Are transaction fees leaving you frustrated – or downright confused? We get it, it’s overwhelming. But we’re here to help.

Understanding these fees is the key to making smarter financial decisions in your business, so you can keep more of your hard-earned money.

Read on to learn the 5 things you must know about transaction fees – and to ensure you’re getting the best deal in the market.

1. Transaction fees come with advantages

Let’s face it: transaction fees are an uncomfortable reality of doing business online. However, they do come with important benefits.

Let us explain.

You pay transaction fees to your payment provider in exchange for services, like receiving and refunding money on your behalf during a transaction.

But there’s another vital service you receive in exchange for your fee: data encryption. A costly exercise if you had to fund and manage it yourself.

This service benefits you and your customers. You get to trade online without the hassle of managing payment and data encryption infrastructure. And your customers enjoy an enhanced checkout experience that’s smooth, secure and safe.

2. Transaction fees have three parts

Transaction fees are composed of three main parts: interchange fees, scheme fees and acquiring fees. Understanding the role and purpose of each is crucial in finding the best rate for your business.

  • Interchange fees are charged by the card-issuing bank to offset the risk of granting credit to consumers.
  • Scheme fees are paid by banks to payment networks like Visa, Mastercard and Amex in exchange for access to their transaction infrastructure.
  • Acquiring fees, also known as merchant or processing fees, are issued by your payment provider for processing transactions between you and your customers.

While the card scheme providers set the interchange and scheme fees, your payment provider determines the acquiring fee. So, when evaluating rates, pay close attention to the acquiring fee.

You can learn more – in our comprehensive transaction fees guide.

3. Your industry can affect your rate

It might not seem obvious, but your transaction fees can vary significantly depending on your industry and the type of product or service you sell.

That’s because payment providers rate some industries and activities riskier than others – like selling gift cards. And that level of risk is reflected in the rate you’re offered.

In other words, if your business is more at risk of experiencing chargebacks or fraud, you may be charged higher transaction fees.

4. Transaction fees are trending down

A fee being reduced? It’s as rare as a traffic-free commute. But we assure you, it’s real!

Thanks to initiatives led by the central banks in Australia and New Zealand, transaction fees are indeed trending down. And that’s good news for you as a business owner.

In Australia, the Reserve Bank (RBA) has introduced Least Cost Routing (LCR), which allows you to route transactions through the lowest-cost network instead of the card issuer’s preferred, typically more expensive network.

The central banks in both Australia and New Zealand also recently introduced interchange caps, limiting the amount banks can charge for interchange fees.

These initiatives are helping to reduce the financial burden of transaction fees on your business.

5. You can shop around for the best deal

Shopping around is a savvy tactic to employ if you want to say goodbye to out-of-control transaction fees.

But before you switch to a new payment provider, there are some things to consider.

First, check for any additional costs that might make switching more expensive – like an exorbitant set-up fee.

Second, make sure you’re comfortable with all other contract terms. For example, if you value flexibility, then you might want to avoid a provider with inflexible cancellation policies.

Finally – and this is a big one – cost isn’t always the number one factor. If you want a locally based support team that operates when you do, for example, you might be willing to pay a slightly higher transaction fee rate.

It’s all about finding an offer that suits your business financially and operationally, so you can focus on what matters most – growing your online empire!

Want to learn more about transaction fees – and how to get the best deal for your business? Download our free guide today.