 3:22 pm

    Nice credit card processing insights and a refreshing point of view of actual added values embedded in credit card processing. You are right – most of us tend to forget that services are actually provided for the fees charged…

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