Whether you're a seasoned business owner or just starting out, understanding the ins and outs of payment processing costs can be confusing. Fees associated with these services are as varied as the businesses they support, making it crucial for merchants, especially those wielding e-commerce platforms, to grasp the nuances.

This article will delve into the world of payment gateway fees, comparing the pricing structures of popular providers such as PayPal, Square, and Zen Payments. Additionally, we will explore the factors that can influence these charges, ensuring you are well informed and prepared when selecting and implementing a payment gateway for your business.

What Is a Payment Gateway?

A payment gateway is an essential tool for online transactions, acting as a digital conduit between a merchant and the customer's bank account.

When customers input their credit or debit card details to purchase online, the payment gateway securely transmits this sensitive data. It encrypts the information, scrambles it into a secure code, then sends it to the customer's bank or credit card network for authorization.

Besides handling credit cards like Visa and Mastercard, a payment gateway can also process online payments from digital wallets and international cards. This ensures that American Express aficionados or those using international payment methods aren't left out.

How Does a Payment Gateway Work?

When a customer hits the 'pay' button during an online transaction, the payment gateway securely transfers the customer's payment information—such as credit card or digital wallet details—to the payment processor. The payment processor then sends this information to the relevant bank or card network (Visa, Mastercard, American Express, or international cards) to receive authorization.

If all is in order, the payment gateway informs the merchant and the customer that the payment is successful. Meanwhile, the funds are temporarily held in a business merchant account before being transferred.

What Are the Various Payment Gateway Fees?

Payment gateway fees are the charges businesses need to pay for using the services of a payment gateway. These fees are usually associated with processing credit card transactions. To give you a clearer idea, let's break down the different types of payment processing fees:

Monthly Fees

Some payment gateways charge a monthly fee for using their services. This fee may cover additional features or services provided by the payment gateway. It is important to consider this cost if you anticipate a high volume of transactions or require advanced features.

Transaction Fees

These are fees charged for each transaction that goes through the payment gateway. It is usually a percentage of the transaction amount plus a flat fee. For example, if the transaction fee is 2.9% plus $0.30, for a $100 purchase, the fee would be $2.90 + $0.30, totaling $3.20.

PCI Compliance Fees

Payment Card Industry Data Security Standard (PCI DSS) compliance is crucial for businesses that handle credit card payment information. Some gateway providers charge a fee for ensuring that their systems meet the PCI DSS requirements. This fee ensures that the gateway's security features are up to date, protecting both businesses and customers.

Chargeback Fees

In the event of a customer dispute or fraudulent transaction, chargeback fees may be incurred. These fees are charged when a customer initiates a chargeback and the payment gateway processes the refund. Chargeback fees are meant to cover the administrative costs associated with the dispute resolution process.

Refund Fees

If a customer requests a refund for a purchase, certain payment gateways may charge a fee to process the refund. This fee offsets the costs involved in handling the refund transaction.

Termination Fees

Termination fees are applicable when you decide to end your contract or close your account with a payment gateway before the agreed-upon term. These fees can vary widely depending on the gateway, and they are meant to offset any costs or lost revenue that the gateway may incur due to the early termination.

Miscellaneous Fees

Payment gateways may also charge additional fees for specific services or features, such as recurring billing, virtual terminal access, supporting various payment methods, or currency conversion. These fees vary depending on the payment gateway and the specific services utilized. Remember to carefully review the terms and conditions and assess the value provided by each payment gateway to ensure that you are choosing a provider that aligns with your business goals.

Variables That May Affect Payment Gateway Charges

When selecting a payment gateway, business owners should be sharp-eyed regarding the various fees that might come into play. It's not just about the percentages; several other variables can affect your overall charges. Here's a handy breakdown:

• Transaction Volume: Often, the more transactions you process, the more bargaining power you might have. Providers may offer reduced fees for higher volumes. If your business experiences high transaction volumes, it's worth exploring payment gateways that offer volume-based pricing structures or negotiate lower rates based on your transaction volume.
• Type of Card: Accepting different cards can impact your fees. Some payment gateways charge different fees for different cards, such as American Express or international cards, compared to domestic debit cards. Ensure you check with the payment gateway provider about their fee structure for accepting different card types to avoid surprises.
• Flat Rate vs. Interchange-Plus: Payment gateways may offer pricing models based on a flat rate or interchange-plus. Flat-rate pricing means you pay a fixed percentage or amount per transaction, while interchange-plus pricing varies depending on the card or bank used. While flat-rate pricing offers simplicity, interchange fees may be lower for businesses that process high-value transactions or accept various card types.
• International Transactions: If your business involves international transactions, it's important to consider that these transactions can attract additional fees. Payment gateways may charge extra for processing international payments due to additional complexities in currency conversion and compliance with international regulations.
• Digital Wallet Transactions: As digital wallets become the newest fad in payment methods, some gateways may have specific fees or pricing structures for transactions made through digital wallets, such as Apple Pay or Google Pay.
• Business Type: The nature of your business can also impact the fees charged by payment gateways. High-risk merchants, such as those in industries like online gambling or adult entertainment, often face higher fees due to the increased risk involved. However, specialized payment providers like Zen Payments cater to the unique needs of high-risk merchants and offer tailored plans to help manage their fees effectively.

Comparing Payment Gateway Costs and Fees

With so many payment gateway options at your fingertips, let's break down the costs and fees of a couple of gateway providers in 2024.*

*All prices mentioned in this article are accurate according to public information at the time of publishing.

Paypal

Paypal is a widely recognized and trusted payment gateway that offers excellent functionality for merchants and a secure service for customers. While there are no specific gateway fees with Paypal, you can expect to pay a processing rate of 3.49% and $0.49 per transaction. The total cost may also depend on any add-ons or customizations you choose.

Stripe

Stripe is another popular payment solution provider that offers payment processing fees but no specific gateway fees. However, they charge a processing rate of 3.40% and $0.30 per transaction (2.90% base rate + 0.50% fee for online processing). There is an additional 1.50% fee for international cards and 1.00% for currency conversion. The overall cost may vary based on any additional add-ons or customizations.

Square

While Square is primarily designed for in-person transactions, it also offers online support. There are no specific gateway fees with Square, but you can expect to pay a processing rate of 2.90% and $.30 per online transaction. Alternatively, if you or your customer use a card on file or manually enter the information, the rate is 3.50% and $0.15 per transaction. The total cost may be influenced by factors such as international cards.

Zen Payments

Zen Payments specializes in high-risk merchant accounts and ensures transparency by disclosing all fees upon sign-up. While the fees for high-risk merchant accounts may vary based on the company and industry, they typically range from 3-5% of sales volume and $0.30 per transaction. These fees are generally higher than standard rates due to the restrictions imposed by major credit card processing companies on high-risk merchants.

Adyen

Adyen offers a pay-per-transaction model with no setup or monthly fees for the gateway. The cost per transaction is €0.11, and additional pass-through costs may apply based on the payment method and currency. Adyen's pricing structure varies, but no monthly fees, setup fees, closure fees, or integration fees are involved. However, some invoices may have a minimum amount, which can be influenced by interchange fees.

Authorize.net

For businesses with a separate merchant account, Authorize.net offers a payment gateway-only connection with a $0.00 setup fee, a $25.00 monthly fee, and a $0.10 per transaction fee. If you choose to use Authorize.net as both your merchant account provider and payment gateway provider, you will pay the same $25.00 monthly gateway fee, $0 setup fee, and a processing rate of 2.90% on all volumes and $0.30 per transaction. Authorize.net has two pricing options depending on your existing merchant account. The all-in-one option costs $25 monthly plus 2.9% and 30 cents per transaction. The option for businesses with their own merchant accounts has a monthly fee of $25, plus a 10-cent transaction fee and an additional 10 cents as a daily batch fee.

GoCardless

GoCardless services have no monthly or setup fees involved. For domestic transactions within the USA, GoCardless charges a flat fee of 1% plus $0.25, with a maximum fee of $2.50. For transactions exceeding $1,000, an additional fee of 0.3% applies. The flat fee per transaction for international payments is 2% plus $0.25. Unlike other gateways, GoCardless includes currency conversion at real exchange rates.

When evaluating payment gateway costs and fees, you must consider your business needs, transaction volumes, and the payment methods and cards you accept. By understanding the fee structures and comparing different payment gateway providers, you can make an informed decision that aligns with your business goals and helps you minimize unnecessary expenses.

Set up Your Payment Gateway With Zen Payments

Navigating the landscape of payment gateway fees can be quite the trek, but you don't have to chart the course alone. Partnering with a trusted merchant services provider like Zen Payments ensures that your business is not just equipped to accept various payment options, no matter your business needs.

Zen Payments specializes in delivering tailor-made solutions. Whether your business skews towards e-commerce, thrives in the high-risk sector, stands strong in retail services, or processes ACH transactions, we focus on what your business needs to grow in an increasingly digital economy.

The Zen Payments team is ready to work with you, creating a custom plan designed for the unique pulse of your business operations. Contact us today to explore our payment processing solutions.