Pass Thru Fees and Everything You Need to Know About Them

In payment processing, cost structures and the options related to them can be especially complex. There's no single model that's used by all service providers to charge businesses for processing card payments.

Instead, a variety of pricing models are in play. Flat-rate, interchange, and tiered pricing models are the most common. Each takes a different approach to determining the specific cost of each transaction.

That's not necessarily a bad —or good— thing. With so many ways to approach the costs of payment processing, some providers tack on additional fees and charges. However, this varied landscape also offers potential opportunities to save money on payment processing.

Today, we'll review pass thru fees, also known as pass through fees. These fees aren't specific to a single part of the payment processing workflow. Instead, they represent a variety of costs charged by payment processors and the bank that issued the card used.

Does it seem like your payment processing costs are too high? Swipesum is here to help your business streamline card processing with effective solutions tailored to your needs.  

Crucially, our independent payments consultants will negotiate with providers on your behalf. That means reduced merchant fees and more money for your company. Book your free consultation to learn more!

Now, let's take a closer look at what pass through fees are and why they're important to your business.

What are Credit Card Pass Through Fees?

It's relatively easy to define and understand specific merchant fees and similar credit card processing fees.  

For example, authorization fees are a foundational cost. An authorization fee is incurred every time a card is swiped. It represents the cost of communication and data transfer between your business's bank (the acquiring bank) and the bank that issued the card used.

Pass thru fees are not an example of a single, standalone charge. Instead, these fees represent the total costs "passed through" to your business. These are the costs of payment processing for which your business is responsible, based on your contracts and agreements with providers.

That includes fees charged by the bank that issued the card used in a given transaction. Interchange fees charged by issuing banks are just one example. There are also assessments, the cost charged by card networks, and many others to keep in mind.

These fees can appear as part of any pricing model. They may be combined into a single or small number of line items in flat-rate pricing. Or, they can be broken out and detailed (although often in abbreviated and sometimes unclear language).

What can be included when it comes to pass thru fees? While it's not practical to provide a truly complete and authoritative list, pass thru fees can commonly include:

Interchange Fees

Interchange fees are a foundational and unavoidable cost when it comes to credit card processing. As Bigcommerce explains, this is a fee paid by the merchant — your business — to the bank that issued the card.

It's also important to note that a single interchange fee on a statement can represent many smaller costs that fall under the interchange category. It's not entirely wrong to think of interchange fees as similar to pass thru fees: a single charge on a statement that represents several smaller costs.

Merchant Services Fees

"Merchant services fees" is another umbrella term. It represents a wide variety of costs charged by merchant account and service providers. These range from the foundational monthly or annual fee to potential payment gateway fees.

Merchant services fees help to compensate service providers for the support and capabilities they provide. However, some service providers may charge unnecessary fees or mark up legitimate fees. The good news is that merchant services fees are not set in stone.

Many of these fees are often negotiable if you don't use a flat-rate pricing model. Merchant services fees, whether bundled together as pass thru fees or not, can be negotiated.

Assessment Fees

Assessment fees represent money that goes to credit card networks. These entities are distinct from the card-issuing bank, even though those banks and card companies work together.

Card networks, also called cardmember associations, have to operate those networks efficiently and reliably. They also need to maintain a high standard of security. Assessment fees help to address those needs.

The Big Takeaway for Credit Card Pass Thru Fees

The most important thing to remember about pass thru fees is that they are a catch-all. In other words, pass thru fees represent a variety of costs connected to the many participants in payment processing, paid by your business.  

In the big picture, pass thru fees are a simple way to represent the costs of credit card payment processing to your company.

Pass thru fees won't be the same for every business. The total pass thru fees for each merchant can and will vary to a significant degree.  

Some components of pass thru fees, like interchange fees, can't be negotiated. However, it's possible to negotiate others, like merchant services fees. In these cases, it's crucial to carefully review each individual charge to determine if it's necessary and/or negotiable.

Additionally, the pricing model and merchant service provider you choose will influence pass thru fees and how they're displayed on your monthly statement.

Optimizing Service and Cost for Credit Card Payment Processing

Your business deserves an effective payment processing solution at a reasonable and sustainable cost. However, navigating payment processing can be especially difficult without deep knowledge and experience in this complex field. That's where Swipesum can help.

Our independent consultants will review potential solutions for your business from the perspectives of performance and cost. They'll provide a shortlist of suggestions that make sense for your business. Then, they'll negotiate with providers to reduce costs, cutting down on total pass thru fees and saving your business money.

Best of all, our services come at no additional cost to your company. Ready to revolutionize your approach to payment processing? Book your free consultation now!