Business Accountants: Understanding Credit Card Processing Fees: A Comprehensive Guide for Restaurants


New Zealand is moving rapidly towards becoming a cashless society, with the majority of payments now being made through credit and debit cards. While this shift offers undeniable convenience for customers, it can impose significant costs on restaurants and businesses. Credit card processing fees encompass various charges, including interchange fees, assessment fees, and payment processor costs, all of which can impact a restaurant’s bottom line.

In this guide, we aim to demystify the world of credit card processing fees, exploring the different types of fees, the entities behind these charges, and strategies to mitigate their impact on your restaurant’s profitability.

Understanding Credit Card Fees: 

Credit card processing fees refer to the charges that businesses incur when accepting credit card payments. Multiple parties collaborate to facilitate these transactions, with each party levying a fee, usually a percentage of the total transaction amount. The key players involved in credit card processing include:

  1. Card Issuing Banks (e.g., ANZ)
  2. Card Networks (e.g., Visa and Mastercard)
  3. Payment Processors 

Every credit or debit card transaction results in a fee imposed by these entities. As a restaurant owner, it’s essential to recognize that each card purchase made via an EFTPOS terminal incurs various fees from these stakeholders.

Determining Credit Card Fees: 

Credit card fees are determined by a complex system that involves several parties within the payment processing ecosystem. These fees can fluctuate based on factors like business type, payment acceptance method, card networks, and the chosen payment processor. For restaurants, credit card fees are typically influenced by three primary parties:

  1. Card Issuers:
    • Interchange fees are charged by card issuers to cover the costs associated with processing transactions. These fees may vary depending on factors such as the type of card used.
  2. Card Networks:
    • Assessment fees are imposed by card networks like Visa and Mastercard for using their payment networks to process transactions. These fees are typically charged on a monthly basis and vary based on transaction volume.
  3. Payment Processors:
    • Payment processors act as intermediaries, clearing transactions and depositing funds into your bank account. They charge a fee for their services, which can be a flat rate or a percentage of the transaction value.

Additional Factors Affecting Fees: Apart from the primary stakeholders, various other factors can influence credit card processing fees. These factors include:

  1. Merchant Category Code (MCC):

    • Businesses are assigned an MCC based on their industry (e.g., restaurants, bakeries). Different MCCs can have varying interchange rates, which might impact fees for high-risk industries.
  2. Transaction Type:

    • Transaction type (card-present or card-not-present) can impact processing fees. Card-present transactions generally have lower fees due to lower fraud risk.
  3. Card Type:

    • Different types of credit cards, such as rewards or corporate cards, have their own interchange rates, potentially leading to higher fees for processing premium or corporate cards.

Understanding Types of Credit Card Fees: 

Let’s delve into the specifics of the primary types of credit card fees and why they are charged:

  1. Interchange Fees:

    • Card issuers, typically banks or credit unions, charge interchange fees to cover the costs of processing transactions. This fee is usually a small percentage of the total transaction amount and helps mitigate risks and processing expenses.
  2. Assessment Fees:

    • Card networks like Mastercard levy assessment fees to use their card brands and payment networks. These fees are charged monthly based on total sales volume.
  3. Payment Processor Fees:

    • Payment processors charge fees for their products, including payment hardware and software that enable card acceptance. These fees can be a percentage of the transaction, monthly fees, or even hidden costs.

The Role of Payment Processor Fees: 

There’s a common misconception that payment processor fees solely contribute to their profit margins. However, some payment processors reinvest these fees to enhance their products and services. For example, Lightspeed constantly invests in improving service capabilities, offering benefits like:

  • Fraud prevention and security to ensure PCI compliance.
  • A unified POS platform designed for convenience.
  • 24/7 support for businesses’ peace of mind.
  • Advanced insights to track essential business metrics.

Minimizing Credit Card Fees: 

While it’s impossible to completely avoid credit card processing fees, there are strategies to minimize their impact on your restaurant:

  1. Negotiate Pricing:

    • Some businesses, especially larger or high-volume merchants, can negotiate customized pricing with their payment processors based on specific needs and transaction volume.
  2. Credit Card Surcharges:

    • Passing on processing fees to customers through surcharges can help offset the costs. It’s essential to be transparent about this practice.

Credit card processing fees are an integral part of restaurant operations. Understanding their structure and the factors influencing their costs is essential for efficient financial management. By negotiating pricing and considering credit card surcharges, restaurants can take steps to mitigate these fees while providing the convenience of card payments to customers.


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