What are trading fees?

Merchant fees are fees associated with credit card processing. These fees vary depending on the type of business, the bank you have a business account with, and the credit cards accepted. Consumers are often unaware that when making purchases with a credit card, the merchant does not receive the full amount, thanks to the deduction of merchant fees. This is one of the reasons companies that accept credit cards are sometimes forced to raise prices, as a small percentage of each purchase can result in a significant expense over time.

Several different fees are included in the commercial fees. When someone opens a business account, there is usually an application fee payable. Additionally, the merchant will need to pay an annual fee to maintain the account. Every time a credit card is run, the merchant is charged what is known as an interchange fee, the fee for the merchant's bank to contact the credit card issuer to authorize the transaction and obtain the money. Additionally, the merchant's bank charges a processing fee for each credit card transaction.

Transaction fees can be based on a percentage of the transaction or can be flat fees. Some commercial banks combine these two methods, charging a flat base fee per transaction and adding a percentage fee. This ensures that they make a minimum amount with each transaction. Merchants are also charged "batch fees" associated with aggregating their transaction information and submitting it in one batch to the bank for processing. Until transactions are grouped together, they are not actually processed as transactions are considered pending, so it sometimes takes a few days for credit card charges to show up in customer accounts.

Different credit cards have different merchant fees, depending on the agreements negotiated with the banks that handle the merchant accounts. This is why merchants generally don't accept all credit cards, because your bank doesn't have an agreement with the card issuer or has, but the merchant's fees are too high for the merchant to pay. Fees can also vary depending on whether people use regular or reward cards. Debit cards, which are handled differently, tend to be cheaper to process.

Merchants' fees are constantly rising and there are periodic protests among merchant groups that the price of credit card processing is unsustainable. For the public, the repercussions of these protests can be felt when companies stop accepting credit cards, set credit card minimums (although this often violates the trade agreement), start charging more for their products, or start offering a "discount" for people who pay in cash as a way to get around restrictions that prevent companies from charging more for credit card transactions.

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