Understanding Credit Card Fees

Carole Oat, the national sales manager at Twin Oaks Software, shares the ins and outs of credit card fees, including what to evaluate in a billing partner.

Software and billing companies supporting club operators need to process credit cards. A club management software (CMS) company that is a certified independent sales organization is a safe bet, as then it’s done in-house with a supported bank and not outsourced to a third party.  

Qualified, non-qualified, tiered, hand-keyed and authorizations are just some of the terms used in billing. Work with a reputable CMS provider that’s willing to explain details and provide support when questions arise. The fees should be clearly understood and vary little. Base costs are called interchange.

A key area to understand is the different fees for the recurring billing portion of credit card processing — also called Mail Order Telephone Order (MOTO) or Card Not Present (CNP) — for membership dues, versus the over-the-counter — card present or retail — done via point of sale. CNP, which also includes ecommerce/online transactions, are generally a half percentage point higher than card present since they are considered higher risk. There is also a variance if it’s a debit card of at least a quarter-point lower.

When fielding inquiries, consider these points:

• The rates quoted should be set, not introductory, and should be broken out by card type. Debit cards 1.3% to 1.6%; regular MC/Visa 1.6% to 1.9%.
• See a line-by-line comparison if claiming a large savings. No application fees.
• Watch for basis points and keep them within .2 and .10 a transaction. Anything more than that is excessive mark up.
• No long-term agreements. Month to month is best.  
• No “buyout” fee or charges for termination and no automatic renewals.
• Settlement of funds should occur within 24 to 48 hours of the transaction. No lag time.
• Chargebacks, or member disputes, should be $14 or less.

Separately, a large component of any MOTO merchant relationship is the back-end programming. It is impossible to integrate with every provider. Integration includes the ability to process all types of cards, handling returns and service fees that download directly into the CMS and disclosing return reasons. Providing an in-house support solution and outstanding customer service are vital.

Key things to verify when choosing a billing provider are:

• Rates per card type, not an overall percentage. On average, debit card fees should be 1.65% to 1.95%. Regular MC/Visa should be 2.25% to 2.5%. Avoid flat rate pricing.  
• No fees for declines, only the transaction fee — .05 is appropriate.  
• Look for an optional account updater program, typically .40 cents an update. And use an address verification service.
• Check visa.com to verify they are PCI-DSS compliant. Non-PCI compliance can cost the merchant $10 to $20 per month.