Credit Card Processing Fees Explained

Credit card payments offer a convenient way for constituents to pay tickets and fees, but implementing credit card processing may seem overly complex. In particular, you encounter many types of fees and it’s important to understand what they all mean.

Credit Card Processing Costs

The expenses associated with taking credit cards fall into three categories: transactional, flat and incidental. They can be either wholesale fees, which are the base pricing charged by the processor, or markups, which give the process a way to monetize the transaction. Transactional costs are paid for each transaction. These are interchange fees that the particular bank or credit card company requires when they process the payment. The most common interchange pricing model uses a combination of a flat fee and a percentage of the transaction.
Many costs fall under flat fees, which have a set rate. For example, annual and monthly fees, network fees and early termination fees may be a few that end up on your bill with the credit card processor. Incidental fees are expenses that don’t fall under the other categories and are not charged on a regularly scheduled basis. Instead, you get billed for these whenever they occur. Common types of this type of fee include chargeback and NSF.

Major Players Defined

During the credit card processor procurement process, you’ll encounter four types of major players.
Card Brands

You’re already familiar with the card brands in this process: American Express, Visa, Discover and MasterCard. They maintain the network that’s necessary to process credit card payments.


Acquirers are the banks that you work with for payment processing. They “acquire” your transactions to allow your constituents to make credit card payments.


This entity is the one that offers a platform for successfully processing payments. Their systems verify each transaction so you don’t have fraudulent payments or invalid card information going through processing. The processor may be a division of an established bank or an independent organization.


ISO, which stands for Independent Sales Organization, is a value-added reseller that offers clients various credit card processing packages. They act as a payment gateway and sit between you and the bank that’s working with your transactions. An ISO may serve as support for your payment services or lease out the equipment necessary for credit card processing.

The credit card processing world has a learning curve, but a basic understanding of the major terms and players gets you started. Integrated government payment processing solves many problems when it comes to collecting fines and fees, so it’s time to consider adopting it.

About Gordon Lucas

Gordon manages the day to day operations for FivePoint Payments and helps ensure on-time product delivery, data analysis and seamless integrations. His ability to navigate both the technical and financial components of our products is critical to the success of the company.

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