Managing a store involves a set of expenses that can have a significant impact on a store’s overall revenue. Transaction processing fees are part of those expenses and are therefore an important aspect for retail merchants to consider. This is why a common question is: How much are the transaction fees of a point of sale?

As a general rule, transaction fees range between 1.5% and 3% of the transaction amount, but they are not charged by the point of sale. In fact, it’s the payment service provider who charges these fees.

Transaction Fees

As mentioned, transaction fees vary as they depend on the payment system provider.

Several other aspects directly influence the price charged per transaction. Indeed, in addition to the provider, the type of payment, the transaction volume and the terms of the contract between the merchant and the payment provider greatly influence the fees incurred.

Percentage rates and fixed amounts charged may vary depending on the type of card (debit or credit), card brand (Visa, Mastercard, American Express, etc.), payment network (Visa, Mastercard, etc.) and other factors. Some providers also offer tiered pricing based on the number of transactions: the more transactions, the lower the fees!

The type of account used for transactions also influences the cost per transaction. Business accounts, for example, tend to have lower fees. Custom rates are sometimes offered to certain businesses based on their revenue.

It’s important to remember that transaction taxes can vary depending on where you make your purchases. For example, in Canada, the GST (Goods and Services Tax) applies to POS transaction fees. These taxes directly impact the total amounts charged to customers for purchases.

Payment fees are usually charged per transaction but can also be billed monthly. For further details on transaction fees associated with a specific payment service, it’s recommended to contact the provider directly.

Point of Sale and Payment Service Provider: What is the Difference?

The point of sale software is the tool that allows merchants to make sales, track their business activities, manage their store and inventory and facilitate interactions with customers. Point of sale softwares offer several significant advantages to the merchant in terms of store management.

On the other hand, payment service providers are companies specialized in processing financial transactions. They ensure transaction security, encryption of sensitive data, and secure transfer of funds between the various parties involved in the transaction. They integrate with your point of sale software and exclusively handle customer payments.

Who is actually responsible for managing the payment service? It is the payment service provider that charges transaction fees. However, some point of sale software companies also offer payment services as an additional feature. It is important, however, to differentiate between fees related to the point of sale software and transaction fees from the payment service.

Indeed, point of sale providers sell store and inventory management software, while payment service providers sell the ability to do transactions with payment methods other than cash.

Your company has access to the best possible rates when you choose a point of sale software that allows integration with other payment providers. This gives you more freedom and allows you to weigh your options carefully and make the best choice for your company. You can choose your own terminal for optimal cost.

When the point of sale software itself is the payment service provider, rates are often higher and you may face penalties if you wish to use an external provider for this service.

Fees From the Payment Service Provider

By investing in a good provider to manage your transactions, it’s essential to consider the fees associated with transaction processing based on the type of payment used. The method of payment greatly influences the cost per transaction: only cash transactions are not subject to these fees.

Credit Card Payments

Payments made by credit card, such as Visa and Mastercard, generally incur fees between 1.5% and 2.5% of the total purchase amount. These transaction fees, known as interchange fees, are paid by the business to the issuing bank of the customer’s credit card for processing the transaction.

It’s worth noting that premium cards often incur higher costs, depending on the benefits offered by the card.

The company may also face chargeback fees if a customer disputes a transaction. When a customer questions a charge on their credit card statement, this results in fees for the merchant. These fees are intended to cover the administrative expenses associated with reviewing and processing the dispute and can amount up to 20 CAD.

Debit Card Payments

Payments made by debit card, on the other hand, generally incur lower fees, ranging between 0.5% and 1.5% of the sale.

Unlike credit card payments, debit card payments involve lower costs called acquisition fees. These are collected by banks and payment service providers for processing the transactions made. This option is often cheaper for the merchant.

Fees may also apply for cash withdrawals made with a debit card. Known as withdrawal fees or automated teller machine (ATM) usage fees, these fees are imposed directly by the issuing bank of the card. The amounts vary depending on each bank’s policy.

Online Transactions

Online transactions generally incur the highest fees. Indeed, the cost per transaction of an online platform typically ranges between 2% and 3% in payment gateway fees.

A payment gateway acts as an intermediary between the merchant and the customer’s financial institution when making a purchase on a website, thus facilitating the secure transfer of funds. These fees vary depending on the payment gateway provider used. They are usually calculated based on a percentage of the transaction value, sometimes accompanied by a fixed amount per transaction.

Fees from the Point of Sale

In addition to the transaction fees listed above, there are also point of sale subscription or purchase fees.

Subscription Fees

Point of sale software providers charge monthly or annual subscription fees. These fees allow businesses to access, among other things, regular updates, quality customer support, and continuous use of the software, ensuring an optimal user experience.

While they may represent an additional investment for businesses, these fees are often considered a necessary cost to benefit from the advantages and reliability of a modern and efficient point of sale software.

It’s important to choose a subscription that meets your needs and budget. By comparing different providers, you can be assured of finding the best point of sale software for your business. Inquire about the benefits of subscribing to Alice POS!

Purchase of Point of Sale Hardware

In addition to having point of sale software, you also need to ensure you have the necessary hardware for its proper functioning.

This usually includes a computer, a payment terminal (connected to the payment service provider), a receipt printer, a barcode scanner, a cash drawer, and a router.

The price is influenced by the chosen provider, the software itself, or the necessary features and options. Depending on your point of sale software, you may need additional hardware, so be sure to inquire about this before making your choice.

Feature Addition Fees

Depending on point of sale software providers, additional features may incur additional fees. Indeed, some POS providers charge more for different options or the addition of additional registers. Hence, it’s important to prioritize providers who are transparent in their pricing model.

What’s important to remember is that it’s crucial to carefully assess your options for payment service providers and point of sale software to have the maximum flexibility for your business in terms of transaction costs.

For more information on the fees and features provided by Alice POS software, contact us for a free demo!

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