When you make a credit card purchase for $100, it costs the merchant about $1.00 in processing fees. It’s unclear why card issuers think they deserve a 2% cut.

Most of the attention in recent months has been focused on fees for processing debit cards.  However, in early July, the Federal Reserve limitedd the base charge that can be imposed to 21 cents per transaction, on average — well below the current average of 44 cents.

The processing fees in question are known as interchange fees, and they’re a major source of revenue for card companies like VISA and MasterCard.  Merchants and consumer groups alike have long challenged the fees for being too high and out of proportion with the actual cost of processing transactions.

Banks contend that they need such fees to maintain the integrity of their computer networks as well as to fund anti-fraud efforts.

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1. Know your Business Type

Visa/Mastercard use pricing indicators or business types to apply discounts toyour rates. In the beginning, Visa/Mastercard used to charge one rate for everyindustry. Some industries refused to accept credit cards because they thoughtthe rates were to high and cut into too much profit margin. Supermarkets wereone of the biggest holdouts. So, Visa/Mastercard began offering discount ratesto specific industries, card types, and processing methods. This is why there are 440 different rate categories. These discounts paved the way for credit cardacceptance at supermarkets, gas stations and fast food restaurants.

Your business may qualify for one of Visa/Mastercards special programs.For example, if your business has an average transaction of less than $15, youmay qualify for the small ticket program. If you are paying 1.64% + $0.25 pertransaction now, then under the small ticket program you could get your rates aslow as 1.65% + $0.04. Now your processor will probably tack on another sixcents to cover its costs. Still, you would save fifteen cents a transaction or 1.5%on a $10 transaction.

Visa/Mastercard has programs for most industries like restaurant,B2B, MOTO,Quick serve restaurants, Convenience Store, Hotel, Gas Stations, Supermarkets,charities, insurance, utilities, government etc.

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Remember those old Visa commercials used to highlight places where they “don’t take American Express.” Well for legal medical marijuana dispensaries, it looks like a reversal: American Express won’t take them.

As of late April, paitents using their American Express cards topurchase medical marijuana received notice that their cards were declined. The rejection of the cards is due to American Express’ decision to no longer allow purchases of such medicinal products with their cards. American Express made this move despite the fact that the purchase of medical marijuana is legal in 15 states.

So far, American Express has given no reason for the new rule, leaving medical marijuana dispensaries and their customers guessing at possible causes. One theory is that the card issuer has received complaints from companies about their employees using their American Express cards to purchase medical marijuana.  American Express may also have received a high number of fraudulent or unauthorized charges from medical marijuana dispensaries due to people using forged or stolen cards to obtain pot.

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From American Banker June 24, 2010: With preferences for carrying and using cash continuing to drop, more consumers expect merchants to accept debit or credit cards for payment. But not all merchants do, especially those that lack physical storefronts. Some industry insiders believe mobile-based products might help encourage them to accept electronic payments.

Indeed – Judging from the discussions among peers at recent industry conferences and the spate of mobile-based products and services entering the market, the topic is on the minds of many in the industry as they consider their business plans.

Today, business owners on the go have more options, when it comes to processing credit card transactions, with smart-phone and cell phone credit card processing applications offering the potential for higher sales, faster collections and many fewer bad debts.

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No longer are the days when credit card terminals cost a lot to purchase or lease. Many seemingly legitimate merchant service processors hawk free credit card machines.  The Internet is thoroughly spammed with FREE CREDIT CARD PROCESSING TERMINAL come-ons.

Are free credit card machine offers legit and worth it?

Often they are NOT.  Many unsuspecting merchants are falling prey to ‘aggressive’ merchant service agents. There is no such thing as a free lunch, or a free $500 wireless credit card machine, it would appear.

So what’s the catch with the free credit card machine offers?

Simple – no merchant account, no free credit card machine. But even more germane, it’s “free,” but you don’t own it, and it actually costs you more. Sounds like a riddle, yes?

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Source: John Tozzi | BusinessWeek Small Biz

Credit-card reform doesn’t apply to small business cards, which more companies are relying on as loans have dried up – so its not only rising credit card processing rates that small business owners are enduring – business owners are also struggling with their own business credit card fees.  We will keep an eye on strategies to help weather this predicament.  – BJK

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The credit card reform Congress passed last year ended “over limit” penalties –- typically $35 fees applied when cardholders charge more than their credit lines allow -– unless customers opt in. At least for consumers –- not so for business credit cards, which the CARD Act does not regulate at all. Now, with two sets of rules, confusion abounds.

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