Nowadays, businesses cannot survive relying only on cash payments. Therefore the importance of digital payments is increasing day by day. Various online payment methods are available such as debit cards, credit cards, mobile wallets, UPI, NEFT, RTGS, Net Banking, etc. Most importantly, all these payment methods are very convenient for customers to pay bills online.
Different Factors That Affect Transaction Charges:
- The interchange rate is a crucial factor that applies to all credit or debit card transactions. It usually covers handling costs and transaction fees. So, the interchange rate plays the most significant role in any business, including a small percentage of the extra price with the fixed cost.
- The second important factor is the merchant account provider fee which allows a company to process electronic payments and deposit money in the bank account. A merchant account is necessary to run a business successfully as it does not wait for the users to pay their credit card bills. Instead, it involves monthly statement fees and maintenance fees.
- A customer can pay any bill by swiping a card or via a mobile wallet. Here, each mode of payment follows a different processing fee which is also highly dependent on the amount of risk. A transaction where anyone pays with his card is less risky than a person paying online with a coupon.
What Are The Different Types Of Transaction Fees?
- Terminal Fees:
Point-of-sale systems are a group of software designed to accept payments. The companies that provide these terminals to retailers charge a small terminal fee.
- Tiered Fees:
A payment processor divides the total interchange cost into multiple categories in a tiered model. In this case, the number of processing fees positively correlates with the amount of risk.
- Subscription Fees:
Sometimes, a company can choose a subscription plan rather than charging per transaction because it gives a clear idea regarding the transaction charges.
- Foreign Transaction Fees:
Foreign transaction fees are applicable when companies make their online transactions abroad. It is also useful when business owners want to pay a foreign vendor in their home country. There are several easy methods to save foreign transaction fees, and those are as follows:
- Choose a credit card company with the most nominal transaction fees after checking the terms and conditions of various other card providers.
- Companies can open a local business account if they have multiple transactions with the same client and business partner.
- Companies can send and receive payments by opening a multi-currency business account with lower exchange fees. They also need to take care of all the invoices and should integrate them with the accounting system.
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- Balance Transfer Fees:
Nowadays, some credit card companies allow the transfer of the whole debt to a new credit card to avoid the high-interest rate. The new credit card company will charge a balance transfer fee to move the previous debt in such cases.
Transaction fees are always unavoidable, but specific ways exist to reduce them. The best way to save the costs is to pass them on to the customers because a small